Busch Dynasty Comes Apart – InBev’s Hostile Takeover

Three Five years ago – in 2008 – I was shocked and somewhat saddened to learn that the international conglomerate InBev had successfully taken over one of America’s most resilient and respected brands: Anheuser Busch.  Of course, I was only 20 and therefore wasn’t exactly a hugely loyal customer, but I did resent the fall of a robust family-owned dynasty.  It some ways, it seemed to foreshadow the precipitous decline of the American aura.  That same year marked the beginning of the “greatest economic collapse since the Great Depression,” as our President likes to remind us several times per press-conference.  How could America’s most famous and recognizable beer be controlled by European?

Bloomberg BusinessWeek provides a fascinating and somewhat sullen account of the final chapter of the Busch empire. The company – formed way back when Abe Lincoln was still sitting in the White House – had been through so much in it’s 150 year history that it almost seems incomprehensible that a mere economic downturn could bring it to it’s knees. But, of course, that’s not the whole story either. Though the family controlled only around 4% of the company when InBev took over, it was the family that dominated everything from corporate culture to St. Louis gossip.

The Busches and their beer company had survived Prohibition, labor strikes, and price wars, growing to operate 12 breweries around the country, producing 128 million barrels of beer in 2007 and taking in nearly $17 billion in revenue. The red, white, and blue Budweiser can is practically synonymous with America itself.

The Busch family had shepherded Anheuser-Busch through so much and had created so much wonderment for the American people. Busch Gardens, stadiums, college campuses and those impossible-to-forget bullfrog commercials saturated the American consciousness with the notion that anything was possible in America. But the culture and attitude that had built the empire was long gone by the time August IV was named CEO just 18 months before InBev’s coup.

These bullfrogs – introduced during the 1995 Superbowl – stand out in my memory as a classic promotional movement.
The Clydesdale horses became an annual Superbowl ritual. The bullfrogs, the “wassssap” guys and more became hallmarks of American branding and marketing. But the man responsible for those uniquely memorable successes was the same man who would preside over the empire’s virtual collapse. While revenues skyrocketed during the 1980′s and 1990′s – with Budweiser’s market share reaching 55% of the US beer market – the writing was on the wall by the mid-2000′s.

As a burgeoning generation of kids grew into adult-hood, the market dynamics changed and liquor, wine and malt beverages became more and more popular. Budweiser just didn’t know how to adapt. It did what it did (make beer) and it did it very well. The success had led quite naturally to complacency and perhaps a sense of entitlement that belied the humble origins of the American behemoth.

Anheuser BuschThis photo provided by a family friend shows former Anheuser-Busch CEO August Busch IV and his girlfriend Adrienne Martin. Martin died Dec. 19, 2010 at Busch’s home.

August IV’s story is what surprised me the most. Having not paid attention to anything to do with Budweiser beyond the clever advertisements, I was – at first – rather surprised to learn of IV’s tumultuous past. Without going into the still-shady details of each incident, suffice it to say that August IV was involved in one car accident that killed a female passenger, a high-speed chase with police that ended in them shooting out his Mercedes’ tire, and the death of his live-in girlfriend in December 2010… in his mansion. That death was officially ruled an accidental overdose…. because there was cocaine in and around the bedroom where the woman was found dead, not to mention various firearms nearby.

Of all people, I am hesitant to pony up to the tired knee-jerk reaction that when rich people get into trouble, their overly protective rich fathers simply shell out money until the problem is gone, if not solved. August IV may very well have done absolutely nothing illegal in any of the above mentioned incidents. And if you have any faith in the American legal system (which nobody would blame you if you didn’t…) you would accept the official story that IV was reckless and maybe a bit stupid, but not a killer, drug dealer or criminal.

Liberals might condemn the excesses of the Busch’s lavish lifestyle, over-the-top mansions and commutes (by helicopter) and sense of entitlement that appears to permeate the actions of August IV. But that is self-serving, simple-minded, unhelpful and, frankly, distressingly offensive to the phenomenal story of the building of the Busch Dynasty and the pressures it naturally imposed on all progeny, not just the ones in charge of the Boardroom in St. Louis.

