Ambitious Brew: The Story of American Beer (46 page)

If that’s what customers wanted, that’s what Miller Brewing would give them. Miller followed its Leinenkugel acquisition with the purchase of tiny Celis Brewing of Austin, Texas, and Shipyard Brewing, a micro located in Portland, Maine. The trio made up the core of American Specialty Craft Beer Company, a Miller subset where company employees explored the mysteries of making and marketing “small” beers. “We have people in here helping us train our palates and our noses, working with our sensory development,” explained the manager of American Specialty. “We listen to guys tell us how they built their microbrewing businesses, about investment, capital. We talk to entrepreneurs. We are immersing ourselves in this world.”

In the mid-1990s, the Big Three struck back with their own “craft” beers, an odd assortment with names like Elk Mountain Amber Ale, Red Wolf, Blue Moon, and Eisbock. Red Dog came from the “Plank Road Brewery,” located in the bowels of Miller Brewing on State Street, formerly called Plank Road, in Milwaukee. Coors left its name off its specialty beers—a bock, a wheat, an Oktoberfest, and a Winterfest. “They will not say Coors,” announced a Coors official. “We want them to be disassociated from the Coors family. If people see a major brewer’s name on a micro, it loses some of the cachet that makes the beer interesting to begin with.”

It didn’t help. For the most part, the small Big Beers flopped. As one brewing executive marveled, “A big name on a small label carries no weight in the world of micros.”

Anheuser-Busch tried another tack in the form of “American Originals.” Company researchers scoured the archives and came up with three names and recipes that dated back to the days of Adolphus Busch: Black & Tan; Faust lager; and the “Munich-style” beer that Adolphus had taken to the 1893 Columbian Exposition. History proved worthless to microbrew drinkers, who were not impressed.

Then, in a move that echoed Mr. Potter offering George Bailey a cigar and a cut of the action in
It’s a Wonderful Life,
August Busch flew to Seattle, toured Redhook, and dangled an irresistible carrot in front of its owners and board of directors: space on A-B delivery trucks and access to the giant’s distribution system. In exchange, A-B acquired 25 percent of the company. The agreement, which the parties announced in June 1994, enabled Redhook to build a new plant outside Seattle and another brewery in New Hampshire.

What felt to some beer fans like treason was simply business. Like hundreds of other small beermakers before and after, the crew at Redhook had struggled with distribution. Unless they could gain access to warehouses and delivery trucks, they could not grow, and the owners of Redhook wanted to grow. Deals like the one with Anheuser-Busch provided the opportunity and allowed A-B to gain a share of craft brewing’s shelf space at the grocery store.

That was the sunnier side of Big Beer’s efforts to cope with this intruder in its midst. Things got much uglier once Redhook and several other microbrewers, including Koch’s Boston Beer Company, issued stock offerings in 1995. The shares roared out of their gate.

Time, Big Brewing decided, to take off the gloves. Less than two months into the new year,Anheuser-Busch added its name to a petition filed with the Bureau of Alcohol, Tobacco and Firearms by the Oregon Craft Brewers Guild. The complaint targeted Oregon Ale and Beer Company, a subsidiary of Jim Koch’s Boston Beer Company. Oregon Ale’s products were contract beers, the draft coming from a micro in Lake Oswego and the bottles from the Blitz-Weinhard plant in Portland. But Koch marketed the products as Oregon beers rather than Boston Beer Company beers and in doing so, the state’s brewers complained, tried to capitalize on the state’s reputation as a font of fine beers. The petitioners urged the BATF to require brewers to include their name on all of their beer labels and to ban the use of “fictitious” brewery names. In the end, thirty brewers from around the nation added their names to the plea.

What might have been an industry-only conflict went national when a prime-time television news program aired a report on the squabble. Koch appeared on the segment, and the program’s content devolved into an attack on Koch’s “factory” beer, which the reporter compared unfavorably to the “traditional” brewing methods employed by Anheuser-Busch. Anheuser-Busch tightened the noose by running ads accusing Koch of “tricking” consumers into believing that his beer was microbrewed.

Other giants entered the fray by offering $200 “tap bounties” to retailers who agreed to dump their microbrews in favor of small beers brewed or distributed by the giants. A-B imposed a policy of “100-percent mind share”—translated into plain English, distributors had to rid their trucks of everything but Anheuser-Busch products. When A-B distributors in California abandoned four of that state’s microbrewers, the craft beer-makers filed suit. But the damage had been done, as the micros scrambled to find new distributors.

