9B. A Previously Untold Story About
A MEETING WITH GUSSIE BUSCH & BAVARIAN (1958)
This meeting took place around 1958 and was never published. It has only been known among a few Schott Family members.
August Busch Jr. (Gussie)
Gussie, as he was called, was interested in enlarging his family's brewing empire by opening new plants around the United States. He was the President of Anheuser-Busch, Inc., (A-B) and the grandson of its founder. In 1953, this brewer expanded into sports by acquiring the St. Louis Cardinals. Gussie had become familiar with the Schott Family and Bavarian Brewing Co. when he testified in the Cincinnati District Court during a suit between the two companies in 1956. Undoubtedly, he was disappointed that the trial hadn't gone somewhat better for his firm, and was somewhat annoyed of a court decision the prevented his company from using their new Busch Bavarian Beer in Bavarian's Tri-State market area of Ohio, Kentucky and Indiana. (See Turnaround Efforts / Litigation.) After the court decision in early 1957, both sides considered possible appeals. Bavarian noted this in their November, 1957, Annual Shareholders and Board Minutes, setting aside about $25,000 for legal contingencies involving A-B for the following year.
In 1958, while Bavarian was obtaining success with their "New Look," their Directors were invited to meet with Gussie Busch at his home in St. Louis. This included William C. Schott, his sons Louis L and William R. (Bill) and Lou Schott (Will's brother). They accepted the invitation. A photo of the Busch home they visited, known as the "Big House" at Grant's Farm, is on the side. It contains 32,000 square feet, 26 rooms and 14 bathrooms. Since either Bavarian or Anheuser-Busch would have appealed the court decision reached a year earlier, Gussie may have wanted this meeting to resolve their differences. At this same time, Bavarian was considering a merger or acquisition, with which Gussie was probably aware.
The Busch Mansion at Grant's Farm. The estate is home to the famous Budweiser Clydesdale's horses and many other animals. Click the image for more information.
Upon their visit to Grant Park, the Bavarian contingency noticed one of Gussie's daily routines. It involved the making and his tasting of loaf of bread made every morning with some of the yeast used for brewing that day. It was a way he liked to "test" the quality of his beer each day. He offered some of this bread to his visitors. Perhaps it was a proverbial goodwill gesture for Gussie to "break bread" with an adversary. Besides trying to resolve the costly and time consuming effort of appeals of the name Bavarian, it seems Gussie had another interest. In order to for A-B to become larger, Gussie had established plants on both coasts in the 1950s; first Newark in 1951 and Los Angeles in 1954. Apparently, he was also interested in opening a plant in Ohio. Gussie was likely aware that Bavarian was receiving overtures from some other companies for a merger or acquisition. In any event, Gussie evidently left the impression with the Schott Family after they visited with him, that Anheuser-Busch would have an interest in acquiring the Bavarian Brewing Co. The ball was in Bavarian's court.
Considerations After The Meeting
The possibility of further conversations with Gussie was discussed within the Schott Family. Concurrently, the President, William R. Schott (Bill), was leading negotiations on a possible acquisition or disposition of the family brewery with other parties in 1958. It is believed that sometime before their meeting with Gussie, Bill had met with Bruce Berckman, the President of International Breweries, Inc (IBI). This brewer had recently been established a few years earlier in 1954 by acquiring a few other brewers, and were very interested in joining with Bavarian. One of the objectives of IBI was to be the 25th largest brewer in the country. By merging with Bavarian, IBI could accomplish this. From Bavarian's perspective, their brewery could essentially operate as they had before. (In comparison, A-B was the largest brewer in the country at that time with a production that was several times granter than for IBI.) Bill would still be in charge of the Bavarian plant and he would be on the Board of IBI. (See IBI.) Another advantage of a merger with IBI is that it would provide the Schott Family with stock in IBI, which was paying an attractive dividend at the time of about 6%; more than for A-B. The older members and directors of the Schott Family (Will and Lou) were at an age where they no longer cared to be engaged with the brewery, and the relatively high dividend provided by IBI was attractive to them. Further, there was a concern that if A-B acquired Bavarian, their plant would be shuttled, laying off most of the employees. The Schott Family also had the best interests of the Bavarian employees in mind. Therefore, there were some compelling reasons to merge with IBI.
Even so, an acquisition by A-B would have provided much better long term security than the other alternatives the Schott Family was considering, most specifically the one with IBI. There was a great deal of consolidation occurring in among brewers, with many simply going out of business. If there was any certainty among the brewing industry, the larger the brewer, the more likely they would remain in business. With respect to the possible issue that an acquisition by A-B would result in many of Bavarian's workers losing their jobs, one of Bavarian's Directors felt that certain arrangements could have been made with A-B to reduce possible layoffs. For instance, possibly Bavarian could be used to produce one of the A-B brands temporarily, like Busch Bavarian, while a new A-B plant was being built in Bavarian's region. Additionally, Bavarian employees could also have been provided opportunities at A-B's other plants, with better security and benefits. Another possibility is that Bavarian could have been awarded a distributorship with Anheuser-Busch, which could have employed about one third of about 250 of Bavarian's employees who were delivery drivers and assistants using Bavarian's fleet of over 40 trucks. After all, the A-B Cincinnati distributorship was awarded just a year later in 1959 to Heidelberg Distributorship. (See Plant No. 2 - bottom of page.) Regardless, evidently Bill, with support from his elders, decided not follow up with Gussie. Bavarian went forward with a merger involving IBI, which was consummated in early 1959.
Several Years Latter
As it turned out, several years after Bavarian's meeting with Gussie, A-B completed a brewery in Ohio, located in Columbus. Coincidentally, that same year in 1966, the Bavarian Brewery in Covington, KY, was permanently closed by IBI and nearly all the employees lost their jobs. It's only conjecture, but perhaps had discussions between Bavarian and Gussie continued and a deal reached, A-B would have built a plant in Ohio sooner, and in the Dayton-Cincinnati-N. KY area rather than in Columbus. Another possibility, is that fewer Bavarian employees would have lost their jobs, particularly if Bavarian's fleet of trucks and drivers would have become an Anheuser-Busch (A-B) distributorship. Of course, with the advantage of hindsight, it would have been far more lucrative for the Schott family to have received stock in A-B than in IBI, which left the brewing business a year after the Bavarian plant was closed.
Schott, Louis L., recollections to his son.
The background photo is the August Busch Mansion, home of Gussie Busch, in Grant's Farm, St. Louis, MO.
It is where the Schott Family Directors met with Gussie Busch in 1958.