Bitter Brew: The Rise and Fall of Anheuser-Busch and America's Kings of Beer (22 page)

They went through the list of sporting events property by property as two media buyers from the ad agency D'Arcy, MacManus, Masius Advertising manned phones at a table in the corner. The NCAA basketball tournament was taken, but how about the National Catholic Basketball Tournament? “What's the cost?” August would ask. If the price were right, he'd bark, “Buy it!” Alabama football? Buy it! Notre Dame basketball? Buy it! And so it went. From the smallest college football game to the most obscure sport (hydroplane racing, hot air ballooning, water polo), he bought sponsorships by the barrel full, several hundred during the four-day conference and eventually thousands. He envisioned making Anheuser-Busch synonymous with American sport by planting the company flag at every competitive event in the country. If there was a three-legged sack race being cheered on somewhere, then, by God, there had better be a Budweiser sign at the finish line. And when the sponsorship rights for the major network sports contests became available again, he expected A-B to wrest them from Miller's grip no matter what the cost. Toward that end, he doubled the advertising budget, raising it to $100 million for 1978, matching what Miller claimed it was spending. “There is little choice for either of us,” he said, “for we are at war.”

Much of the burden for wrestling sports sponsorships away from Miller and other brewers, and for forging relationships with all teams in the major professional sports, fell on Michael Roarty, the vice president of marketing. Fortunately, he seemed ideally suited for the task. Exuding even more twinkly-eyed Celtic charisma than Miller's John Murphy, Roarty was A-B's designated MC and unofficial ambassador of bonhomie. Fellow Irishman Denny Long described him as a
shanachie
, a Gaelic word meaning “storyteller.” He was an open tap of stories, jokes, and anecdotes, the guy everyone wanted to sit next to at dinner. “There is a charm about him that is almost hypnotic,” a reporter once said.

Roarty turned that charm on the growing list of famous entertainers and sports figures A-B contracted to promote Bud and Bud Light, mixing easily with the likes of Paul Newman, Roger Maris, and Bob Hope, with whom he became particularly close. “He was in charge of intangibles,” his good friend Long said many years later, chuckling. “I never cared for that stuff, and August couldn't bear it, but Michael loved it, and he was brilliant at it.”

There was no question that the Miller Lite blitzkrieg had taken Anheuser-Busch by surprise. As Miller rolled out its new “less filling” beer in 1975 and 1976, August and some of the A-B brass scoffed at the very idea of light beer and claimed they had no intention of introducing their own low-calorie brand to compete. “We think our beer is light enough,” said vice president of brewing Andrew Steinhubl, who repeated the company line that any weight gain among beer drinkers was probably due to the fact that beer enhanced people's appetite and had nothing to do with the calories in the beer itself. August predicted to his executive team that Miller ultimately would fail.

So it was doubly embarrassing when Miller Lite proved an unqualified success, with five million barrels shipped its first full year on the market. A-B responded by introducing two new brands in 1977—Natural Light and Michelob Light. But because of management's earlier scorn for the light beer category, the move was seen as a jumping-on-the-bandwagon act of desperation.

Miller said as much when it petitioned the Federal Trade Commission to halt the sale of Natural Light, claiming the new product's name infringed on its Lite trademark, which gave it the exclusive right to use the terms
lite
and
light
in marketing beer. According to Miller, A-B was attempting to “ride the coattails” of its multimillion-dollar investment in developing the Lite brand.

A-B struck back with its own FTC complaint, accusing Miller of fraudulently advertising its Lowenbrau brand. Miller had begun importing Lowenbrau (German for “lion's brew”) from its six-hundred-year-old maker in Munich in 1974, positioning it as a premium-priced competitor to A-B's Michelob brand and playing up its Old World provenance. After two years, however, Miller quietly switched to brewing Lowenbrau under license in its Fort Worth, Texas, plant, while maintaining its premium, imported price. The Texas Lowenbrau was not the same as its Bavarian namesake. It contained corn grits and two chemical additives, ingredients that would put it in violation of Germany's so-called purity laws, which mandated that beer could contain only water, hops, barley, and yeast.

