Anheuser Busch Companies, Inc. Business Information, Profile, and History

Company Perspectives:

Innovation, a long-standing strategy at Anheuser-Busch, represents the path to greatness. Adolphus Busch employed this strategy 120 years ago to make Budweiser the first national beer--using new ideas like pasteurizing beer, refrigerating railcars to transport it across the country and mobilizing grassroots salespeople to market the product. Today, Anheuser-Busch has some of the most innovative brewing, packaging and adventure-park facilities in the world. Leaders keep their eye on the future and continually find new ways to think about their business. Anheuser-Busch is no exception.

History of Anheuser Busch Companies, Inc.

Anheuser-Busch Companies, Inc. is the largest brewer in the world, producing more than 100 million barrels of beer each year. The company's primary brands, Budweiser, Bud Light, Michelob, and Busch, are market leaders, enabling the massive St. Louis enterprise to claim nearly 50 percent of the U.S. beer market. Anheuser-Busch also operates nine theme parks, including Busch Gardens and Sea World properties at several locations.

19th-Century Origins

Anheuser-Busch has been overseen by a member of its founding family since 1852, when Eberhard Anheuser, a prosperous soap manufacturer in St. Louis, bought a failing brewery from Bavarian immigrant George Schneider. The brewery's cool underground caverns near the Mississippi River were conducive to good brewing, and Anheuser was determined to turn the business around, but he lacked experience in the industry. Therefore, he hired his son-in-law, Adolphus Busch, a recent German immigrant schooled in the art of brewing, as his general manager. Together, Anheuser and Busch approached the enterprise with an aggressive business strategy and knowledge in quality brewing, two factors that have informed Anheuser-Busch's history ever since.

According to a popular company legend, Adolphus Busch obtained the recipe for his beer during a visit to a German monastery. There, monks provided him with a recipe and some of their brewer's yeast, the secret of their excellent beer. That recipe became the basis of Anheuser-Busch beers, and the original strain of yeast, allegedly preserved for years in Adolphus's ice cream freezer, remained in use in the 1990s. Although fictitious, the story highlighted two important philosophies at Anheuser-Busch: only the finest 'European' ingredients were to be used and the basic recipe would remain essentially unchanged.

In 1853, Anheuser and Busch increased the rejuvenated brewery's capacity from 3,000 to 8,000 barrels per year and began to expand their sales effort into Texas and Louisiana, as well as their home state of Missouri. The beverage became increasingly popular, as cowboys reportedly deserted their beloved red-eye whiskey for the light Bohemian beer, which became known as Budweiser in 1891, when the company purchased the rights to the name from the Bohemian brewer of 'Budweis.'

Budweiser's formula was enhanced by innovations in the brewing industry, particularly as pasteurization allowed for longer preservation periods. Moreover, newly invented refrigerated railroad cars permitted the transport of beer across state borders, and the bottling of beer allowed for easier distribution throughout the country. Regional brewers lost their advantage to large breweries such as Anheuser-Busch, which had found the means to supply beer to every state in the union. Despite the growth of its market, however, Anheuser-Busch still referred to itself as a 'regional brewery'--an institution that understood the distinct needs and tastes of local people.

Anheuser gave over the day-to-day operations to Busch in the 1870s. The company continued to prosper, and its workforce increased. During his tenure, Busch initiated the concept of considering employees members of a family: cared for and nurtured by the company and expected to remain loyal to the company for a lifetime. Anheuser-Busch considered this unique relationship between employer and employee, intimate and cooperative, vital in producing an outstanding product.

In the 1890s, Pabst, a competitor, was the best-selling beer in the United States. Busch and his 'family' thwarted the competition, however, with the introduction of Michelob in 1896. Forceful and frequent advertising promoted Budweiser and Michelob as the most popular beers in the country, and this goal was realized in 1901, when Anheuser-Busch became the leading national brewery.

Busch died in 1913, and his son, August A. Busch, Sr., took over; the younger Busch soon focused on diversifying the company's interests. Toward this end, Busch patented the first diesel engine, which was installed in the brewery to increase production. With the onset of World War I, Busch founded a subsidiary to produce the engines for Navy submarines. In addition, the Anheuser-Busch family purchased sufficient war bonds to finance two bombers--each named 'Miss Budweiser.'