Adolphus, who took over in 1880 after Anheuser’s death, was the first to use pasteurization to keep beer fresh, the first to use refrigerated railroad cars, and the first to bottle beer on a large-scale, all of which helped make Budweiser America’s first national beer. He lived in a Victorian mansion right next to the brewery; a canon blast would announce his return from a long trip. To celebrate his 50th wedding anniversary in 1911, he held a party for 13,000 people at the St. Louis Coliseum and gave each of his nine children one million dollars to build a home.

Scandal and expectations were the constant backdrop of August IV’s life. His father, August III, pushed out his own father in a mid-70′s boardroom coup. This act of heresy never sat well with other members of the clan who never forgave III for his disloyalty to the family patriarch. Nevertheless, III became a phenomenal chief executive, leading the company to record profits, expanding the company’s reach and overseeing a massive increase in marketing budgets that resulted in comfortable and hard-earned success.

He would go on to build 11 other breweries and support one of the biggest advertising budgets in the country. By the 1990s, one of every two beers sold in the U.S. was made by Anheuser-Busch.

But – as I can fully understand – August IV grew up not as the favorite son of a successful leader of an iconic American brand. Instead, he grew up as little more than the future heir to the throne. A link in the chain that had to be groomed and trained for his destiny. He was not supposed to be loved, not supposed to be independent and not supposed to question authority. His father – III – was cold, distant and according to family members, a pretty lousy father.

Buddy Reisinger, who like August IV is a great-great-grandson of the founder, Adolphus Busch, says the Third encouraged sibling warfare. “He would say to August, ‘You’re never going to make it. You better watch your back.’ He tortured that kid. There’s carrot and there’s stick. The Fourth got all stick.”

However, because of his destiny – being heir to the Empire – August IV received all the benefits of his family’s name and bank account. His legal run-ins during college would derail even the most resilient young man. He had to defend himself to an unforgiving world during a time when excess and flamboyance was encouraged, if not expected. At the same time, though, the excesses of the mid-1980′s have now been relegated to the annals of regrettable history, evidence of the fallibility of unfettered corporate America and an unofficial warning to future leaders that privilege would only carry you so far before you were condemned as un-savable.

But again, context must be applied. When August III aged and ceded power, his legacy was immense. Could August IV take the reins and continue the dominance his father had left him? Imagine the pressure. Imagine the expectations and the murmurs of lower level employees who had toiled for decades only to now report to a party-boy boss who had done little to prove himself except be born a Busch.

Sometimes called Three Sticks by employees, stubborn, brusque, and a bit of a bully, August III was generally considered an extraordinary businessman. Anheuser-Busch’s U.S. market share increased from 23 percent to more than 50 percent during the 27 years August III ran the company. “People used to ask if the Fourth could handle it,” says Reisinger, who worked at the company for 12 years. “The Third was not replaceable by any one person. Period. You’d need four or five guys to do what that guy did. … From big ideas to little ones, there was one decider.”

But IV commanded to company with resolve and independence in a surprising way:

Yet August IV did have one quality his father did not: charisma. He was good-looking and good-humored, and for many in the industry he was a welcome contrast to his dad. Among the first things August IV did was try to reduce some of the company’s most extravagant spending. He canceled an order for a new $40 million Dassault Falcon 7X jet, which his father was eagerly awaiting, and he closed the executive dining room, where his father used to eat breakfast every morning. In a speech accepting the 2006 Presidential Award from the Webster University George Herbert Walker School of Business and Technology in St. Louis, Busch said: “Mistakes will happen, mistakes are inevitable, but in failure there is learning and in learning there is experience. That’s how you improve and grow.”

The iconic Clydesdales came about during August IV’s time as head of marketing.

Troubles Ahead

These sentiments would serve IV well.  He steamrolled the corporate budget and demanded a new age of austerity.  Good timing. But, in other areas, IV faltered.  He conceived and launched a new liquor and a malt-beverage that were total duds.  He was a phenomenal marketer with little ability for being “the decider” as his father was so well-known.  As Budweiser’s market share began to fall under IV’s short tenure, rumors of a hostile takeover bid from InBev went from fringe to mainstream and quickly, to reality when InBev made a bid of $65 per share in 2008.

