Anheuser-Busch Company, Inc.

views updated

Anheuser-Busch Company, Inc.

One Busch Plaza
St. Louis, Missouri 63118
(314) 577-2000

Public Company
Incorporated: February 21, 1979
Employees: 39,769
Sales: $7.677 billion
Market Value: $9.683 billion
Stock Index: New York

Anheuser-Busch is the nation’s leading brewer of light, premium, and super-premium beers. Expensive European hops and beechwood-chip aging in eleven breweries across the country distinguish Anheuser-Busch beers such as Budweiser, Michelob, and Busch from much of their competition. Although principally a brewer, Anheuser-Busch has diversified, via various subsidiaries, into food products, refrigerator cars, metal containers, corn syrup, starch, and baker’s and brewer’s yeast. The company has also established two entertainment parks. These non-beer enterprises account for only 10% of Anheuser-Busch profits, but they are indicative of the company’s success.

In 1852 Eberhard Anheuser, a prosperous soap manufacturer in St. Louis, bought a failing brewery from a Bavarian immigrant named Sneider. Although the brewery’s cool underground caverns near the Mississippi River were conducive to good brewing, and although he had the will to succeed, Anheuser lacked one crucial ingredient for success—experience. He therefore hired his son-in-law, Adolphus Busch, another recent German immigrant schooled in the art of brewing, to be his general manager. That which the two men separately brought to the enterprise—an aggressiveness in business and a knowledge of quality brewing—has informed Anheuser-Busch’s history ever since.

Although the true story of the founding of Anheuser-Busch is interesting enough, the company’s executives have sometimes preferred a different one, that in the 1870’s Adolphus Busch stopped at a German monastery and was given the recipe for the beer the monks were brewing there. They also gave him some of their brewer’s yeast, the secret of their excellent beer. That recipe became the basis of Anheuser-Busch beers, and the original strain of yeast is still used in the beer brewed today (indeed, the original yeast was preserved for years in Adolphus’ ice-cream freezer!). The story is fictitious, but it does serve to illustrate the dominant philosophies of Anheuser-Busch—that only the finest “European” ingredients are to be used, that the recipe of the beers does not change with time, that the founders of the company established precedents that continue to be followed.

During 1853 Anheuser and Busch increased the rejuvenated brewery’s capacity from 3,000 to 8,000 barrels per year and began to expand their sales effort into Texas and Louisiana as well as their home state of Missouri. Cowboys, we are told, deserted their beloved red-eye whiskey for the light taste of Budweiser, Adolphus Busch’s 1876 imitation of a light Bohemian beer (the rights to the name were not purchased from the Bohemian brewer of “Budweis” until 1891). Because of constant innovations in the brewing industry, Budweiser’s formula was soon improved. Beer was now pasteurized and preserved for longer periods. The newly invented refrigerated railroad cars permitted the transport of beer across state borders, and the bottling of beer allowed for easier distribution throughout the country. Regional brewers lost their advantage to large breweries such as Anheuser-Busch, which had found the means to supply beer to every state in the union. Despite the growth of its market, however, Anheuser-Busch still referred to itself as a “regional brewery” —an institution that understood the distinct needs and tastes of local people.

Anheuser gave over the day-to-day operations to Busch in the 1870’s. The company continued to prosper. As Anheuser-Busch grew, so did the number of its employees. Adolphus Busch initiated the idea (much imitated since) that his employees were somehow members of a family, cared for and nurtured by the company, loyal to the company for a lifetime. The relation between employer and employee is thus intimate and co-operative, and it is that co-operation that results in an outstanding product. In the 1890’s Pabst, a competitor, was the best selling beer in the United States. Busch and his “family” thwarted the competition with the introduction of Michelob in 1896. Forceful and frequent advertising cunningly suggested that Budweiser and Michelob were uniquitous —and therefore popular. By saying it often enough, the. company achieved what it had proposed: by 1901 Anheuser-Busch was the leading brewery in the country.

Busch died in 1913, and his son (also called Adolphus) took over; he was soon to prove that one of the company’s virtues was its flexibility. The first diesel engine was patented by Busch and installed in the brewery to increase production. With the coming of World War I, Busch founded a subsidiary to produce the engines for Navy submarines. As well, the Anheuser-Busch family purchased sufficient war bonds to finance two bombers—appropriately named “Miss Budweiser.”

Then one war ended as another began: in November 1918 President Wilson signed the bill that instituted Prohibition. Anheuser-Busch had already stopped producing beer in October of 1918, but it did not wait for imminent collapse. Instead, Busch used this hiatus to the company’s advantage, by diversifying into related fields. Malt syrup was canned and sold to people who required malt for their homemade brews. A refrigeration car company was established to transport perishables. Bevo, a soft drink made from ingredients similar to those in beer, was a great success for three years; it later failed when Prohibition laws concerning the use of yeast forced the company to change ingredients. Thus, Anheuser-Busch early began a trend toward diversification that would thereafter characterize the history of the company.

