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, howev
er—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.
“August IV has successfully prepared himself by leading the U.S. beer company through a period of great change and challenge,” his father said in a press release dated September 27. “He brings with him the new thinking of his generation, yet appreciation for the great traditions and values of this company.”
After 49 years at Anheuser-Busch, 68-year-old August III retired as chairman of the board on November 30, relinquishing a bit further his official hold on the group. Stokes, 64, who had been with the company for 37 years and had worked directly with The Third for more than 30 of them, took over as chairman.
Both men cut deals to remain highly paid consultants for the company, as per tradition for many of Anheuser’s departing or demoted executives. August III agreed to consult part-time for six years, and Anheuser pledged to continue covering his business travel, office, and security expenses and even to continue leasing its corporate aircraft from his company. It also pledged to provide free draught and packaged beer to his house upon request. In December, he elected to be paid his $37 million pension, along with another $27 million in deferred compensation, in one lump sum rather than having payments spread out over many years. Stokes made a similar election and received $34.6 million in pension and deferred pay—bringing the amount Anheuser paid its two former chiefs that month to nearly $99 million.
After spending exactly half of his life working at Anheuser-Busch, 42-year-old August IV—who was literally born to be chief executive—took over on December 1 and brought with him an easy-going, approachable leadership style that contrasted sharply with that of his father’s.
The mood at the company, though, was hardly euphoric. Investors and analysts were concerned about its heavy dependence on the United States, where there were few opportunities for growth. Budweiser’s market share had been slipping for years, and neither The Third nor Stokes had been able to stop it. Wine, craft beers, and imports were continuing to grow in popularity, and Anheuser-Busch was struggling to invent “beer occasions” that provided excuses for people to drink. Beer’s total share of the alcohol market had dropped to 55 percent from its peak of 60 percent in 1995. The market was even topping out when it came to devoted beer drinkers. The human stomach is only so big, America’s obesity problem notwithstanding, and Anheuser-Busch wasn’t likely to convince many people to chug a case of Budweiser a day no matter how hard it tried.
The company’s stale share price reflected these concerns, and investors were getting frustrated. It marked the toughest era for the company since The Third had taken the reins in the 1970s. August IV was staring a mountain of hard work in the face.
A few things changed when he took office. With the company under heavy pressure to rein in costs, he quickly decided to shutter Anheuser’s ostentatious executive dining room. The luxurious eatery had served as a place of respite for Gussie and The Third for decades, but it was little more than a nerve-wracking poaching ground for many of their subordinates.
“He used to have breakfast in our dining room, which was like a bank dining room,” said Bob Lachky, referring to August III. “It was gorgeous. [The Fourth] shut it down and made it a call center. He said it was ridiculous that only certain people in certain grade levels got to use it, and it was starting to separate the employees. Plus, I don’t think The Fourth ever used it.” Many of Anheuser’s other top staffers also avoided the place like the plague. They weren’t eager to get cornered and reamed out by August III as they tried to scarf down a ham sandwich. Still, most of them remember being summoned up there at one point or another.
One morning after his retirement, The Third helicoptered to the office and called down for breakfast, not knowing that his son had pulled the dining room’s plug.
“And they said, ‘But sir, we don’t have the dining room anymore, ’ ” Lachky said, recounting the story. “He goes, ‘What?’ And they said, ‘Well, it’s not here. It’s closed. August IV closed it. ’ And he was like, ‘What?’ He thought he’d come back to his old haunt, and it didn’t exist.’ ”
A much bigger point of cost-related contention between father and son, however, involved The Fourth’s decision to cancel delivery of a new $40 million Dassault Falcon 7X—Dassault’s first fly-by-wire plane, which could make it all the way from St. Louis to China nonstop. The Third had been eagerly awaiting the aircraft for years, and Anheuser-Busch was scheduled to be the plane’s U.S. launch customer. The Fourth strenuously objected to the idea, however, contending that it would send the wrong message to shareholders. He canceled the order, which made for one of the biggest rifts the two men’s already-sour relationship ever suffered.
“There was a lot of consternation surrounding that decision,” said board member General Shelton. “I don’t know behind the scenes what went on, but maybe in retrospect, there wasn’t as much prior coordination done before that decision was made to set it up so that it would not be a kind of ‘In your face!’ to his dad.”
Those were minor cultural shifts, however. The Fourth faced a major battle against Anheuser’s historic inertia if he wanted to enact meaningful change. While he was now officially CEO, some people on Wall Street suspected that he still might not be able to wield much control over the company with his 69-year-old dad still lurking behind the curtain and Stokes acting as chairman of the board. “Mr. Busch now has center stage for himself, but it remains to be seen if this is indeed his company and if he has the will—and the full support of the board—to move the King of Beers in the bold new direction it must go to deliver for shareholders,” said analyst Carlos Laboy.
Stokes could have helped guide The Fourth through the transition. After 38 years with the company, he knew every button to push and had an ability to work with both father and son. But his continued presence seemed to help cement The Third’s control.
“Pat was a good executive, he knew where all the levers were, and he was there ostensibly to help The Fourth,” said one former top executive and strategy committee member. “But to put Pat in at chairman of the board was basically a transparent move to stay in control of what was going on.”
“It was odd,” the former executive said, summing up the environment within the company after The Fourth was put in charge. “It was his dad’s way of keeping August at bay. By having Pat there, it was his dad’s way
of saying, “You’re not quite ready. You have the title, but you’re still not quite ready.”
Former Anheuser staffers have mixed views on whether Stokes could have softened the blow of The Fourth’s transition or whether he was equally hamstrung by The Third. “If there is anything I can blame Stokes for is that he didn’t develop The Fourth,” said Bill Finnie. “I am going to give him the benefit of the doubt, that maybe he could not have driven change. Stokes may not have been able to do a whole lot while he was CEO. But he sure could have made sure his successor would drive change. If Stokes had developed The Fourth, and The Fourth had not just had his own people but people with the same cojones that The Third had . . . it would have been a different story.”
The Fourth did make several early attempts to promote new executives of his own choosing—he pushed hard to appoint one potential chief operating officer, but The Third disagreed and shot the candidate down. He did the same with several of his son’s other nominees, and even targeted executives who were already with the company and who ultimately departed under pressure.
“He didn’t trust anyone anymore,” said a former strategy committee member. “His son said, ‘Look, if you want me to be the guy, I should be allowed to pick my team and you should let me make some strategic decisions.” The Third slapped many of them away, though, unchecked by a board of directors he had known for years, if not decades.
“If I can’t have my team, how can you hold me accountable for performance?” The Fourth said in one newspaper interview.
The Third and The Fourth were polar opposites when it came to being able to trust and delegate. The elder was loyal mainly to people who provided commendable service to Anheuser-Busch. His son appreciated people who could be loyal friends, and was trusting to the point where it seemed that his father considered the trait a fault. The Fourth depended heavily on deputies and hangers-on, both at the office and away from it, and he struggled to differentiate between people who were truly competent at their jobs and those who were just good at being friends. The Third seemed determined not to let his son make certain mistakes—even if it meant constructing a workplace environment that allowed his son few comrades.
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