Ambitious Brew: The Story of American Beer (35 page)

Thus they turned to mergers. National Brewing bought an olive oil company and Heileman purchased Machine Products, which fabricated airplane parts. Iroquois Brewing of Buffalo acquired an investment firm, a maker of natural food supplements, and a company that manufactured parts for computers and spacecraft.

More than one ailing brewery surrendered its independence to outsiders. The Liebmann family, which never recovered from its California fiasco, sold Rheingold to Pepsi-Cola United Bottlers, Inc (PUB). Jake Ruppert’s brewery suffered a similar ignominious fate. In 1963 Marvin Kratter, a New York real-estate developer, bought the brewery and then leveraged it two years later to buy the Boston Celtics basketball team. Kratter’s heart wasn’t in beer; it was in wheeling and dealing. Soon after the Celtics deal he sold the Ruppert brand to PUB/Rheingold, thus closing the hundred-year-old brewery on Manhattan’s Upper East Side. (He held on to the Celtics for three years, and then sold them to Ballantine Brewing. The reason? A computer manufacturer had absorbed Kratter’s company and the new management had no use for a basketball team.)

But most brewery mergers consisted of like joining like, as strong players gobbled weaker ones. Narragansett Brewing of Rhode Island bought Heffenreffer and 103-year-old Krueger, the canned beer pioneer, then was itself acquired by Falstaff. Drewry’s bought Piel Brothers of Brooklyn; Pfeiffer of Detroit bought E. & B. Brewing; and Rochester Standard absorbed Haberle Congress in Syracuse, New York. Peter Hand of Chicago merged with Buckeye of Toledo, Ohio. Ortleib Brewing of Philadelphia took over Fuhrman and Schmidt of Shamokin, Pennsylvania; Sunshine Brewing in Reading, Pennsylvania, snatched Columbia Brewing in Shenandoah. Blitz-Weinhard of Portland, Oregon, grabbed Great Falls Breweries of Great Falls, Montana, and Oshkosh Brewing in Wisconsin picked up Rahr Green Bay Brewing. Carling bought Arizona Brewing in 1964, but sold it two years later to National Brewing of Baltimore (which staged a successful takeover of Carling in 1975).

The mergers reduced the number of breweries—and the array of beer brands found in grocery stores. It’s easy to blame mid-century brewing’s shrinking numbers on corporate giants, but as the roll call above reveals, small and medium-sized brewers were hardly innocent victims; they played their own part in downsizing the industry. Mergers provided marginal players with additional brewing capacity and so a chance to make a run for glory, but in the 1950s and 1960s, vat capacity mattered less than that most valuable of all assets: space on a distributor’s truck. When Blitz-Weinhard of Oregon, for example, bought Great Falls Brewing of Montana, Blitz bought not just a brewery, but access to its distributors and so to another market.

As the brewers’ ranks dwindled, the competition between them intensified, and the wholesaler himself became vulnerable. An Illinois wholesaler for Falstaff learned that truth in a particularly brutal manner. First the brewery sold him lager contaminated with phenol; many of his customers dumped him and his bad beer. Then Falstaff’s sales manager showed up at the warehouse and demanded that the wholesaler capture 98 percent of the territory for Falstaff, and do so using “chiseling” tactics, such as offering lower prices to favored customers, or providing free kegs to tavern owners who would switch to Falstaff. The wholesaler struggled, torn between the need to protect his investment in trucks and warehouses and his desire to preserve his integrity. When he refused Falstaff’s demands, the brewery terminated his contract. The wholesaler lost everything, and sold his trucks, warehouses, and other assets for a few cents on the dollar.

Wholesaling functioned, in other words, as the old tied-house system had worked before Prohibition. And as in the days of the tied house, one man’s disaster was another man’s opportunity. No one understood this dynamic better than Roy Kumm, the president of Heileman Brewing in La Crosse, Wisconsin. In the early 1960s, Kumm bought five failing breweries in order to gain access to their distributors. Kingsbury Brewing gave him an entrée into Minneapolis, northeastern Wisconsin, and parts of California and Washington. Brewmaster provided accounts in Ohio and Michigan. Foxhead opened doors in New York and New Jersey.

California, which had become one of the largest beer markets in the country, proved a harder lock to pick. Those brewers who had invaded the state back in the early 1950s controlled distribution and thus retail outlets. The only way in was by purchasing an existing California beermaker, which Kumm tried to do in 1966, when he bid on, but failed to win, Lucky Lager. “There is,” he groused, “no other way to do it. You cannot get in with any of the wholesalers out there. It is an absolute impossibility. It is a locked door.”

