Dethroning the King (7 page)

The Third realized not long after starting work at Anheuser-Busch that it was due for modernization. He started advocating for change in a way that would later prove ironic when his own management style and perspective grew dated. Despite pushback from Gussie, August III started recruiting staffers from the top handful of U.S. business schools—the University of Pennsylvania's Wharton School, Harvard Business School, Columbia Business School, and Northwestern University's Kellogg School—to steer Anheuser-Busch into a more modern age. If Anheuser was going to knock off its competitors, it needed more intellectual fire-power than Gussie's legions of old-school beer salesmen and brewers could offer. The Third's move to recruit a bunch of underlings also yielded a longer-term benefit. He surrounded himself with a cadre of loyalists—he dubbed the MBAs his “eaters”—who owed him their wealth and success. Those eaters rose through the ranks behind him, racking up hundreds of thousands of stock options as they went.

“August does not have a college degree, and he was up against not only Gussie but also all of the board,” said Bill Finnie, who was a member of that group. “He really had to be good, and he knew he needed people that could help him look good.”

Gussie, who espoused more of a “finger in the wind” corporate strategy, made no secret of his disdain for his son's growing ranks of MBAs. He didn't appreciate being told that the loyal staffers he had hired—many of them old-line beer salesmen and brewmasters with little business education—were outdated and insufficient. Still, the MBAs' computer models were saving the company money and pin-pointing the best ways to expand. So while relationships between the old and new camps were rocky at points, Gussie grudgingly allowed spreadsheets to start making some of the decisions he would have made based on sheer guts and gumption.

“The old man, in his day, was great. But then scientific management took off,” said Jack Purnell, one of the first six MBAs August III hired. “August III bought into that.” The notion that The Third seized intellectual control of the company at roughly 30 years of age is striking, considering Gussie's vast experience and tenure. The Third was the right man for the task at that moment in history, just as Gussie had been when he injected Anheuser-Busch with life following Prohibition and the Great Depression.

“I think it was the right thing to do at the time,” said Charlie Claggett, the former chief creative officer for one of Anheuser-Busch's longstanding ad agencies. “His dad was from a different era; he was an affable farm boy. August is much more of an engineer. He came in when the cigarette companies were eating Anheuser's lunch, threw out all of the good ol' boys and brought in Wharton grads.”

With Gussie still technically in charge, The Third and his eaters helped Anheuser-Busch crush reams of smaller competitors in the 1960s by slashing brewing costs to a level its rivals couldn't match. That alone, though, wasn't going to beat Miller Brewing Company, which started coming on like a freight train at the end of the decade. Tobacco giant Philip Morris bought Miller from W.R. Grace in 1969, topping a bid from PepsiCo, and the move positioned Miller as Anheuser-Busch's most despised rival for decades to come. Milwaukee's Joseph Schlitz Brewing Company and Colorado's Coors Brewing Company, two other family-owned brewers, were also tough competitors. But neither had a war chest like Miller's. With new backing from its deep-pocketed parent, Milwaukee-based Miller was threatening to crush Anheuser-Busch under its thumb.

August III spent considerable time over the three decades in which Philip Morris owned Miller ranting that their rival was playing dirty—funneling money from its lucrative cigarette business toward Miller to make it a stronger competitor to Anheuser. Philip Morris had the right to redistribute money between divisions, and Anheuser-Busch could have employed the same strategy if it bought up a range of other businesses. But The Third loathed “cigarette money” and pretty much anyone whose hands touched it, and frequently lectured his colleagues about the dangers of smoking. Gussie was less shy than his son about drinking liquor and wine, and was known to enjoy a good smoke. When he ejected his father from the company, The Third immediately pulled the Winston cigarette dispensers out of the executive dining room at Anheuser-Busch headquarters.

“You couldn't have a pack of cigarettes,” said former Budweiser ad man Charlie Claggett. “If they were Philip Morris brand, you'd be shot on the spot. But it was any cigarettes. He disdained the cigarette people because they weren't brewers, and brewing was what he was all about. They were just these tacky, rich, money-grubbing cabals who wanted to come in and steal his market share.”

After being first to market in 1973 with a mainstream light beer, Miller enjoyed years of unobstructed dominance in that segment while Gussie waffled back and forth over whether Anheuser-Busch should jump in with a light formula of its own. “The old man didn't buy it, that ‘Lite' was real beer—and he was still in charge in the early '70s,” said Jack Purnell. “While the rest of us were really worried about it, including August, he wasn't. He thought it was just a momentary flash in the pan.”

Gussie's age started to become a factor at the office in the early 1970s, which added to the challenges Anheuser-Busch was already facing. It was struggling to deal with the wage and price controls imposed by President Nixon in 1971, which had boosted the costs of its beer's ingredients, and rival Schlitz had come up with a novel battle tactic—a way to brew beer in just 15 days, less than half the time it took Anheuser, using new techniques that sped up the fermentation process.

Still, Gussie wasn't convinced that his son was ready to be chief. In 1971, at the age of 72, he named trusted deputy Richard Meyer as president of the company. Gussie remained CEO and chairman of the board, but the move was nonetheless historic: Meyer became the first person who wasn't a member of the Busch family to rise to such a lofty position. It served as a forceful reprimand for August III, who had put some of Anheuser's old guard on alert with his abrasive attitude and efforts to fill the company with workaholic clones of himself.

“The talk,” reported
BusinessWeek
, “was that the elder Busch was teaching his chilly, tough-minded son some humility.”