When Prohibition ended, Anheuser-Busch experienced an unforeseen problem: people had become used to the sweet taste of the soft drinks and homemade brews that were available during Prohibition, and were not willing to return to the bitter taste of beer. In response, many brewers changed their formulas to achieve a sweeter taste. However, since one of the philosophies of the Anheuser-Busch company is that it must maintain successful traditions, Busch refused to alter the formula for best-selling Budweiser. Dr. Robert Gall, the company’s post-Prohibition brewmaster, agreed with this decision. The company initiated a major advertising campaign: Busch challenged consumers to a “five day test.” He predicted that after five days of drinking Budweiser the consumer would not drink a sweet beer again. The advertising campaign was successful and established a trend for future consumer appeals.

During World War II the company, now led by Adol-phus Busch III, again made substantial contributions to the war effort: Anheuser-Busch supplied ammunition hoists, in production at a new Anheuser-Busch subsidiary, to the military. The distribution of Budweiser beer was withdrawn from the Pacific Coast in order to supply the government with additional freight cars for war essentials. Spent grain was sold to financially troubled war-time farmers for poultry and livestock food. These patriotic actions elevated sales and advanced Anheuser-Busch’s image as a patriotic company.

Between 1935 and 1950 the demand for Anheuser-Busch beer always exceeded the supply. In 1941 three million barrels of beer were produced; in 1950 six million barrels were produced. Production was at its highest, and the industry was no longer hampered by wartime restrictions. The death of Adolphus Busch III in 1946 momentarily caused the company to relinquish its lead in the industry. But with the succession of his brother, August Busch, Jr. (Gussie), the company became the nation’s top brewer once again.

The advertising policy of August Busch, Jr. did not significantly differ from the high-pressure ads used by his brother and father. Adolphus had advertised his beer through the distribution of pocket knives and gold pieces. Patriotic art such as “Custer’s Last Stand” was employed in advertisements. In 1933 the famous Clydesdale horses were introduced and still remain an advertising legend. After the war, August Busch required an even more expansive approach to entice the public to drink Anheuser-Busch’s beer. Thus, Anheuser-Busch became the first brewery to sponsor a radio network. Positive consumer response prompted William Bien, the vice-president of marketing, to design a legendary advertising campaign: “pick-a-pair-of-six-packs.” The campaign cost $2.5 million for two months, but was the most successful promotion in the history of the beer industry.

Despite its successful promotions, Anheuser-Busch entered a close competition at the beginning of the 1950’s with Carling beer. At first, August Busch did not acknowledge the severity of the competition. A holiday had just been declared in Newark, New Jersey in honor of the opening of a new Anheuser-Busch factory in that city. This established an industry precedent: no other beer company had ever been so honored. But the new facility and new equipment necessitated a price increase. Carling profited when its lower-priced beer attracted disaffected Anheuser-Busch customers. Busch countered with a low-priced lager beer in 1954. Busch Bavarian soon replaced the lager and was better received. Again Busch had vied against the competition and won. This victory spurred more aggressive advertising promotions in keeping with the brewery’s tough marketing strategy. In 1953 Anheuser-Busch bought the St. Louis Cardinals baseball team and created a new arena in which to advertise its product. In addition, a new category of consumers, sports fans, could be targeted for advertising campaigns.

It was not long before another brewery attempted to displace Anheuser-Busch from its number one market ranking. By decreasing the Price of its beer in the 1960’s, Schlitz hoped to force Anheuser-Busch into a price war just as Carling had attempted to do in the 1950’s. However, August Busch, Jr. believed that the consumer recognized the quality of Anheuser-Busch beer and could not be swayed by a lower-priced competitor. By committing several marketing and advertising mistakes, however, Schlitz made it unnecessary for the public to decide between the two beers. Competent marketing and product confidence were once again the tools of Anheuser-Busch’s success.

At the end of the 1960’s August Busch III began to prepare to take on the position of chief executive officer held by his father, August Busch, Jr. He attended college for two years in Arizona and then transferred to a Chicago school where he learned the art of brewing. He started at the bottom of the Anheuser-Busch company ranks and advanced according to merit. He even joined the union, but formally withdrew when he became the chief executive officer in 1979. August Busch III vowed to uphold Adolphus Busch’s philosophy that natural ingredients must be used to distinguish the company’s fine brewing from the lower quality brewing of other beers. During the 1970’s and 1980’s Miller Brewing Company challenged this philosophy. August Busch III, however, had already devised a unique method of dealing with the competition, including: 1) the introduction of new brands; 2) an increase in the advertising budget; and 3) the expansion of the breweries. Although Busch’s aggressive plan was effective for a short period, Miller introduced a light, low calorie beer to the market in 1974. Consumers were impressed and Miller Lite became the best selling beer for a few months. Shortly after the popularity of the new beer peaked, Anheuser-Busch edged back into the top ranking but since then has always been closely followed by the Miller brewery.

Anheuser-Busch introduced two light beers in 1977, Natural and Michelob Light, with Budweiser Light soon to follow. Moreover, August Busch instigated more focused marketing. He hired a team of 100 college graduates to promote the sale of Anheuser-Busch beers on college campuses. He also targeted new advertisements to specific consumer groups such as youth and the working class. The marketing budget was quadrupled, and sales were increased by focusing on the tastes of categories of people rather than on the general public.