The stock had been trading in the high $50′s, so the offer created quite an unwelcome dilemma for the young Busch.  And when the bid increased to $70 per share, the Board made the decision easy for IV by making it for him: it accepted immediately.  The 150 year old company that had come to embody all that was great about America – dogged perseverance, exceptional quality and an anything-is-possible mentality – was now controlled by a German-Brazilian mishmash. One more victim of globalization, one more arrow in the heart of American capitalism. One more reason to speculate on American decline.

While millions of young Americans like me were naturally shocked, the toll that the takeover took on August IV had to have been exponentially more devastating. Having just been named CEO, having just married and having just become the patriarch of the Busch Dynasty, August IV had allowed it to all slip away. His fault or not, the times had changed and the family-run business was simply not able to compete without the international clout and institutional shakeup that InBev provided. Not only that, but IV ran headlong into the family drama that his own father had created decades earlier:

InBev soon had two surprising supporters among the Busch family: August III and his half-brother, Adolphus, who had been angered by the Third’s power grab some 35 years earlier. William J. Vollmar, who retired in February 2008 as Anheuser-Busch’s corporate archivist, told the St. Louis Post-Dispatch in July of that year that he believed Adolphus’s support for the InBev deal stemmed from their decades-old feud. “I don’t know if vindictiveness is the right word, but it’s something close to that,” he said. “Adolphus IV didn’t feel that August III treated their father right. … So now, in effect, he’s trying to destroy the family legacy.”

His own father, August III, saw the writing appearing on the wall: “But it would appear that he saw the train wreck coming and got out of the way.” How could anyone navigate the waters of this unfolding tragedy with any semblance of calm, vision or assurance? Again, the pressures that IV must have confronted would have overwhelmed virtually any iconic American tycoon, let alone someone who had spent a lifetime playing the delicate game of representing a world-famous brand while simultaneously living a life of meaning and independence. It ain’t easy, folks. And while it’s easy to retort that “life ain’t easy,” that attitude belies the genuine struggle and familial turbulence that ravaged IV’s psyche.

Takeover’s Aftermath

After InBev took over, IV drifted into a purpose-less period of soul-searching. Tragically, there is no fairy tale resurrection or triumphant return. At least not yet. Instead, August IV’s girlfriend overdosed on cocaine and died in his own bedroom. He was sued by her ex-husband, who had previously been like a “brother” to August, for negligence. Soon after, the woman’s parents joined the legal dogfight in an effort to capitalize on the empire’s notoriety by claiming a piece of the settlement with the ex-husband. That fiasco is still before the courts.

As for the company, Anheuser-Busch-InBev has been remade… and not in the image of it’s storied past. The new leaders slashed billions from the budget, selling off assets and re-focusing the company on it’s international message and brand. The corporate nature of the new company more closely resembles a Harvard Business School case-study than the hard-driving ingenuity and grit of Anheuser-Busch’s early days. They did it the American way. They did it their way. But now, InBev has little patience for the pillars of it’s newest purchase’s steady success. Instead, a European internationalism has replaced the American icon’s essence.

“A paternalistic, slightly complacent culture existed under the Busches,” says Stirling. “That’s been replaced by an incredibly hard-driving culture from Brazil. Employees join InBev knowing that it has created scores of millionaires because of its stock. It’s almost as if the two companies have two different ideas about what the purpose of life is.”

Whether that is sad, pragmatic, inevitable or wonderful is yet to be determined. But it does make one stop and think on July 4, as tens of millions of Americans fire up the grill for hot dogs and beer, that we can’t even celebrate America’s birthday without inviting in the unwelcome feeling of foreign entanglement. We can’t enjoy our Buds in the same way knowing that the money spent buying that 30-pack is going straight to Munich. And that’s a shame. But it’s the way of capitalism and perhaps it should be welcomed. Perhaps it is the legacy of the 20th century that we should remember fondly the building up of American Exceptionalism while embracing the new way of the world.

For now, this Bud’s for you, IV.

+Cliff Satell

Cliff Satell

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