After the war, in November 1918, President Woodrow Wilson signed the bill that instituted Prohibition. During this hiatus, Anheuser-Busch diversified into related fields. Malt syrup was canned and sold to people who required malt for their homemade brews. A refrigeration car company was established to transport perishables. Bevo, a soft drink made from ingredients similar to those in beer, was a great success for three years; it later failed when Prohibition laws concerning the use of yeast forced the company to change ingredients. Nevertheless, Anheuser-Busch began a trend toward diversification that would thereafter characterize the history of the company.

When Prohibition ended, the company experienced an unforeseen problem: people had become used to the sweet taste of the soft drinks and homemade brews that were available during Prohibition and were not willing to return to the more bitter commercial beer. In response, many brewers changed their formulas to achieve a sweeter taste. However, Anheuser-Busch refused to alter the formula for best-selling Budweiser, a decision endorsed by Dr. Robert Gall, the company's post-Prohibition brewmaster. Instead, the company initiated a major advertising campaign, challenging consumers to a 'five-day test.' Busch predicted that after five days of drinking Budweiser the consumer would not drink a sweet beer again. The advertising campaign was successful and established a trend for future consumer appeals.

During World War II, the company, led by Adolphus Busch III, again made substantial contributions to the war effort. Anheuser-Busch supplied the military with ammunition hoists, which were in production at a new company subsidiary. Moreover, the distribution of Budweiser beer was withdrawn from the Pacific Coast in order to supply the government with additional freight cars for war essentials, and spent grain was sold to financially troubled wartime farmers for poultry and livestock food. These patriotic actions elevated sales and advanced Anheuser-Busch's image as a patriotic company.

Between 1935 and 1950, the demand for Anheuser-Busch beer consistently exceeded the supply. In 1941, three million barrels of beer were produced, a figure that doubled by 1950. After the death of Adolphus Busch III in 1946, the company temporarily relinquished its lead in the industry. But with the succession of his brother, August 'Gussie' Busch, Jr., the company became the nation's top brewer once again.

Post-World War II Expansion and Diversification

August Busch, Jr., continued the practice of aggressive advertising established by his brother and father, which had involved the distribution of pocket knives and gold pieces; advertisements featuring reproductions of patriotic art such as 'Custer's Last Stand'; and the 1933 introduction of the famous Clydesdale horses, which remained popular in the 1990s. Under August Busch, Anheuser-Busch became the first brewery to sponsor a radio network. Positive consumer response prompted William Bien, the vice-president of marketing, to design a legendary advertising campaign: 'pick-a-pair-of-six-packs.' The campaign cost $2.5 million for two months, but was the most successful promotion in the history of the beer industry.

Despite its successful promotions, Anheuser-Busch entered a close competition at the beginning of the 1950s with Carling beer. During this time, a holiday was declared in Newark, New Jersey, in honor of the opening of a new Anheuser-Busch factory in that city. The new facility and new equipment necessitated a price hike, however, and Carling profited when its economical beer attracted customers put off by Anheuser-Busch's higher prices. In response, Busch introduced a new, low-priced lager beer and also pursued aggressive advertising promotions. In 1953, Anheuser-Busch bought the St. Louis Cardinals baseball team, targeting sports fans as a new category of consumers. Ultimately, the company was successful in rebuffing Carling's challenge.

Another brewery soon attempted to displace Anheuser-Busch from its number one market ranking. Decreasing the price of its beer in the 1960s, the Schlitz brewery hoped to force Anheuser-Busch into a price war. August Busch, Jr., remained confident that consumers would recognize Anheuser-Busch beer as superior in quality. Public opinion, however, was never tested, as Schlitz committed several marketing and advertising mistakes, and Anheuser-Busch retained its ranking.

During this time, August Busch III began his career at his father's company. After attending college for two years in Arizona and undergoing instruction in the art of brewing at a school in Chicago, Busch III started in an entry-level position at the company. In 1979, he took over as CEO, vowing to uphold Adolphus Busch's philosophy that natural ingredients be used to distinguish the company's fine brewing from the lower quality brewing of other beers.

The Miller Brewing Company challenged this philosophy during the 1970s and 1980s. Miller introduced a light, low-calorie beer in 1974, which became the best-selling beer for a few months. Although Anheuser-Busch soon edged back into the top ranking, it remained closely followed by the Miller brewery. In response to Miller's challenge, Anheuser-Busch introduced two light beers in 1977, Natural Light and Michelob Light, and the popular Budweiser Light was introduced soon thereafter.