August Busch III manages the brewery with a style different from that of his father, grandfather, or greatgrandfather. The use of a “management control system” has increased the efficiency of the company, making it more a modern corporation than a small family business. According to August Busch III, the following three principles are the core of his management control: 1) planning; 2) teamwork; and 3) communications. Without these controls, Anheuser-Busch’s image as a regional brewery, which produces different beers to satisfy the tastes of the local residents, would, ironically, be impossible.

Anheuser-Busch has continued to rank number one in the brewing industry into the 1980’s. In 1980 sales had reached 50 million barrels and in 1982 sales increased to 54.5 million barrels and have since gone higher. Competition with Miller is still intense. In 1980 Miller was 5% behind Anheuser-Busch in beer sales. Despite this slim margin, Anheuser-Busch’s aggressive sales techniques and diversification into associated markets ensures its future success.

Anheuser-Busch purchases subsidiaries with regard to their efficacy in providing products which will further popularize the name of Anheuser-Busch. The malt plants in Wisconsin and Minnesota, the beer can factories in Florida and Ohio, and the yeast plants in Missouri, New Jersey, California, and Florida are directly related to the production of beer. The St. Louis Refrigerator Car Company inspects and maintains the 880 refrigerated railroad cars which are used to transport the company’s beer across the country. Manufacturers Railway ships Anheuser-Busch beer after it has been manufactured at the brewery with help from the malt and yeast subsidiaries.

Other Anheuser-Busch subsidiaries, however, are not beer-oriented, but they are more relevant to the company’s strategy than they at first appear to be. Campbell-Taggart, Inc., the second largest bakery in the United States, acquired in 1982, associates Anheuser-Busch’s name with the food industry. In fact, 6.7% of Anheuser-Busch’s operating income is spent on food products. The production of baker’s yeast in the already existent brewer’s yeast factory further develops Anheuser-Busch’s interest in the food industry. Eagle Snacks, Inc. nationally distributes food products to bars, taverns, and convenience stores. This subsidiary’s most threatening competitors are Frito-Lay and Planters Peanuts. Despite intense competition, Eagle Snacks has brought Anheuser-Busch’s reputation into an arena where consumers are most likely to buy Anheuser-Busch beer along with the food products.

Within the entertainment industry, Anheuser-Busch has developed theme parks, called Busch Gardens, in Virginia and Florida. The Tampa, Florida park, “The Dark Continent,” boasts one of the world’s largest collections of wildlife under private ownership. “The Old Country,” in Williamsburg, Virginia is modeled after villages in 17th-century Europe. Although operation of these theme parks is not profitable, exposing Anheuser-Busch’s name to a new target group, the younger generation and their parents, justifies the investment in the subsidiary. Furthermore, the educational theme parks confirm the Anheuser-Busch World War I policy of contributing to the public welfare while improving the Anheuser-Busch reputation.

That Anheuser-Busch owns the St. Louis Cardinals also helps to popularize Anheuser-Busch products with Cardinal and other sports fans. In fact, name association is the key factor in any Anheuser-Busch decision to purchase prospective subsidiaries. A subsidiary may not be linked to beer but if the name and reputation of the company can improve Anheuser-Busch’s image, then Anheuser-Busch concludes that it can improve the sale of beer.

The immediate future of Anheuser-Busch will be devoted to the foreign market. It has already exported beers to ten foreign countries, but only experienced successful results in Canada and Japan. In Japan, Budweiser is second only to Heineken in the imported beer market because of the company’s success in promoting Budweiser as a beer for the young adult. In Canada, Budweiser is successfully marketed as a beer for all ages. However, in England Budweiser’s specific qualities rather than its unique consumer appeal are promoted. English beer is heavy, so Budweiser is merchandised as a “lighter” beer. Anheuser-Busch entered the German beer market with a partner, the Oetker Group of Germany, and a different advertising style. Advertisements spotlight the Old West by using dubbed voices of familiar wild west screen actors. These complementary advertising techniques have resulted in exported beer sales equal to 15% of the total Anheuser-Busch sales and 10% of the total profits.

Despite the emphasis on the foreign market, Anheuser-Busch will also be compelled to focus on the declining beer consumption of Americans. The company introduced LA, the first low alcohol beer on the market, in 1984. Perhaps other such alternatives will be introduced. Perhaps subsidiaries to produce non-alcoholic beverages will be considered. Whatever methods August Busch III uses to approach the problems of the next decade, Anheuser-Busch is certain to remain one of the dominating influences in the brewing industry.

Principal Subsidiaries

Anheuser Busch, Inc.; Busch Entertainment Corporation; Manufacturers Railway Company; St. Louis Refrigerator Car Company; St. Louis National Baseball Club, Inc.; Busch Properties, Inc.; Metal Container Corporation; Container Recovery Corporation; Metal Label Corporation; Anheuser Busch International, Inc.; Busch Creative Services Corporation; Busch Agricultural Resources, Inc.; Busch Industrial Products Company; Civic Center Corporation; Eagle Snacks, Inc.; Campbell Taggart, Inc.; and Anheuser Busch Beverage Group, Inc.