As it had back in the 1880s, the merger movement of the 1960s kept some small players alive for a few more years. But in the end, it also inadvertently fostered the giants’ ambitions and placed the smaller players in an even tighter squeeze. In 1966, the Supreme Court upheld a lower court decision that found Schlitz guilty of violating antitrust statutes when it had acquired another brewery. That decision haunted—and shaped—the industry for years.

Barred from acquiring competitors’ plants and equipment, Schlitz and Anheuser-Busch simply dug into their pockets and built more plants. They’d started doing so back in the 1940s, but their pace of construction accelerated significantly in the 1960s, and the new factories were far more efficient than any of the tiny, aging breweries available through merger. With these behemoth brewhouses, the Big Two could produce more beer at a much lower cost than anyone else and slash their distribution expenses as well. By the early 1970s, A-B and Schlitz owned fourteen breweries between them, produced eight or ten million barrels apiece each year, and measured their annual growth in double digits. No one could catch them. That was unfortunate, because the two giants built those plants at a moment when seismic shifts rattled the industry. In the 1960s, the decade and a half of stagnant demand ended and beer consumption shifted upward. The moment Gus Busch had planned for had arrived.

R
OBERT
A. U
IHLEIN
, J
R
., grandson of August, did not intend to let Gus run away with his lead. He had joined Schlitz Brewing in 1942, starting in sales and working his way up to a vicepresidency in 1951—just in time to watch A-B knock Schlitz out of the number-one slot. Bob Uihlein longed to fight back, but his uncle Erwin, the company president, wasn’t interested. Nor was Sol Abrams, general manager and a Schlitz employee for some sixty years. The two older men settled into second place. For much of the 1950s, one employee said later, Schlitz Brewing resembled a “big lion dozing in the sun.”

That worried Bob Uihlein and the four hundred or so other Uihleins whose comfortable lifestyles depended on stock dividends. In 1961, the family-dominated board of directors replaced Erwin Uihlein with his nephew. Eighty-seven-year-old Sol Abrams retired.

Bob Uihlein was a tall hulk of a man with a passion for tennis, polo, and big-game hunting. He was decisive, smart, and ready to tackle a job for which he’d been training his entire life. He purchased an IBM computer and hired a slew of “genius-I.Q. types,” including Fred R. Haviland, Jr., who came to Schlitz via advertising and a stint at Anheuser-Busch. Sales rose 19 percent in Uihlein’s first year on the job, thanks in part to a new advertising campaign (“Real gusto in a great light beer”). He plowed some of the profits into acquisitions, on the theory that a diversified company was a healthy company. His new vice-president for finance spent $100 million on Chilean fishing fleets, a Pakistani glass factory, and breweries in Puerto Rico, Spain, Belgium, and Turkey. None of the investments returned a profit, but by the time Uihlein figured that out, it didn’t matter, thanks to Haviland and the whiz boys in marketing.

Indeed, the new gusto in Schlitz stock was due less to Uihlein than to Fred Haviland. When you drink, he explained to a reporter, “you imbibe the image along with the brew.” He and his computer analyzed consumer behavior, trying to figure out “what makes the beer drinker tick and how to get to him . . . Beer to us is a product to be marketed—like soap, corn flakes, or facial tissues.” “It’s the Procter & Gamble way,” he added, in case anyone had missed the point. “We’re Procter & Gamblizing the beer business.”

Procter & Gamblizing meant determining how, why, when, and where people drank beer; why they chose one brand over another; and how and why the color of the label, its wording, or even the shape of the bottle affected their decision. Haviland and his staff determined that people regarded beer as an extension of themselves, and most wanted their chosen brand to convey a sense of “premiumness”: If the beer appeared to be refined and high class, so, by extension, was the person drinking it. Never mind that the brew in question probably looked, tasted, and cost the same as any other; advertising and image created the “premiumness”that drinkers desired.

Haviland’s efforts inspired the campaign built around the word “gusto” and new labels for Old Milwaukee, the company’s lower-priced beer, that featured “lots of white to suggest lightness.” Clearly, Bob Uihlein had seen the light.

