Christopher “Kit” Bond, a U.S. Senator from Missouri, asked the U.S. Department of Justice and the Federal Trade Commission to review the proposed takeover, claiming that it was his responsibility to make sure the Bush administration considered the potential deal’s impact on consumers and the market. In a letter to the U.S. attorney general, Bond said sentiment in Missouri that was adamantly opposed to the deal “intends to be active” and was “growing by the moment.” Democrat Claire McCaskill, the other senator from Missouri, expressed a similar level of angst.
Industry watchers waited to see whether presidential candidates would be drawn into the fray, and the media did their best to bait them. John McCain, whose wife, Cindy, was heiress to Phoenix-based Hensley and Co., the country’s third-largest Anheuser distributor, stayed quiet on the matter—probably a wise move, given the hornet’s nest it would have stirred up over his conflicts of interest. Cindy McCain, who was known to drive around Phoenix in a car with license plates that read “MS BUD,” controlled somewhere between 40,000 and 80,000 shares of Anheuser stock, worth between $2.5 million and $5 million.
Barack Obama, who stayed mum on the topic for nearly a month, finally stated on July 7 that it would be “a shame” if Anheuser were bought by a foreign company. “I think we should be able to find an American company that is interested in purchasing Anheuser-Busch, if in fact Anheuser-Busch feels that it’s necessary to sell,” he said. It was at this critical moment that Obama first hinted he supported the government intervention in American business that became a hallmark of his early administration. Within months of his early 2009 inauguration, the U.S. government took ownership of General Motors and Chrysler to stave off the deepening recession and prevent heavy job losses for American workers.
President Obama, incidentally, appeared to enjoy using beer as a diplomatic tool. He held what became known as the “beer summit” at the White House during the summer of 2009—an attempt to unite a black Harvard professor and the white police officer who arrested him after they controversially came to loggerheads. And when the United States played England in the World Cup the following June, Obama suggested to British Prime Minister David Cameron that they wager the best beer in America against the best lager in Britain over the outcome of the match. The game ended in a tie, leaving everyone to guess which brand of beer the president thought was the nation’s best.
InBev had been able to stay ahead of the media curve so far, but it feared falling behind as opposition to the deal threatened to build. InBev’s team knew they couldn’t let pro-American political sentiment spin out of control. That had happened in a few other instances recently, and the results hadn’t been good. Dubai Ports World dropped an effort in 2006 to buy a company that operated American shipping ports because of the firestorm it generated on Capitol Hill, and Chinese companies had scrapped the attempted acquisitions of both oil company Unocal in 2005 and Internet router maker 3Com in March 2008, just a few months earlier, in the face of political opposition over potential national security risks.
The idea that a sale of Anheuser-Busch might have national security implications seemed ludicrous. Was anyone really going to try arguing that a beer brewer was vital to America’s interests? Did it matter whether Budweiser was concocted by an American or Belgian company, especially if the beer was still produced in America by American workers?
InBev’s team clearly didn’t think so, but it wasn’t worth finding out. They needed to put a softer spin on the story to get politicians and the media off their backs before the pressure grew too heavy. So Brito traveled to Washington, D.C., to fly the company’s flag.
He was reluctant, initially. “Brito was of the view: ‘Why should I waste my time? They’re never going to like me, they’re never going to support me,’ ” said a person close to InBev. He changed his tune when InBev’s advisors argued that it was time to give the company a relatable public face and show it wasn’t some out-of-touch foreign villain. They weren’t necessarily expecting a boycott, but they did happen to be dealing with a country in which conservatives started calling French fries “freedom fries” when France opposed the invasion of Iraq in 2003—even though French fries actually come from Belgium, InBev’s home turf.
