Bitter Brew: The Rise and Fall of Anheuser-Busch and America's Kings of Beer (29 page)

The bread didn't rise in the food products division either, as both Eagle Snacks and Campbell Taggart fell far short of expectations. As one investment banker sniped at the time, “Being superior planners and producers in the beer industry does not make [Anheuser-Busch] superior bakers.”

“Actually, given our years in the production of baker's yeast, we were pretty damned good bakers,” countered Long. “I think the biggest problem with Campbell Taggart was the age and condition of their plants and equipment.” The overriding problem was that August III's great “diversification initiative” loaded too much onto the backs of A-B's distributors, many of whom who were either unwilling or unable to carry the weight.

Long was not responsible for the food products or beverage operations, but he felt the pressure nonetheless because beer supported it all. Every year, he had to sell tens of million of dollars' worth of beer just to offset the cost of the diversification. He was having trouble sleeping.

August didn't make it any easier for Long when he decided to expand the company's profitable theme park and resort operations to include a cruise ship company. A-B purchased a majority interest in the Seattle-based Exploration Cruise Lines, which operated a fleet of five smaller-size (five- to six-hundred-passenger) ships that specialized in “one-of-a-kind” travel adventures to out-of-the-way destinations in Panama, Tahiti, Alaska, and the Pacific Northwest. Some members of the board and the policy committee had misgivings about the venture. They fretted that cruise ships were expensive, profit margins were low, and the capital cost of growing the business was enormous, with each new ship costing anywhere from $50 million to $80 million to build. Their concerns were validated; Exploration Cruise Lines proceeded to lose $40 million over the next two years.

Fortunately, at the time Anheuser-Busch could absorb such losses. Americans may have been drinking less beer than in recent years, but more of what they were drinking was Budweiser and Bud Light. In 1985 they guzzled 46.5 million barrels of Budweiser alone, an increase of nearly 2 million barrels over 1984, and 25 percent of all beer sold in America. Bud Light sold 5.4 million barrels in 1985, an increase of 1.2 million. A-B's total output of 64 million barrels gave it a market share of 36 percent. The following year, the numbers increased to 72.3 million barrels and a 38 percent market share. It appeared that the company would hit a 40 percent market share by 1987, three years sooner than August had predicted. Now there was talk of reaching the milestone of 100 million barrels and 50 percent market share by the mid-1990s. “Is it arithmetically possible?” August responded to a reporter's question. “Yes.”

Miller remained a distant No. 2. Its signature High Life brand had been beaten into submission by the booming sales of Budweiser, but its Lite brand accounted for 50 percent of all light beer sales, 18.5 million barrels in 1985, making it the second-best-selling beer in the country, behind Budweiser. Still, Bud Light was cutting into Miller's lead in the low-calorie category at a rate of more than a million barrels a year.

From the beginning, Bud Light had sold well among twenty-five- to forty-four-year-old professionals, the traditional drinkers of light beer. But in early 1987 A-B made a bold play for an even younger segment of the beer drinking population—twenty-one- to twenty-four-year-olds. When speaking for public consumption, industry executives referred to this group euphemistically as “contemporary adults.” Among themselves, however, they described them more accurately as “heavy users.” These were not the folks who stopped by the corner tavern at the end of a hard day's work to reward themselves for all they'd done. They were more the hard-partying college kids who liked to get hammered before a football game and drink themselves into a stupor on the beach during spring break. For them, Mike Roarty introduced a new ad campaign during the fourth quarter of Super Bowl XXI. It starred an English bull terrier named Spuds MacKenzie, riding a skateboard and wearing a Hawaiian shirt, sunglasses, and a God-given shit-eating grin while an adoring trio of beautiful girls in bikinis jiggled and sang his praises as “the original party animal.”

The ad campaign was an instant sensation. Taken by the tongue-in-cheek idea of a “spokes-dog” for a beer company, the media jumped on the story like, well, a dog on a bone. Reporters, columnists, TV producers, and talk show bookers inundated A-B with so many calls about the studly Spuds (in real life a female named Honey Tree Evil Eye, or Evie for short) that Fleishman-Hillard assigned the pooch his own PR rep, who played along with the conceit by referring to his client as “Mr. MacKenzie” while scotching persistent rumors that Spuds had been killed either in a limo accident or a “hot tub mishap in California.” One writer for the trade magazine
Adweek
raised concern about the campaign's underlying message, noting that Spuds was presented all too cleverly as “the embodiment, the visual equivalent of, a pleasantly inebriated state,” which would have violated FCC regulations if Spuds were a human.