He wasn’t the only one. Other brewers hunted for what marketing mavens called “segments” of potential profitability. That explains “Lite” beer, introduced in 1967 by Meister Brau of Chicago, an agglomeration of small midwestern breweries. Back in the 1950s, some brewers had tried to promote ordinary beer as diet friendly and no more fattening than grapefruit or crackers—without changing their lager’s recipe. Lite beer was a whole different animal: Unlike its predecessors, it contained fewer calories than regular beer. The company supported the new brew with television ads that featured a lithe blonde dressed in a sleeveless black-and-white striped cat suit who performed exercises and urged viewers to “Meet the beer you needn’t hold back on . . . ”A few months later, Forrest Brewing, a division of Rheingold, trotted into the segment with Gablinger’s, which contained sixty fewer carbohydrate calories than a regular bottle of beer, or about the same number as a slice of bread. Drink Gablinger’s, suggested the advertising campaign, and “save the bread for a sandwich.”

The diet beer segment was just one of many fragments into which the brewing industry was splintering. Demand was back—but Americans seemed suddenly, almost inexplicably, to want something other than basic American lager. Consider imported beer: In the 1960s, it comprised less than 1 percent of the total beer market, but that slice grew at the rate of 9 percent a year, a gallop compared to domestic sales’ 2 percent trot. Choosing an imported beer over a domestic one, opined an advertising manager for Heineken, was like buying a Cadillac instead of a Ford. The decision bespoke sophistication, worldliness, and appreciation for “the finer things.” “It’s fun when you have guests in to ask, ‘Would you rather have German or Mexican beer?’” said a man interviewed for a report in
Newsweek
magazine. He stocked up at Tony’s Liquors in suburban Los Angeles, where thirty-two different imports lined the shelves.

Fun? Not as far as American brewers were concerned. “It is particularly irritating,” groused a vice-president at Carling, “to see someone pay 75¢ for a bottle of Heinekens.” Even more irritating to see visitors at the 1965 World’s Fair in New York drink three million glasses of Löwenbräu. And positively maddening to watch Americans flock to the British-style pubs that, along with the Beatles and Mary Quant clothes, were all the rage in the mid- to late 1960s. Dozens of pubs, complete with darts, fish and chips, and British beers and ales (served cold to accommodate Yankee palates), opened in New York (thirty opened in the space of about a year), Chicago, St. Louis, Los Angeles, and even Atlanta.

The Carling executive ought to have paid closer attention, because the sudden popularity of imports marked the onset of a transformative moment in the American palate. Had the Carling man but known it, the era of bland food was grinding to a halt, and the next twenty years would see what amounted to a revolution in American food and drink. The cause of these tectonic shifts in cultural markers are always hard to pinpoint with precision, but post-war affluence was surely one factor. So was travel abroad and a generation of kids determined to reject whatever the establishment had to offer.

Whatever the reason, in late 1966,
Time
magazine analyzed the trend. A shop owner in San Diego reported that he stocked three thousand different “fancy foods, from kippered sturgeon and kangaroo tails to pickled rooster combs.” A grocery store manager in Washington, D.C., remarked that just ten years earlier, an average chain store carried perhaps a half dozen kinds of cheese. Now, he said, any self-respecting grocer stocked “at least 50 assorted, high-powered imported cheeses.” An array of photographs illustrated the report, most of them showing notable Americans at work in their kitchens. It’s a measure of the times (and their difference from our own) that the “celebrities” included Vice President Hubert Humphrey, an MIT provost, the wife of an architect, and historian Barbara Tuchman. Augie Busch, Gus’s son, was there, too, preparing doves broiled with butter and served rare.

If Americans wanted something exotic, then smart brewers were going to give it to them. Gus Busch put Michelob, a beer developed by his grandfather sixty years earlier, into a sleek new bottle, slipped an importlike foil wrapper around its neck, slapped on an eye-opening price (an astonishing $7.30 a case, more than twice the price of Bud), and sent it to market. Meister Brau introduced Meister Brau Bock and bought the North American distribution rights to a German beer. Others followed suit, signing franchise agreements and brewing pseudo-imports, dark beers, bocks, and anything else that might tempt the palates of the “discriminating drinker” segment.

But in the 1960s, the most important segment was “youth.” Brewers understood that their future success rested on the ability to capture and keep the millions of “war babies,” as Americans called them, tumbling into adulthood. Easier said than done. The kids of the 1960s, at that time the most well-educated, affluent young adults in American history, were not behaving quite like anyone had expected them to. In the spring of 1962, several dozen students gathered at a camp on the shore of Lake Huron in eastern Michigan and drafted a political statement that condemned American foreign policy, racism, capitalism, colonialism, and the military-industrial complex, and inspired dozens of antiwar, antinuclear marches.