Sensing a delicious opportunity, A-B marketing executives enlisted their lawyers and their public relations reps at Fleishman-Hillard in a plan to use an FTC complaint as the linchpin in a media campaign aimed at embarrassing Miller and killing Lowenbrau as a competitor. In a presentation to August, they explained how they were going to provide every legitimate media outlet and every A-B distributor with a copy of the complaint, complete with nearly ninety pages of backup research and exhibits showing how Miller's advertising and package labeling were leading American consumers to believe they were buying a German import that had won six gold medallions in international taste competitions. Any reporters who needed more convincing would be sent six-packs of Lowenbrau so they could see for themselves that you needed a magnifying glass to find any reference to Texas on the labels or cardboard cartons. All in all, the executives believed the campaign would be so credible that it could not be ignored, and Lowenbrau drinkers would be livid, because they were educated, affluent, didn't like to be ripped off, and would not forget.

August was delighted. “We'll blow their doors off,” he said. When he asked, “What do you think will happen with the complaint?” the lawyers told him, “Absolutely nothing; the FTC won't act on it.”

But the media sure did. A-B's blitz mailing of several thousand thick packets—“I think we set a record for poundage,” said a former Fleishman-Hillard executive—resulted in more than two hundred newspaper articles, the most damning of which was an Associated Press story that included a statement from a Lowenbrau executive in Munich saying the company was embarrassed by what its U.S. licensee had done. Within a year, the Lowenbrau brand was all but dead in America.

The two beer companies continued to pummel one another with seemingly petty legal complaints. Miller filed one with the U.S. Bureau of Alcohol, Tobacco, and Firearms, accusing A-B of falsely advertising Michelob Light as a low-calorie beer. The company pointed out that most light beers, its own included, contained about 100 calories, a third less than regular beers. But Michelob Light contained 134 calories, only 20 percent less than regular Michelob. In addition to asking the agency to stop A-B from promoting Michelob Light as a “light” beer, Miller's attorneys took a gratuitous—and inaccurate—slap at A-B's brewing process: “We understand that Anheuser-Busch produces Michelob Light by brewing a batch of Michelob and then diluting it with carbonated water. Although it has watered down its beer, Anheuser-Busch has not reduced the price.”

A-B's attorneys replied drolly, “We find it hard to understand how we can be accused of misleading consumers [when] every can and bottle of the product prominently displays the statement: ‘Contains 134 calories, approximately 20 percent fewer than Michelob.'”

Miller finally went with a nuclear option, asking the FTC to bar A-B from claiming that any of its beers were “natural products” or were “brewed naturally” or contained “all natural ingredients.” According to the complaint, A-B used “800,000 pounds of tannic acid annually” in its brewing process, and its vaunted beech wood aging “consists of dumping chemically treated lumber” into its beer storage vats. “It is an affront to the American consumer that this industrial giant and major advertiser should be allowed to continue to resort to advertising claims that are false and misleading.”

As schoolyard taunts go, it was the equivalent of telling little Johnny in front of all the other kids that his mother was a dirty whore. Miller compounded the insult by submitting “testimony” from three nutritionists who said that A-B's ad claims were deceptive based on a definition of a natural food as “one that has undergone only minimal processing after harvest, or contains no chemical preservatives,” such as milk or washed fruit.

A-B called Miller's complaint “a publicity ploy without substance and deliberately misleading regarding our brewing process.” It said the tannins used in makings its beer occurred naturally in many foods, including cereal grains, grapes, and tea, and its beech wood chips were not chemically treated, but rather washed in baking soda prior to being placed in the aging vats.

A-B filed one last patently silly complaint with the SEC, claiming that the labeling on Miller High Life, which still carried the slogan “The champagne of beer,” was misleading because the product “contained none of the qualities of champagne.” After the two companies had spent millions in the legal tit-for-tat, neither the FTC nor the ATF took action on any of their complaints.