Under Busch III, the company developed a unique strategy for dealing with competition that included introducing new brands, increasing the advertising budget, and expanding its breweries. Moreover, Busch III refocused the company's marketing practices to target more specific groups of consumers. He hired a team of 100 college graduates to promote the sale of Anheuser-Busch beers on college campuses. He also oversaw the development of new advertisements designed to appeal to the working class. In the process, the company's marketing budget quadrupled, and sales increased.

Busch III also adopted a 'management control system' that increased the efficiency of the company, redefining it as a modern corporation rather than a small family business. The new management system emphasized planning, teamwork, and communications, controls that, ironically, were intended to promote Anheuser-Busch's image as a regional brewery producing different beers to satisfy individual tastes. Anheuser-Busch continued to rank first in the brewing industry into the 1980s. By 1980, sales had reached 50 million barrels, increasing to 86.8 million barrels by 1992. Although competition with Miller remained intense, the Budweiser brand outsold its next four competitors combined.

Anheuser-Busch initially espoused an acquisition policy of purchasing companies that would enhance its brewing operations, including malt plants in Wisconsin and Minnesota, beer can factories in Florida and Ohio, and yeast plants in Missouri, New Jersey, California, and Florida. The St. Louis Refrigerator Car Company inspected and maintained the 880 refrigerated railroad cars used to transport the company's beer across the country. Manufacturers Railway shipped Anheuser-Busch beer after it was manufactured at the brewery with help from the malt and yeast subsidiaries.

Other subsidiaries, however, were soon established that were not directly related to the beer industry. Campbell-Taggart, Inc., the second largest bakery in the United States, was acquired in 1982, associating Anheuser-Busch's name with the food industry. In the 1980s, 6.7 percent of Anheuser-Busch's operating income was spent on food products. Another acquisition, Eagle Snacks, Inc., nationally distributed food products to bars, taverns, and convenience stores. Despite intense competition from Frito-Lay and Planters Peanuts, Eagle Snacks enhanced Anheuser-Busch's beer business by targeting consumers likely to purchase beer to complement their food products.

Anheuser-Busch also developed and acquired theme parks, forming the Busch Entertainment Corporation in 1979. The first 'Busch Gardens' opened 20 years earlier in Tampa, Florida, and featured a 300-acre park boasting one of the world's largest collections of wildlife under private ownership. Another tourist attraction, 'The Old Country,' in Williamsburg, Virginia, was modeled after villages in 17th-century Europe. Anheuser-Busch also acquired the eight-park Sea World chain of mostly aquatic theme parks in 1989 for $1.3 billion. Although these entertainment parks were not particularly profitable, they helped expose Anheuser-Busch's name to a new target group--a younger generation and their parents--and enhanced the company's reputation for contributing to the public welfare. Anheuser-Busch's ownership of the St. Louis Cardinals served a similar function.

Anheuser-Busch also devoted considerable energy to nurturing its foreign market. The corporation formed Anheuser-Busch International, Inc. in 1981 to expand its presence in the global beer market through joint ventures, licensing agreements, and equity investments in foreign brewers. The corporation's timing in this venture proved fortuitous: the fall of trade barriers and conversion of formerly communist and socialist governments to free enterprise systems opened a wealth of opportunity for Anheuser-Busch. By 1993, the company's beers were offered in 21 European countries and ranked as the second most popular lager beer in the Republic of Ireland and the United Kingdom. Budweiser was introduced to Japan in 1981 and stood as that country's leading import by the early 1990s because of successful promotion to the young adult market. With a nine percent market share worldwide, Anheuser-Busch had the largest export volume of any American brewer in 1993, accounting for more than 45 percent of U.S. beer exports.

Adjusting to a New Marketplace: 1990s

During the early 1990s, Anheuser-Busch was compelled to face the declining--and more discerning--use of alcoholic beverages among Americans. The company had introduced LA, the first low alcohol beer, in 1984, but this product did not prove widely successful. LA was replaced by O'Doul's in 1990, however, which soon became the nation's most popular nonalcohol brew. Moreover, as Americans' tastes grew more refined and microbreweries made unprecedented inroads into the modern beer industry, Anheuser-Busch sought to enhance the appeal of its brew. The company introduced eight new beers between 1984 and 1991, and, by 1993, Anheuser-Busch offered 19 beer brands, three of which were imports. Anheuser-Busch's Bud Dry and Ice Draft from Budweiser appealed to such premium beer drinkers. New brand introductions did not seem to detract from Budweiser's brand power; the new variations captured 17 percent of the market, while Bud only lost half a share point.