“You could be this nameless, faceless foreigner, or you could be smart, articulate, bright, polished Brito,” InBev’s team told their CEO. “If you’ve got a guy like that who can talk on his feet and speaks good English,” one advisor said, “why not showcase him and say, ‘Hey, this isn’t some weird guy from the barrio in Rio de Janeiro. This is a real guy, you know, Stanford Business School.’ ”
So that Monday, Brito went Washington, D.C. The goal was to demystify the company, to neutralize potential opposition, and to calm the representatives of Congress who were spouting rhetoric over the injustice of letting an American institution be acquired by a foreign rival. It was relatively clear that the most outspoken politicians would still oppose the deal, but shaking their hands in front of the cameras certainly wasn’t going to hurt InBev’s cause.
It wasn’t an easy two days. Anheuser-Busch had burgeoned into an influential force in American politics over its century and a half of existence, and Brito was trying to combat all of the money Anheuser had spent over the years to ensure it was represented in the halls of Congress.
Missouri’s politicians had always seemed to be pressed securely under Anheuser-Busch’s thumb because it employed so many workers in the state—which, not coincidentally, has some of the most permissive alcohol laws of any U.S. jurisdiction. Passengers in moving cars there are free to drink alcohol legally, and there is no law against consuming an open container of alcohol on the street.
Anheuser-Busch also had significant pull on a national level. Its political action committee (PAC), which parsed out donations to candidates, was one of Washington’s largest, and it ran one of the capitol’s most active lobbying offices with roughly a dozen lobbying firms on retainer, including former St. Louis congressman Dick Gephardt’s Gephardt Group, former White House press secretary Michael McCurry’s Public Strategies Washington, and powerhouse firms Akin Gump Strauss Hauer & Feld and Timmons & Co. At the height of its political giving during the 2002 election cycle, Anheuser-Busch and its employees spent $2.3 million on candidates, with 57 percent of the money going to Republicans. A team of eight Anheuser Clydesdales even marched down Pennsylvania Avenue during President Bill Clinton’s 1993 inaugural parade despite protests from health and antialcohol groups.
Anheuser-Busch also had help from like-minded groups like the National Beer Wholesalers Association (NBWA), based just outside of Washington, which represents more than 2,850 beer distributors across the country and is consistently one of the nation’s biggest-spending PACs. The NBWA ranked as the fifth-largest PAC contributor to political candidates during the 2009-2010 election cycle as of mid-2010 after doling out more than $1.8 million—57 percent of it to Democrats and the rest to Republicans—during that time period. That put it ahead of other heavily active PACs like the American Bankers Association and the Teamsters Union.
The fact that Anheuser-Busch brews beer always made its lobbying efforts more challenging. It constantly faced opposition from groups like Mothers Against Drunk Driving (MADD) and others who said its advertising targeted underage drinkers. It was precisely because of that sensitivity over alcohol that Anheuser needed to wield such significant political influence. The company had already been through Prohibition once, and it was determined to push its roots deeply enough into Washington’s soil to prevent shifts in public sentiment from wreaking havoc on its business again.
August III, like his ancestors, understood how the beer business and politics intersected and was diligent about staying ahead of the fight. At a time when pressure was growing in Washington to ban alcoholic beverage advertising entirely, he deftly handled criticism from MADD by throwing a bunch of money behind the effort to curtail drunken driving. “That slowly turned the focus to driving,” said Charlie Claggett, who h
andled Anheuser’s “Know When to Say When” moderation campaign. “It’s not the beer that’s the enemy, it’s the fact that you get behind the wheel. That’s the enemy. Get a designated driver and don’t drive while drunk. Take care of yourself and your friends. It just changed the whole game.”
The Third did the same to stanch frustration over discarded beer cans, endorsing the “Pitch In” litter pickup campaign and creating a recycling unit in 1978 that recycled more than 430 billion aluminum cans in its first 30 years. And when civil rights leader Jesse Jackson attacked Anheuser-Busch in 1982 over whether it had enough minority-owned distributorships, the boycott failed. The Third refused to meet with Jackson rather than pandering to him as other CEOs had, and decided to fight back by showing how the company’s policies benefited minorities.
Anheuser-Busch also spent plenty of cash in Washington to help ensure that its burgeoning market share never became a political hot button. By the early 1990s, The Third’s desire to control half of the U.S. beer market had grown relentless. Many other CEOs, knowing that seizing half of their market could make them a target for public ire, might happily settle for 49 percent to avoid the controversy. Not August III.