Miller posted excellent numbers in 1978—31.3 million barrels shipped, 7 million more than the previous year, and an increase in market share to 19 percent. But the record came at great expense, as Miller reported that Philip Morris had invested $4 billion in its brewing operation since 1972.

Anheuser-Busch finished in first place for the twenty-first straight year, shipping 41 million barrels and increasing its market share to 24 percent. But despite its 10-million-barrel edge, the perception persisted in the financial press that Miller was winning the war.

In a caustic article illustrated with an antique Budweiser bottle covered with cobwebs,
Forbes
stated, “For six years now, Murphy's Miller has been walking all over St. Louis' Anheuser-Busch.” The article took August and his management team to task for “arrogance” and “complacency,” saying they suffered a “classic case of self deception” and were “merely reacting” while Miller was “calling the shots.” The magazine that once mocked Gussie for his stubborn insistence on quality now ridiculed August for his sports-sponsorship buying spree, saying it looked “like an overreaction.”

Anyone who knew August could imagine him gagging on the humble pie when the reporter got him to admit, “We missed the boat.” (Which the magazine turned into the article's headline.)

Denny Long, too, was forced make an embarrassing admission. “We didn't take Miller seriously, but we do now,” he was quoted as saying.
Forbes
described him as almost shouting as he vented his frustration at the prevailing Miller-versus-Anheuser-Busch narrative: “They say Miller is innovative, that its ads are creative, that it brings out new products to create new market segments, that it's gaining market share. Aren't we doing all these things, too? In the last 12 months we have introduced more new products, more new ads, added more new marketing people and worked harder than in any similar time in Anheuser-Busch history.”

(In the wake of the article, August issued an order to Fleishman-Hillard: “You are not to have anything to do with
Forbes
magazine again.” The ban lasted eight years, and when one Fleishman-Hillard rep violated it by responding to a
Forbes
reporter's request for some publicly available A-B information, August had him fired from the account.)

August and the company received much more even-handed coverage in
Newsweek
, whose reporter pressed August about his new nemesis and captured the coiled warning in his response. “Miller is aggressive,” he said. “They're fine marketers. We compliment them.” Then, fixing the reporter with an icy stare and speaking very slowly, he added, “But we will remain No. 1.”

Four years after he was shown the door, Gussie still showed up at the brewery with some regularity. His office suite on the third floor of the administration building remained intact, with its large gilt-framed oil portraits of Adolphus and August A. and the dark mahogany roll-top desk from which he and his father had run the company for more than seven decades. He usually announced his arrival as he stepped off the elevator, either by sounding the familiar racetrack trumpet fanfare “The Call to the Post” on a battery-powered horn he carried, or by braying at an equal volume, “Awwwwwguuuust!” Which never failed to make people jump or set August's teeth on edge.

Their relationship was outwardly polite, and August went out of his way to praise his father's contribution to the company in public statements. But privately, each held deep resentments. Gussie did not attend August's wedding to Virginia Wiley in 1974 and, in August's opinion, was not a very attentive grandfather to their two children—Steven August, born in 1975, and Virginia Marie, born in 1979. When a longtime A-B executive suggested to August, “Perhaps it's time you and your dad patch things up,” August turned to him and said angrily, “That man to this day does not know the names of my children. He looks at them and he doesn't know who they are.” On another occasion, when August sent word to Grant's Farm that the company would not approve some changes his father was planning to make at the Bauernhof, Gussie flew into a rage. “Who the fuck are you to tell us what we can do out here?” he hollered in a phone call to August. “If I ever see you again I will shoot you.”

Fortunately for August, Gussie spent most of his time tending to his duties as chairman of the Cardinals. Unfortunately for baseball, he spent most of that time fighting with people—Marvin Miller and the players association, his fellow National League owners, the National League's president and its chief labor negotiator (both of whom he wanted fired), baseball commissioner Bowie Kuhn (him, too), and his own players.