Spuds quickly became a pop culture icon. The dog traveled to public appearances accompanied by his three “Spud-ettes.” He did a spot on
Late Night with David Letterman
and one with Joan Rivers on Fox's
Late Show
. He landed a role in a movie with Martin Mull and made
People
magazine's annual “Best Dressed” list. He inspired a line of Spuds MacKenzie merchandise that grew to more than two hundred items—wall posters, beachwear, sunglasses, satin jackets, stuffed dolls, plastic toys—enough that Macy's opened twenty-two Spuds MacKenzie boutiques in its New York department stores. Most important for Anheuser-Busch, Spuds sparked a dramatic increase in Bud Light sales, a jump of 21 percent—to 8 million barrels—in the first year of the campaign, pushing the brand to the No. 3 position, just behind Miller Lite and gaining.

Like many celebrities before him, however, Spuds eventually was undone by his success. Over the course of some twenty national TV commercials, the character developed a following among a group of consumers with a particular affinity for goofy-looking dogs in silly outfits—kids. And when Spuds paraphernalia began showing up in toy stores, howls of protest went up from Mothers Against Drunk Driving, the National Parent Teacher Association, and even the U.S. Bureau of Alcohol, Tobacco, and Firearms, all of which accused Anheuser-Busch of cynically marketing to minors. Senator Strom Thurmond held a stuffed Spuds doll as a prop while delivering a stem-winder on the Senate floor attacking beer advertising aimed at youngsters.

A-B spokesmen responded that they were shocked,
shocked
, that anyone would think the company would “spend money and manpower and energy to advertise to a group that legally cannot consume beer.” (In truth, the industry was well aware that “heavy users” tended to settle on their brand preferences while they were in high school and college, before they reached the age of twenty-one.)

“The company does not apologize for the Spuds character,” an A-B spokesman told
Adweek
, which promptly busted the company for an egregiously inappropriate instance of target marketing that took place on the White Mountain Apache reservation in eastern Arizona.

“At the Apaches' annual Labor Day rodeo and tribal fair, life-size versions of Bud Man and Spuds MacKenzie rode an antique Model-A delivery truck down the parade route,” the trade magazine reported. “As the familiar spokes-characters passed by, eager children rushed to the truck to gather handfuls of Budweiser can-shaped candies that showered down.” Noting that the Native American community was predisposed to high rates of alcoholism,
Adweek
called the promotion by A-B's local distributor a case of “brand-building among minors, targeting vulnerable consumers and ignoring the issue of alcohol abuse.”

Faced with increasing controversy and bad publicity, A-B finally agreed to put Spuds down figuratively, but not before the character had taken a crippling bite out of Miller Lite's market share. In the annals of A-B advertising, Spuds MacKenzie still ranks as the company's most effective spokes-mammal.

During the first rush of Spuds-mania in the spring of 1987, Denny Long had every reason to be proud of his thirty-five years with the company. In his rise from office boy to president, he had played a key role in transforming Anheuser-Busch from a $700 million brewery that was “run like a grocery store,” in the words of former corporate planning VP Robert Weinberg, into a $7 billion conglomerate the
Los Angeles Times
described as “archetypical of the corporate giants Coca-Cola and Pepsico in soft drinks and Philip Morris and R. J. Reynolds in cigarettes.” During Long's eight years in charge of the brewing division, sales had doubled and profits had quadrupled.

Every step of the way, Long had been with August; they'd grown up in the company together. August had gone out of his way to credit him with winning the great beer war, publicly presenting him with a bronzed sculpture of a soccer shoe delivering a crushing soccer-style kick to a Miller High Life can. August and Long weren't actually friends; Long knew that. Even though they'd talked practically every day and spent thousands of hours together on company planes, August always maintained a boss-employee distance. August didn't seem to make friends; he didn't have time. He'd only had two or three that Long knew of, and the closest of them, John Krey, the scion of a St. Louis meatpacking family and, thanks to August, the owner of an A-B distributorship in St. Charles, Missouri, had died of cancer recently. In the last few months of Krey's life, August had ordered one of the company planes retrofitted with a hospital bed and flown Krey and his wife to Europe. Long suspected that now, after Ginny and the kids, he was one of August's closest relationships. He was confident that whatever happened, August had his back.

