Dethroning the King (18 page)

Anheuser-Busch also started to lose momentum against an increasingly aggressive Miller in the early 2000s, and its dominance of the U.S. beer market took a turn for the worse, dropping from the stunning high of 52 percent it hit during The Third's last year as CEO. Even if The Third had remained at the helm, there may have been nowhere to go but down. Miller was running harsh attack ads that were proving quite effective in reversing Miller Lite's decade-long slide against Bud Light. Drinkers' tastes, meanwhile, were changing, and more and more people had started to favor wine, liquor, and craft beers over mainstream brands like Budweiser.

As Anheuser's stranglehold on the market began to loosen, The Third, as chairman, with Stokes as his CEO, helped push through a few strategic moves that drew criticism from within the company's ranks. When Hurricane Katrina hit New Orleans in 2005 and prompted Anheuser's beer inventories to swell in hurricane-affected areas, the company had two options—it could cut prices to sell its beer off quickly or let it spoil on the shelves to protect its pricing power. Anheuser chose the former, and as the U.S. market leader, instigated a huge pricing war with the other brewers from which its market share never recovered. Its profit dropped by nearly a quarter in the third quarter of that year. “If this is successful discounting, failure looks preferable,” one industry analyst quipped.

“He started a price war,” said one strategy committee member. “He started cutting price to punish them, and took so much revenue out of the marketplace. And then blamed everybody else, blamed us, blamed the marketing guys, blamed August IV. There was just a lot of blame going around.”

August III also pushed hard for Anheuser-Busch to hit back at Miller, a move many insiders felt was beneath Anheuser-Busch.

“That's when he started to turn on us, the marketing guys, saying, ‘Nobody can talk to us that way! Attack!' ” said Bob Lachky. “That's the point in time where we saw him change, where he became very aggressive, saying, ‘It's marketing's fault that we can't grow.'” For the first time people could remember, August III was showing signs of being afraid, and he was lashing out in response.

Against the protestations of some of the company's top marketers, Anheuser-Busch counterattacked. It ran ads that portrayed Miller as the “Queen of Carbs” at a time when the protein-heavy Atkins diet had made “carbohydrate” a dirty word. And it shamelessly draped itself in the American flag while drawing attention to Miller's foreign ownership.

The Third's protectionist ads made some Anheuser-Busch insiders uncomfortable, particularly after he plastered the Busch Gardens theme parks with slogans and banners that shouted to unsuspecting park goers that Miller was foreign-owned. The propaganda seemed Big Brother-ish and out of place in an environment that was supposed to be about wholesome family fun.

“We were doing things that were crazy,” said one former top executive. “Our theme parks were putting up signs that said, ‘Drink American, not Miller,' and it was terrible. Consumers don't look at things that way. And someone who is a recent arrival in our country could take that the wrong way. It's just so wrong today. It's desperate. It sounds terrible.”

One of Anheuser-Busch's advisors on Wall Street ran into the signs during a family trip to Busch Gardens in Tampa, Florida, three or four years prior to InBev's takeover bid.

“I was with my kids,” the advisor said. “And in the men's room at Busch Gardens, they had all of these plaques up against SABMiller. ‘It's not American. “SAB” stands for South Africa.' It was verging on racist craziness. I remember standing around the men's room going, ‘What the hell?' There must have been ten of them.”

August III was a student of his family's history. He often read old letters Adolphus had written about his days running the company, and he took them to heart, referencing at times how “My grandfather used to do this” or “. . . that.” He knew that there were critical points in history at which Anheuser had nearly been lost—most notably, during Prohibition.

“He was always cognizant of the terrible trials the company had been through, and he just didn't want it to happen to him. He didn't want to lose the company,” said one strategy committee member. “There was a lot of blame going around.

“He didn't trust anyone anymore. People can say Augie was going crazy—no. He didn't trust the team. He didn't want the thing to go down. He was going to solve it himself.”

Anheuser's strategy committee meetings became contentious, as a growing number of the executives determined that the company needed to merge with a rival, or at the very least forge a strong alliance to stay competitive. The Fourth was still plugging away under Stokes as president of the company's all-important brewing division, trying to finally prove he was up to the task of being CEO. As the competitive landscape grew tougher and tougher, it became clear that he might have painfully few options at his disposal for ensuring the company's success by the time he was promoted. The Fourth undertook some efforts as brewery head to reverse the company's slide, bolstering Anheuser-Busch's brewing portfolio by adding new brands to its distribution system and trying to tap into the higher-end market. He also added non-alcoholic drinks from Hansen Natural Corp. to Anheuser's distribution chain and tried to get his father to consider buying Hansen outright or making other acquisitions.

And though The Fourth's view on the brewing industry was more global than The Third's, he also embraced some of his father's America-centric rhetoric to make his devotion to the company clear. At a wholesaler convention in March 2005, August IV whipped the group into a frenzy over the fact that Anheuser-Busch was the only major American-owned brewer standing in the wake of the MolsonCoors merger. To kick-start the troops into a patriotic fervor, he declared that the Miller commercials that targeted Budweiser were actually desecrating America. At the height of the crowd's excitement, he then strode to the chair where his father was sitting, paused, and knelt in front of him. The Third's eyes welled visibly with tears, and the over-the-top gesture pushed the wholesalers into rapture.

It had become clear by that time to many Anheuser-Busch insiders that August IV was bound to move into the CEO slot. The company's board had encouraged him to take a few steps in their shoes, so he had joined the board of package shipper FedEx in 2003. A few sections of his résumé still remained untended, however, and his image had as much to do with it as his actual competence. The Fourth still had a playboy problem.

