It’s Labor Day weekend and thoughts turn to the end of the summer and cook outs. And beer. Labor Day weekend accounts for a significant portion of the $100 billion U.S. annual beer sales.
There are thousands of beer choices in 2022. Craft beer breweries are everywhere. But when all is said and done, by this coming Tuesday, the best selling beers will be Anheuser-Busch and Coors brands. Two companies that began as family-owned businesses in the mid-1850s and eventually morphed into brewing conglomerates.
Anheuser-Busch and MolsonCoors are the two largest brewers in the United States. Hardly surprising, it’s been that way for generations of beer drinkers.
It wasn’t quite that way in 1980. Anheuser-Busch was number one but Coors – still not quite a national brand – was fourth. Between them was another family owned brewery started before the Civil War – Stroh’s. You may have never heard of Stroh’s but for 130 years it was a household – well, at least a beer-drinker-in-the-Midwest household – name.
Like Coors and Budweiser, Stroh’s was founded by an immigrant in the mid-1850s. Like them, Stroh’s started as a family business. Like them, the Stroh’s passed the business down for four generations.
Unlike them, the Stroh’s didn’t survive, adapt, and thrive into 21st Century. Neither did the Stroh’s fortune, at one time one of the largest family fortunes in the United States.
It’s not often that real life allows a direct comparison of companies over a century like a business school problem, but that’s the Coors, Anheuser-Busch, Stroh’s scenario. Each were family owned businesses that made it – while surviving Prohibition, no less – from the Civil War through to the Reagan years.
Then, in the space of ten years, there were two.
As you can probably guess, there is no one reason for Stroh’s demise. But they all revolve around bad planning and irresponsible corporate decision making unchecked by shareholders.
Stroh’s made beer in Detroit. They marketed mostly to the Mid-West. They, obviously, had a great, loyal following. They decided at the turn of the 19th Century that only the men of the family would run it - no women, no outsiders. All the family members were shareholders.
The Board was made up only of Strohs. The CEO was always an immediate member of the family. Every family member was ‘guaranteed’ dividends for life regardless of their participation in the business. By 1980 Stroh’s dividends were paying for the lavish lifestyles of some twenty-seven family members, only a handful of whom active in the business.
Stroh’s had an entrenched market but made the mistake of becoming entrenched as a company.
After one hundred and twenty years of success doing it the ‘family way’ no thought had been given to planning ahead. Change came and it came fast. In Stroh’s case it came from their fellow-immigrant-founded-in-the-1800’s company, Coors.
Coors was spreading eastward. By the late ’80s their sales were poised to surpass Stroh’s. Stroh’s management wasn’t ready. The CEO wasn’t ready. They didn’t realize – until too late – that they had missed the light beer wave and were already behind the rest of the industry. The shareholders were as oblivious as they were happy with their dividend payments.
The CEO panicked. He tried a series of increasingly ill-advised, knee-jerk-like reactions to catchup with Coors. Instead of concentrating on keeping their loyal market intact against the Coors incursions, he decided to expand ‘just like Coors.’ He borrowed to buy other regional breweries – as far away as New York.
Nothing worked. The CEO borrowed lavishly again to fund new ventures – including moving into biotech – while still paying the family dividends. The only result – crushing debt.
In 1999, Stroh’s closed the brewery. A planned sale to Coors went spectacularly off the rails. In the end, Stroh’s had to fire-sale their assets, including the Stroh’s name and trademarks.
There’s much to learn from all this. For today we’ll leave it with this: the only companies that need planning more than start-ups are established, successful ones.