Then came the June 1996 issue of
Consumer Reports,
which confirmed what experienced craft brewers already knew and what Koch had discovered a decade earlier: Many “expensive microbrews and imports were flawed and stale-tasting.” No surprise, contract brewers and Sierra Nevada landed at the top of the rankings. Nor was it a surprise that so many expensive craft beers ranked low: As in the late 1930s, there were too many new brewers turning out too many beers with annoyingly cute names—Moose Drool, Whistle Pig Red, Dog’s Breath Brown Ale, Big Nose Blond—and forgettable flavors.

In October 1996, Koch announced that company sales were off 5 percent over the previous year. Boston Beer’s share price plunged 20 percent, and stocks of the other publicly owned micros dropped, too. “Boston Beer: The Sad Fall of An I.P.O. Open to All,” read one newspaper headline.

The turmoil rattled the infant industry. And it was about to get worse. In 1997, Kurt Widmer of Portland, Oregon, sold part of his Widmer Brothers Brewing to Anheuser-Busch in exchange for space on delivery trucks. (A few years later, Widmer, once one of Jim Koch’s most severe and vocal critics, began brewing some of his beer under contract at Heileman.) Michael Laybourn and the other founders of Mendocino Brewing also faced facts: Their beer was winning one award after another, but their stock offerings had not raised the money they needed to expand. Without help, they would fall prey to the brewer’s Catch-22. In 1997, the Mendocino partners sold a minority share of stock and a majority share of the company’s board to United Breweries Group, the largest maker and distributor of beer and spirits in India. Before the year was over, UBG had purchased shares of two more craft breweries.

As
IT TURNED OUT,
these were growing pains, not death throes, and they were good for the industry. The encounters with the Big Boys toughened the survivors, who either fashioned new, and better, strategies for growth or reeled in their ambitions and stayed close to home. Customers came back. The number of breweries and brewpubs soared, reaching well over one thousand by century’s end. By the late 1990s, Ken Grossman’s annual output inched toward a half million barrels and he was outproducing Leinenkugel and F. X. Matt. Jim Koch shot past the million mark.

The late-twentieth-century reinvention of American brewing laid bare the industry’s bone structure and revealed a fundamental truth about brewing: Almost alone among commercial enterprises, it is one in which, regardless of the brewery’s size, success depends less on number-crunching, share value, and MBA management than on basic entrepreneurship and a personal passion for the product.

Consider the sad story at Schlitz, which, already bleeding from the carnage of the 1970s, did not survive the century. In June 1981, striking brewery workers walked out of the Milwaukee plant. Company officials, most of them accountants rather than men with beer in their veins, announced that they planned to shut the brewery for good in September, even as Pabst and Heileman battled for ownership of the tattered remnants of what had been one of Milwaukee’s finest. Schlitz’s board of directors approved a sale to Heileman, but the Justice Department nixed the deal as a violation of antitrust laws. In the spring of 1982, Schlitz finally found a home, with Stroh of Detroit.

Stroh was one of the family-owned survivors, having been in business for 149 years under five generations of Strohs. But the family made its bid for grandeur at the wrong moment, demonstrating that brewing heritage and passion alone do not make great breweries. Had they maintained their “small” mystique and cachet, they might have survived. But in an industry hobbled by fragmentation, fickle consumers, and dwindling demand, no one wanted beer from an ordinary Big Brewer wannabe, and it was impossible for Stroh to catch up with giants A-B and Miller. Add the new burden of debt and stagnant demand, and the pressure proved fatal. In 1998, the company’s board sold its Tampa plant to Dick Yuengling; a year later they disposed of the rest of the assets, including the cornucopia of brand names Stroh had acquired over the years: Schlitz, Old Milwaukee, Old Style, Schmidt’s, Lone Star, and Special Export.

In 2000, the nation’s tenth-ranked brewer was Minnesota Brewing Co. of St. Paul, but the company was nearing the end of its short-lived run for glory. Management would file for bankruptcy in 2002, selling its Grain Belt label to August Schell Brewing in nearby New Ulm, Minnesota (the second-oldest family-owned brewery in the country).

The number-nine spot belonged to Ken Grossman, now sole owner of Sierra Nevada Brewing Co. and as passionate about his beer and his future as he had been back in 1978.