A range of Busch men had built reputations for womanizing. August IV, though, significantly upped the ante, to the point where some Anheuser insiders wondered what he was trying to prove. He was known to walk into nightclubs and buy rounds of Budweiser for everyone in the bar, and was often seen patronizing St. Louis's trendier hotspots with a model or some other girlfriend on his arm—or frolicking at Lake of the Ozarks on one of the company's boats, surrounded by a bevy of bikini-clad women. His home, which had once been owned by hockey star Brett Hull, was described as the ultimate bachelor pad, with a huge hot tub and beer taps in the kitchen, and people reported that he often had women accompany him on business trips. One company advisor was once told by a prominent St. Louis businessman that August IV “came through our secretarial pool like Sherman through Georgia.”

While General William T. Sherman left behind a trail of scorched forests and fields on his 1864 march to the port of Savannah, The Fourth was more apt to leave a string of broken hearts and spilled drinks. He was engaged at one point to a model from Missouri named Judy Buchmiller, but they rescheduled their wedding twice. “I'm very much in love with the girl I'm engaged to,” he had said in early 1991. “We're still, hopefully, going to get married. We're very much in love. I want to marry the girl.” Their engagement was called off for good later that year.

“I'll marry when the time is right,” he said in 1997, when he was dating a woman named Sage Linville who had moved from California to be with him in St. Louis. “There's a girl I'm very much in love with,” he said. “Sage Busch is an interesting name, isn't it? I'm not making predictions about that.”

The Fourth, who shared his father's taste in blondes, toned down his party-boy antics in his 30s, although he certainly didn't abandon them. He logged plenty of hours trotting the globe in the company of Ronald Burkle, the California-based billionaire supermarket magnate and investor. The Fourth spent a good amount of time hanging out at Burkle's tony estate in Los Angeles, at points even putting in business calls to the company's advisors from his place, and Burkle described August IV in the early 2000s as his best friend. Burkle introduced The Fourth to Yusef Jackson, the son of the Reverend Jesse Jackson, at a party at his house in 1996, and Jackson and his brother Jonathan were later chosen to take over a key Anheuser-Busch distributorship in Chicago, prompting cries of favoritism that the Jacksons denied.

In 1998, a 34-year-old August IV told a reporter that while he was “not celibate, by any means,” he was sharing his home with no female companions other than his three Rottweilers. His increased level of involvement at the company, The Fourth said, made establishing a personal life more difficult.

“If I don't start seriously working on a relationship, some ten years down the road I'm going to look back and say, ‘Well, I made it in the company, but I missed something else,'” he said.

Eight years after making that statement—just in time, according to his synopsis—he finally did settle down. Amid persistent chatter that getting married was a requirement for him to become CEO, The Fourth wed 25-year-old Kathryn Thatcher, a native of Fairlee, Vermont, on the auspicious date of August 5th, 2006, in a nod, perhaps, toward a potential heir in the future. August's aunt, Beatrice Busch von Gontard, said at the time that she had always wondered how long the “August” name cycle would continue. “Where's the cutoff ? Or do you be like Henry VIII and just keep going?”

The couple was carted away from their Bradford, Vermont, wedding ceremony by a team of eight Clydesdales pulling a bright red wooden beer wagon, which was festooned with white bows and sported a “Just Married” sign at the back. Its green-suited drivers, who perched on its steering bench next to a Dalmatian, pulled up outside the wedding reception site at the Hanover Inn across the border in New Hampshire for photographs. To the chagrin of some disgruntled locals, several of Hanover's best-known bars and restaurants agreed to feature Anheuser-Busch beers more prominently while guests were in town for the festivities.

The Fourth's decision to get married was “arguably as important” to his efforts to become CEO as his four years as head of the company's U.S. beer operation had been, the
Financial Times
said, because it dampened “the playboy image that had caused doubts about his suitability for the top job.” According to
Fortune
, The Fourth had “long understood that he needed to marry in order to have his father, chairman August Busch III, and the board of directors take him seriously.”

“That was always the quid pro quo,” a former Anheuser employee told the magazine. “It was ‘August, until you settle down and stop being the wild man, nothing is going to happen.' ”

Even The Fourth's marriage, however—which was something his father ostensibly supported in concept—caused problems in the two men's relationship. “Some of the tension between him and his dad, I think . . . dealt with the fact that he did take off occasionally with his wife and go to the lake or wherever, to take a little bit of time off and away from the job to spend with her,” said General Shelton. “When he got married, I thought I saw him adding a little more balance to his life, mixing a little bit of the social with the work, which I thought served him and the company very well.”

The wedding left just one major box still unchecked—receipt of the board of directors' approval. That finally came in September of 2006 when the board announced it had chosen The Fourth as Stokes's successor and said Anheuser would be well served by his leadership.

There were reports of discord on the board about the decision. “He's a party boy, you cannot hide that,” said industry writer Harry Schuhmacher. “There are too many people that know it. The hot tub in the living room, and dancing girls and parties all night . . . that went on throughout and still goes on today, I'm sure. And that's his nature. But Richard Branson is a party boy too. Does that disqualify someone from leading a large company?”

The board decided it didn't. And frankly, there were no other candidates who could match August IV's breadth of knowledge on the American beer industry. He could cite Budweiser sales statistics for small towns in Tennessee by memory, and he had literally grown up at the brewery. He wasn't the perfect candidate, but The Third hadn't cultivated any others. Compared with the company's next-best option—bringing in a consumer products executive who didn't understand the fickle beer market—The Fourth was deemed Anheuser's best choice.