“Mr. Busch, why?” Buddy Reisinger remembers asking The Third. “You hate the public stuff, you hate the government, the S.E.C. Why would you want to put an industry that’s a functioning oligopoly . . . why would you want the government on your back? At fifty-share, a little bell is going to go off. Why is that the important thing?”
The Third, uncowed, pushed religiously onward. Hitting that magic number had become how he defined the next level of success, and the risk of having to run a political gauntlet to attain it was worth it. More likely than not, the dollars he spent in Washington would help smooth things over. And they did.
InBev, espousing that same notion, hired four of Washington’s best-known lobbying and PR firms to calm tempers over its takeover attempt, including one run by former senators Trent Lott and John Breaux and another run by Joe Lockhart, a former White House press secretary. It started paying operatives from Mercury Public Affairs to call local politicians around the country to outline why it wanted to buy Anheuser-Busch and what the deal would mean for voters. And it sent two letters explaining the deal and the commitments it planned to make to key public officials in target states.
That Tuesday and Wednesday, several of Brito’s new lobbyists escorted him to the offices of five Missouri congressional representatives and to a meeting with South Carolina’s James Clyburn, the third-ranking House Democrat. The highly orchestrated spectacle, which drew a herd of reporters who followed at Brito’s heels, was little more than an expensive and elaborately staged game. Brito wasn’t going to convince any of those politicians to back the takeover—the sound bites they’d get for opposing the deal were too important for their next elections. And he certainly wasn’t going to back down and scrap InBev’s bid based on some minor agitation out of Missouri. His Washington jaunt was about face time, shaking hands, and kissing rings, not about demonstrable results.
McCaskill sat down with Brito and two of his aides at noon on Tuesday and offered them a choice between three Anheuser-Busch beers. Brito and McCaskill both grabbed Bud Lights, and she made a quick toast—”To Anheuser-Busch!”—before launching into a lecture on how hard it was going to be for InBev to win the hearts and minds of her Missouri constituents. The meeting adjourned after half an hour and McCaskill quickly huddled with Brito’s attendant group of media scribes.
“They basically came to try to get me on board, so to speak,” McCaskill told the reporters. “I said, ‘Not going to happen.’ ” She was shameless in breaking out the rhetoric. “We do not have a ‘For Sale’ sign on our front lawn in America,” she told the St. Louis Post-Dispatch in one interview, calling InBev’s bid a “premium profit for hedge fund investors.” Brito called his meeting with McCaskill “very, very helpful.” She issued a letter that day to Anheuser’s board that called for them to reject InBev’s offer.
Brito met with Kit Bond the following day and he, too, used the opportunity to voice opposition to the deal. It would mean job losses in St. Louis, a blow to the Missouri economy, and a loss of charitable contributions in St. Louis, said Bond, who couldn’t resist tossing in a few of his own lines of cheesy politico-speak: “My Missouri constituents say, this Bud’s not for you,” he said.
Brushing aside all of the pomp and circumstance, Brito’s trip to D.C. actually helped both sides get what they wanted. He was able to promote InBev’s cause and generate some press, and the politicians whose constituents cared about Anheuser-Busch were able to make it seem as though they were putting up a fight, even though it was clear there was little they could do to stop the deal. Brito only ended up needing to make one trip to the nation’s capital. The political unrest sparked by InBev’s bid didn’t last long, but that wasn’t because he had charmed his way into American beer drinkers’ hearts. It was because they had too much else to worry about.
When InBev launched its attack on America’s favorite beer company, the country’s baby boomers were just coming down from the high of living beyond their means for three decades. These Cadillac Escalade and McMansion owners were suddenly facing overdue mortgage payments, empty 401(k)s, and unemployment lines. Regardless of how many cases of Bud were stacked in their four-car garages, they had little will to rally en masse for Anheuser—a company that had grown just as fat and delusional during the good years as they had. Anheuser’s relevance in their lives, or at least the pride they took in drinking American-made beer, had diminished to a point where a hostile takeover of the company seemed on par for the course when so much else in America was already going wrong.