It didn't work. If anything, the move fanned the flames already burning within The Third's strident loyalists, who felt Gussie was past his prime. “The company was run like a corner grocery store,” said Robert Weinberg, one of the first executives August III recruited, who was forced to resign after disagreeing with Gussie during a board meeting. “I couldn't give my secretary a twenty-five dollar a week raise without the old man approving it.”

By 1974, Gussie was growing increasingly rattled by Miller's aggression and success. As Anheuser's profits and share price dropped through the floor, he started grasping at straws to turn things around by slashing the company's sales and marketing budgets and firing a slew of workers at headquarters, a shocking move that caused consternation within Anheuser's ranks. Concerns mounted that Gussie had lost his edge. After Gussie's lieutenant, Richard Meyer, resigned in 1974 to protest the job cuts, Gussie finally installed his son—who was already an 11-year veteran on the company's board of directors—as president.

The Third and his league of loyal underlings had a grand vision for Anheuser-Busch, and they were ready to unleash it on the market as soon as he became president. First, though, they had to wage war at home. Gussie was showing no indication that he planned to relinquish the CEO title. For a man in his mid-70s, he remained full of vigor and aggression—and that, for The Third, was the problem. The only thing now standing in his way was his own aging father.

So in May of 1975, The Third deposed Gussie with the same cool, detached efficiency that became a hallmark of his tenure. Fittingly, for a man whose life revolved around the brewery, 37-year-old August III seized control not in a heart-to-heart with his dad at the family dinner table but within the emotionally sterile atmosphere of Anheuser-Busch headquarters, through a dramatic and painstakingly choreographed boardroom coup. The power grab gave The Third a chance to show his remarkable ability to play one-on-one politics behind closed doors, a tactic he employed to great success for decades afterward with his own board of directors. He courted each member of Gussie's board individually to ensure he had the support of enough of its members, and secured commitments from a range of executives that they would resign if he was not elected CEO. Confident that he had the backing he needed, The Third then called for a vote on the matter by the board of directors.

The night before the board's scheduled meeting, Gussie summoned every director out for a face-to-face chat in the imposing “gun room” at Grant's Farm, one of many testaments on the estate to the family's longstanding fascination with firearms. As Walter C. “Buddy” Reisinger, a great-grandson of Adolphus Busch, strode toward the gun room's door, it swung open and another board member exited, shooting a wilted glance in his direction.

“Buddy, I only have one question for you,” 76-year-old Gussie rasped, moments after Reisinger walked in. “How are you going to vote tomorrow?”

Reisinger, one of many family members who tried to broker peace between Gussie and The Third during the coup, confessed that he planned to vote for August III and then briefly outlined his position. The layers of internal politics and infighting were too messy to delve into. Among those issues was at least one tangible viewpoint: The board felt August III had a better grasp of the threat from Miller and how to address it.

“This should be the greatest moment of your life,” Reisinger told Gussie. “You brought the company a lot of success, and you're still alive and can now turn it over to your son. This should be the best thing you could ever do.”

Gussie wasn't swayed. When the vote came down the next day in favor of his son, Gussie—who had been emotionally ravaged just months earlier by the death of his eight-year-old daughter in a car accident—lashed out like a wounded animal at the directors and executives who betrayed him. The family split into factions based on their support or abhorrence of August's forced ascension, and Gussie's younger children by his third wife, Trudy, including The Third's half-brother Adolphus IV, were particularly upset.

“August has stabbed my father in the back,” said Peter Busch, another one of Trudy's children, to a mentor of his at the time. After his 29 years as head of the company, Gussie was left with little to show for it other than his beloved St. Louis Cardinals. He remained president of the baseball team until he died on September 29, 1989, at home near St. Louis, at the age of 90.

“It was a tough time,” said Michael Roarty, a legendary marketing executive at the company. “But I think the timing was right.”

“Anheuser-Busch is a proud company, and the Busch family made it so,” Roarty said. “Gussie was a proud man. But as time went by, August proved to be a great general. Many of the great things we experienced were directly attributed to August III. There's a tendency to forget that, but it shouldn't be forgotten.”

When asked more than three decades later about the coup, The Third remained stoic and brief. “My father built the company,” he said. “He was a visionary. He and I had years of a great relationship and I had great respect for him.”

Yet from that day in May until Gussie's death more than 14 years later, the two men's relationship remained strained in the best of times and non-existent in the worst. They didn't speak for roughly a decade. Gussie hired Louis Susman, a St. Louis lawyer, to represent him on matters concerning the company, the Cardinals, and eventually, his giant personal estate, and Susman ultimately served as a go-between for Gussie and The Third.

At the time of his death, Gussie controlled a 13.5 percent stake in the company worth roughly $1.5 billion. For his work as executor of the estate, Susman was handed 2 percent of the trust income and 1 percent of the sale of Gussie's personal property and was soon worth millions.

In 2009, President Obama raised a few eyebrows by rewarding Susman with a job as ambassador to the United Kingdom, one of the country's most prestigious overseas appointments, despite his lack of foreign policy expertise. The promotion allowed Susman to move into Winfield House, the London Embassy's opulent residence in Regent's Park, which makes Grant's Farm look like a stable. Many of those who spoke out in Susman's support cited the “diplomatic” experience he gained while brokering deals between Gussie and The Third, whose animosities seemed to be deeper-rooted than any harbored between the United States and the United Kingdom.

The Third's first few years in office weren't much easier than orchestrating the coup had been. After finally wresting control of the company, he turned to face a Teamsters strike—one of the most challenging environments in Anheuser-Busch's history. The union was threatening to walk off the job over pay negotiations, so The Third, who had no intentions of caving to its demands, staffed his white collar business grads on the breweries' production lines to try to keep the place afloat. The episode—The Third's baptism by fire—marked the start of his antagonistic relationship with organized labor.