At number eight sat the nation’s oldest beermaker: D. G. Yuengling & Son. Dick Yuengling, Jr., had devoted the 1990s to making the kinds of careful business decisions that only a hands-on entrepreneur could: He used secondhand equipment when possible and saved on stamps by having his drivers deliver necessary mail to the brewery’s wholesalers. But when Yuengling did spend money, he did so dramatically and effectively: In 1998 he announced plans to build a new brewery from the ground up in Pottsville; a year later, he bought Stroh’s Tampa plant. In 2001, Yuengling would break the one-million-barrel mark.

Number seven, Latrobe, was an oddity: The Pennsylvania maker of Rolling Rock, which had become the favorite of collegians in the 1980s, was owned by Labatt, which was itself owned by Belgian giant Interbev.

Jim Koch’s Boston Beer Company claimed the number-six spot. He still brewed some beer on contract, but in 1996 he’d bought the old Hudepohl-Schoenling brewery in Cincinnati, the town where he’d grown up. Few brewers had been as personally battered by the late-century beer wars as Koch; but few proved more tenacious and passionate than he when it came to making fine beer.

Genesee of Rochester, New York, in the number-five spot, had been around western New York for more than a century, owned and run by the Wehle family since repeal. But in 2000, the Wehle at the top, dying of cancer, decided to sell what had become an ailing company. A group of investors, nearly all of them Rochester locals, bought it, intent on saving some local history and the brewery’s five hundred jobs. The owners immediately aligned themselves with the microbrewing end of the industry, hiring a brewmaster with a craft brewing background and launching a new line of full-bodied brews.

At number four was an entity named Pabst, but which had nothing to do with the Pabst Brewing that had once been the world’s largest beermaker. Pabst officials, uncertain how to navigate a stagnant market and changing tastes, spent the early 1980s leaning into a whirlwind of mostly hostile takeover bids. In the end, Paul Kalmanovitz, a California investor, won. He acquired Pabst in 1985 and proceeded to strip its management, its advertising, its employees, and its sales. When Kalmanovitz died in early 1987, his successor vowed to save the brewery.

It was too late. In 1996, Phillip Best and Frederick Pabst’s proud factory—the acres of soft red brick, the wrought-iron lamps with their ornate “P,” the once-bustling shipping yard—fell silent, locked behind an ugly chain-link, barbed-wire-topped fence, its only companions a growing community of weeds, rats, and birds. Captain Pabst’s beloved Blue Ribbon brand survived—in name only and as one of an array of beer labels owned by the Kalmanovitz Charitable Foundation, a San Antonio, Texas, holding company. Blue Ribbon became the darling of the bike messenger and retro-chic crowd in the early 2000s—but it was brewed at the Miller plant out on State Street.

In 2000, the Coors family still clung to their number-three spot, but Pete Coors’s plans to topple the two leaders had never panned out. Indeed, the brewery’s share of the market slipped in the 1990s, perhaps because for the first time in company history, the family turned the wheel over to an outsider, a man who had once run Frito-Lay.

As for the top two, they were the same pair who had held the spots since the late 1970s. But in 2000, Miller produced less than half of A-B’s 96 million barrels, and its market share dwindled slightly each year. In 2002, Philip Morris conceded defeat and sold Miller to a South African outfit. Would things have turned out differently if Fred C. Miller had not boarded that plane in December 1955? Perhaps.

And then there was the leader: Anheuser-Busch. At the beginning of the new century, half the beer consumed by Americans sported the Anheuser-Busch eagle, and just one of those brands, Budweiser, accounted for a staggering 18 percent of all the beer sold in the United States—proof that microbreweries notwithstanding, many Americans still favored a light-bodied, effervescent beer of the kind created by Carl Conrad and Adolphus Busch more than a century earlier. In 2002,August Busch IV, the great-great-grandson of Adolphus Busch, took over as president of Anheuser-Busch, the fifth Busch to serve in that post.

That as much as anything else explains why Anheuser-Busch is the world’s largest brewery: For more than 150 years, the family has nurtured and built and fought, trusting almost no one but themselves to care as much about the company’s name and its beer as they did. The craft brewers, the brewpub owners, the contract brewers, and everyone in between could take a lesson from the Busch family: Stick to the basics, in this case uncompromised quality and consistency. And if anyone needed proof beyond the sales figures, they need only visit the St. Louis brewery. There, in its immaculate grounds, in Adolphus’s still-pristine stables, in the perfectly maintained 1893 brewhouse, stands evidence of the family’s constant vigilance and its justifiable pride in its history, products, image, and reputation. Evidence, in short, of the entrepreneurial passion—and ambition—that had served the company for a century and a half.