Given the madness that was unfolding in the markets and on Main Street, some of the news coverage of Anheuser’s takeover battle that might otherwise have run on the front page of the world’s biggest newspapers was relegated to their middle sections—or left on the cutting room floor. “It was almost like it got just a flash on CBS evening news,” said board member General Shelton. “I really thought it would be viewed as a much bigger deal, but obviously it wasn’t.”
My concern is that across America, this is happening,” he said. “Maybe it’s not all bad—I’m a big believer in globalization and a world economy and things that could lead to peace long term. But I do worry when so many U.S. companies are going into foreign ownership.”
At certain points in American history, protectionist rhetoric alone might have rustled up enough popular anger to ruin InBev’s takeover attempt. But this was not a time for political or economic frivolity. People were too distracted by the credit crunch-related turmoil in their own lives to care about whether Budweiser was brewed by an American or Belgian company. That was the sort of philosophical debate people wasted time on when they actually had the luxury of time to waste, rather than spending it searching for a job or struggling to save the job they had.
So while InBev’s takeover bid had brought with it two major types of risk—financial and political—one actually ended up helping to nullify the other. Americans who might otherwise have hoisted pitchforks in protest were distracted by the financial markets, which were threatening to collapse in shambles. And politicians found it tough to justify wasting time on Anheuser-Busch rather than addressing rising job losses, budgetary deficits, and disintegrating real estate markets. Yes, they’d ostensibly be fighting to save American jobs by endorsing Anheuser’s independence. They’d also be helping to bail out a company that was run by multimillionaires and had been inefficient for years. It was already looking likely that they’d have to step in to float the wreckage of another iconic American company whose leaders had been too beholden to family interests, had gotten fat, happy, and lazy, and had ultimately run it into the rocks—General Motors.
Brito’s public relations push was helpful, but InBev’s ability to suppress public outrage had less to do with his efforts than with the complacency, resignation, and distraction of t
he American public. Protectionist sentiment, whether it was logical or not, just wasn’t strong enough—Congress battled several months later over whether to include a “Buy American” provision in President Obama’s $787 billion stimulus bill, but the fever over that issue also quickly died. The strongest words spoken against InBev, in fact, may have come from Stephen Colbert, the Comedy Central satirist who drowned his sorrows on camera in an effort to enjoy as much Budweiser as he could “before those waffle humpers change the formula.”
“The big backlash some people predicted just really didn’t happen,” said Harry Schuhmacher. “You had some of it in St. Louis, but outside of Missouri, people appear not to know or care where their beer gets made. I think it’s just an apathy on the part of people who drink light beer. They don’t think about their beer. It’s really just a nice, refreshing way to get ethanol into your system.”
The cards were stacked against Anheuser-Busch. It could have produced a brilliant plan to slaughter InBev in the press, pulling out all of the protectionist stops and draping itself in the American flag, and much of it might still have fallen on deaf ears based purely on timing.
Curiously, though, Anheuser didn’t come up with a brilliant counterattack. At first, it made a deliberate, and arguably foolhardy, choice to have no defense strategy at all.
InBev had assumed that its bid might spark a negative political reaction, and had nervously prepared for Anheuser to come out swinging as soon as the bid was official. Anheuser didn’t have much of a leg to stand on from a financial or operational point of view, but it boasted a century and a half of American ownership and had legions of devoted Budweiser drinkers, union workers, and distributors at its disposal if it wanted to rally pro-American sentiment.
When InBev made its offer official on June 11, Anheuser scrambled to quickly issue a press release that said its board of directors would review the bid and decide “in due course.” The merger battle appeared to be starting off with a bang. So after a quick gut check on Brito’s part, InBev fired back almost immediately with the first rounds of a PR campaign it had painstakingly developed. Why give Anheuser-Busch time to gasp for air if everything was already prepped and ready?
Dethroning the King Page 20