9B. A Previously Untold Story About
A MEETING WITH GUSSIE BUSCH & BAVARIAN (1958)
This meeting took place around 1958. Details about its occurrence were never publicized, and it has only been known among a few Schott Family members to date.
August Busch Jr. (Gussie)
August Busch Jr - known as “Gussie” - was the President of Anheuser-Busch, Inc., (A-B) and the grandson of its founder. Gussie was interested in enlarging his family's brewing empire by opening new plants around the United States. 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 may have been annoyed about a court decision that prevented his company from using their new Busch Bavarian Beer in Bavarian's Tri-State market area of Ohio, Kentucky and Indiana. (See period 9. 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 could have appealed the court decision reached a year earlier, Gussie may have wanted to hold this meeting to resolve their differences. At this same time, Bavarian was considering a merger or acquisition, which Gussie was probably aware of.
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: making and tasting a loaf of bread each morning with some of the yeast used for brewing beer that day. It was a way he liked to "test" the quality of his beer on a daily basis. Gussie offered some of this bread to his visitors; perhaps this was a proverbial goodwill gesture for Gussie to "break bread" with an adversary. Besides trying to resolve the costly and time-consuming appeals effort for the Bavarian name, it seems Gussie had another interest related to the brewery. In order to for A-B to become larger, Gussie had established plants on both coasts in the 1950s; first Newark in 1951 and then 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 other companies for a merger or acquisition. In any event, Gussie evidently left the impression with the Schott Family after their visit, that Anheuser-Busch would be interested in acquiring the Bavarian Brewing Co. The ball was in Bavarian's court.
Considerations After The Meeting
After their trip to St. Louis, the Schott family discussed the possibility of having further conversations with Gussie. 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 was 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, one major advantage was that by joining with IBI the 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 greater than for IBI.) In case of an IBI deal, Bill would still be in charge of the Bavarian plant and he would be on the Board of IBI. (See period 10. 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 elderly age where they no longer cared to be engaged with the brewery, and the relatively high dividend provided by IBI was attractive to them. Finally, 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. Put together, there was a compelling case for Bavarian to pursue a merger with IBI.
Even so, an acquisition by A-B would have provided much better long term security than the other alternatives the Schott Family were considering, most specifically the one with IBI. There was a great deal of consolidation occurring among brewers during this time, with many simply going out of business. If there was any certainty within the brewing industry, it was this: the larger the brewer, the more likely they would remain in business. With respect to the possible issue that an A-B acquisition 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, Bavarian could have been used to produce one of the A-B brands temporarily, like Busch Bavarian Beer, while a new A-B plant was being built in Bavarian's region. Additionally, Bavarian employees could also have been provided with 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 Bavarian's 250 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 did build a brewery in Ohio, located in Columbus. Coincidentally, in that same year - 1966 - the Bavarian Brewery in Covington, KY, was permanently closed by IBI and nearly all employees lost their jobs. It's only conjecture, but perhaps had discussions between Bavarian and Gussie continued and a deal been 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 formed part of 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. IBI's stock diminished considerably, particularly a couple years before the Bavarian plant was closed, and was ultimately delisted. Some of the Schott family members disposed of their positions in IBI sooner than others.
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.