Which is why he didn't see it coming.

A few months earlier, in December 1986, the A-B legal department had been contacted by a lawyer acting as the court-appointed trustee in the bankruptcy of a St. Louis–based advertising and promotions firm that had done a lot of work for the brewery. The lawyer said he had come across documents indicating that the firm's principals, one of them a convicted embezzler, may have engaged in a kickback scheme with several A-B executives. It appeared that the executives—Michael Orloff, the vice president of wholesale operations, and Joseph Martino, the vice president of sales—might have traded A-B business for cash and gifts. Since the bankruptcy was part of a court proceeding, the documents would become public at some point, and barring the discovery of some convincing mitigating evidence, the court would turn the matter over to the appropriate law enforcement agency for investigation.

August III was immediately briefed, and an internal investigation was quietly launched. Long was told about the investigation, but August decided to keep it out of his purview because Orloff and Martino worked for him; Martino was considered Long's protégé. The decision to exclude him didn't sit well with Long. He thought it created the appearance that August didn't trust him.

The next few weeks were difficult; as auditors brought in by the board of directors began going through thousands of invoices from outside suppliers, Long was not kept posted. Every now and then August would drop a little bombshell on him, telling him, for instance, that a no-name New York rock band managed by an old friend of Joe Martino's had been paid more than $200,000 by the company but had performed no services. Long was shocked that Martino could have been involved in something so sleazy. It didn't sound like the guy he knew. Martino had grown up working-class poor in the Bronx and went on to earn an MBA from the Wharton School of Business. At age thirty-four, he was a rising star in the company, regarded among his peers as a street-smart straight arrow. Which is why August's suspicions about Martino and drugs didn't ring true either.

Ever since his son's trouble in Tucson, August had been on a tear about drugs, especially cocaine, which he blamed for all manner of society's ills. Now he was convinced that Martino and maybe a few others were involved in cocaine, possibly to the point of distributing it throughout the company. “Did you know that 65 percent of the employees in the Bevo [bottling] plant are on drugs?” he said to Long one day. “How do you know that?” Long replied.

August responded vaguely that the investigators had said that to A-B's chief of security, Gary Prindiville.

Like August, Long was an old-school beer guy who knew next to nothing about drugs, but he was fairly certain you couldn't come up with a number like that unless you conducted extensive testing among the plant employees, which he knew had not been done. He thought the 65 percent was a wild exaggeration, and the idea that Martino was behind the distribution was completely out of line. Of course, it didn't matter what he thought. What mattered was that August believed it. The conversation left him unsettled, wondering if perhaps August's opening question—“Did you know that …”—wasn't entirely rhetorical, and what he really meant was, “How could you have let this happen?”

On February 28, August ordered Long to inform Martino about the existence of the internal investigation. Long and Martino were both in Chicago for a wholesaler presentation, so Long took the young vice president for a ride in the company-provided town car and, as August had instructed, gave him the bare bones of what he knew, mentioning the alleged band scam and the drug suspicions. Martino, apoplectic, said none of it was true.

Back in the office the following week, an A-B security detail searched the closet outside Martino's office where he kept promotional items—golf balls, T-shirts, and ball caps emblazoned with the Budweiser name or the company logo—that were routinely handed out by the marketing executives. Every marketing executive had such a closet, and the higher-ranking the exec, the better the goodies. Mike Roarty's closet was like Ali Baba's cave, crammed with treasure ranging from golf bags to high-end electronic equipment that he'd received as gifts from wholesalers and suppliers and in turn gave away to VIPs and favored employees in the great circle of corporate swag. Lavish gift giving and receiving was part of the A-B corporate culture dating back to the beginning, when Adolphus Busch established the practice of giving away sterling silver pocket knives engraved with the company logo. His son, August A., handed out guns, and his son, Gussie, awarded yacht cruises with booze and broads. Making friends was their business, after all. In more recent years, sales executives motivated sales reps and cemented business relationships with Rolex watches, which were purchased in quantity through the company. One newly appointed vice president once found boxes of Rolexes stashed in the back of a cabinet in his new office, apparently long forgotten by a previous occupant.