As the decade progressed, so too did the growth of the craft-brewing industry, forcing the nation's three largest brewers to take heed of the beer industry's upstarts. Anheuser-Busch's closest rivals, Adolph Coors Company and Miller Brewing Company, introduced a host of new brands during the mid-1990s as a riposte. Anheuser-Busch followed suit, but to a much lesser extent, pursuing a more conservative strategy that proved to be a prudent approach later in the decade when many of the specialty brands introduced by the big breweries were confirmed failures. Bill Weintraub, the senior vice-president of Adolph Coors, noted as much. 'I think they've (Anheuser-Busch) understood that supporting their core brands is a smarter way to build brands over the long term,' he conceded in the May 5, 1997 issue of Brandweek. Although Anheuser-Busch invested substantially in the craft-brewing phenomenon--including signing a distribution and equity partnership agreement in 1994 with Red Hook Brewery, a leading craft brewer--the company's primary focus was on its core brands.

Amid a flurry of new beer brands introduced during the mid-1990s, Anheuser-Busch scaled back its operations, divesting properties while other large brewers expanded their portfolios. In 1995, the company announced it was severing its ties with Eagle Snacks after 17 years of losses. Concurrently, Anheuser-Busch announced it was divesting itself of the St. Louis Cardinals and Busch Memorial Stadium properties. In 1994, the baseball franchise posted a loss of $12 million, and Eagle Snacks racked up $25 million in losses. The divestitures were made so that the company could direct more of its attention and resources to beer and theme parks, the two principal areas of Anheuser-Busch's focus for the future.

Of particular importance was injecting new life in the company's all-important Budweiser brand, which was suffering from stagnant sales growth as the company entered the mid-1990s. Internationally, the company was realizing encouraging growth, thanks in large part to investments such as the 50 percent of Grupo Modelo (brewer of Corona beer) acquired in 1993 and the majority stake purchased in the Chinese brewer Budweiser Wuhan International Brewing Company, in 1995, but domestically the brand's sales had flattened. The task of spurring Budweiser sales fell to August Busch IV, whom many regarded as the next in line to lead the family business. (In 1997, August Busch III announced his intention to retire in 2003.) Under the 30-year-old's direction, a revamped marketing plan was developed that aimed at winning over younger consumers, who had gravitated to imports and microbrews. 'There was a culture weaved into the Budweiser brand,' the younger Busch explained to Fortune on January 13, 1997. 'No one wanted to change it.' August Busch IV spearheaded the widely popular 'talking frogs' advertising campaign for Budweiser and the successful 'I Love You Man' advertising campaign for Bud Lite, both of which were credited with lifting sales. In 1997, two years after the irreverent, youth-oriented advertising campaigns were launched, annual worldwide beer volume (including the interests Anheuser-Busch held in other breweries) eclipsed 100 million barrels for the first time, as Budweiser sales moved measurably upward.

At the end of the 1990s, Anheuser-Busch's dominance of the U.S. beer industry testified to the prolific growth of the company during the 20th century. By 1999, the company's share of the U.S. beer market had risen to 47.5 percent, fueling confidence that August Busch III's goal of capturing 60 percent of the market by 2005 could be achieved.

Principal Subsidiaries: Anheuser-Busch, Inc.; Busch Entertainment Corporation; Manufacturers Railway Company; St. Louis Refrigerator Car Company; Busch Properties, Inc.; Metal Container Corporation; Anheuser-Busch Recycling Corporation; Anheuser-Busch International, Inc.; Busch Media Group, Inc.; Busch Creative Services Corporation; Busch Agricultural Resources, Inc.; Precision Printing & Packaging, Inc.

Principal Competitors: Miller Brewing Company; Adolph Coors Company; Heineken N.V.

Chronology

• Key Dates:

• 1852: St. Louis soap merchant Eberhard Anheuser acquires the Bavarian Brewery.
• 1853: Anheuser, together with son-in-law Adolphus Busch, expand sales into Texas and Louisiana.
• 1876: Budweiser is introduced.
• 1896: Michelob is introduced.
• 1936: Budweiser is packaged in cans for the first time.
• 1955: The Busch brand is launched.
• 1959: Company's first amusement park, Busch Gardens, opens in Tampa, Florida.
• 1964: Annual production reaches ten million barrels.
• 1982: Bud Light is introduced.
• 1984: Through licensed brewers, Budweiser is introduced in England and Japan.
• 1989: Anheuser-Busch Companies purchases Sea World.
• 1997: Worldwide annual production eclipses 100 million barrels.