For generations the “King of Beers” reined over St. Louis and ruled the world-Budweiser controlled 52 % of the U.S. beer market, and Anheuser-Busch was the world’s top brewer. Today, the Great American Lager is no more. On November 18, 2008, the stock, known for its “BUD” ticker symbol, stopped trading, and one of America’s oldest, most beloved brands lost its American-owned status.
How did InBev, a Belgian company controlled by Brazilians, dethrone the king after barely a whimper of a fight? Timing, bad leadership practices, flawed strategy, and some unexpected help from powerful members of the Busch dynasty, the very family that had run the company for more than a century. Anheuser-Busch’s collapsed in spectacular fashion as the economy weakened, but there’s more to the story. AB committed collusion in its own death by holding flawed perceptions like we are “too big to be taken over” and “best business practices don’t apply here.”
At the time of the InBev acquisition, the iron-fisted August A. Busch III had just handed the reins to August A. Busch IV. But from the start, The Fourth’s leadership drew lukewarm reviews from investors and his own board of directors.
The Fourth’s questionable leadership style should surprise no one. Since he initially learned his leadership style at the knee of his father, who had wrested control from the grandfather, The Fourth had an uphill climb and ineffective role model. But unlike his father, The Fourth didn’t take a helicopter to the downtown AB headquarters. He just didn’t go. He set up his office in the suburban soccer park the company had purchased in the early 1980s to accommodate local youth players, collegiate, and professional teams. His decision to isolate himself from headquarters compromised his own leadership but soon rubbed off on the rest of the leadership team who became laissez-faire in their own leadership styles.
As The Fourth tried to reestablish relationships his father had severed, he met unexpected resistance. In theory The Third had handed the reins to his son in 2006, but in actuality, The Third maintained a death grip-visiting wholesalers and causing confusion about who was in charge-until 2007 when the board finally forced him out of his office at Anheuser-Busch headquarters.
It wasn’t always bad news, however. Few can argue with the success The Third attained for the company during his tenure. In 1977 AB controlled 28% of the U.S. beer market. By 2002, The Third’s last year as CEO, Anheuser-Busch brewed more than one out of two beers consumed in America.
AB had been enormously successful for so many years that cutting expenses seemed neither necessary nor palatable. Why should they? Their profit margins significant, they developed bad habits. Their hubris and naïveté eventually led to their demise, but the excess was great while it lasted. However, after years of downplaying and ignoring developments in other parts of the world, assuming its own supremacy, and spending money like a drunk sailor on shore leave, the company had to confront the brutal facts.
Many blame The Fourth’s lackluster leadership style, but at the time of the takeover, the company-once the world’s top brewer-had slipped into fourth place because of the inward-looking, America-centric strategy it had espoused in previous decades. AB missed several global expansion opportunities, thanks to The Third’s overly cautious insularity.
The Third passed up repeated chances to cut deals that would have redrawn the global beer industry’s map and protected AB against takeovers. He burned some bridges in the process that proved impossible to rebuild. While he dragged his feet during the 1990s, his competitors jumped to theirs. AB soon lost the emerging markets in Eastern Europe and South Africa. The gap between AB and those behind them in the race began to close and never re-opened.
Of all of The Third’s missed opportunities, the most fateful was a chance to snuff out InBev before it was ever created. The leadership of the Brazilian company approached The Third about working together to create “the Coca-Cola of beer,” to have a lock on the North and South American beer markets. When The Third declined the offer, the Brazilians pursued opportunities in Canada and Europe-alliances and acquisitions that would ultimately define the demise of AB.
Many people realized huge financial gain from the sale of Anheuser-Busch, but most did not. Just before Christmas of 2008, three weeks after the deal had been officially completed, InBev announced it would cut 6% of the US workforce. Seventy-five percent of those cuts hit the St. Louis area, and that was on top of the 1,000 workers who took buyouts or early retirement.
St. Louis had waged a long battle with Milwaukee to call itself the “beer capital” of America, but thanks to the Brazilians and the collusion of the Busches, that war was lost forever. Some analysts argue that InBev was the necessary end to the story since the things that made AB great when it was growing were not the same things that make a company great going into the future. To others, the obvious question was: “Why couldn’t-and didn’t-Anheuser-Busch develop those abilities so it could survive on its own without needing an acquirer to take over?” One answer is it chose to press on for years with its insular growth strategies and profligate spending.
Another possible answer, that doesn’t contradict the first, is that The Third recognized that the company’s days as an independent brewer were limited, so he engineered things so that the company would be sold on his son’s watch, rather than on his own. The Third had supported his son’s CEO candidacy once AB’s glory days had ended, blocked his son’s efforts to resurrect the company, and then ultimately steered it toward InBev, putting hundreds of millions of dollars into his own coffers. Perhaps his intentions had not been so nefarious; maybe they were simply misguided. No matter. The outcome was the same.
For more details, see Dethroning the King, by Julie Macintosh, John Wiley & Sons, 2011.
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