[BND] From Pariah to the Mainstream

Part 2 of From Pariah to Mainstream:  How a Trade Association Changed the Image of an Industry

In the early part of the 20thCentury, the federal government was not the go-to solution for anyone who wanted to change society as it is today. While abolishing alcohol nationwide would require national legislation, Wheeler decided not to lobby Congress.  Instead, he set out to get laws passed on a state-by-state basis banning the sale and manufacture of beverage alcohol. He relied on mass media to convince politicians there was widespread support for the Anti-Saloon League’s approach of total opposition to the production or sale of alcoholic beverages, with no exceptions.

He understood that if one controls the margins, one controls the political system. So, he focused on getting those who supported Prohibition to vote for candidates who supported the cause--regardless of party or position on other issues--and to vote against those who did not. The effectiveness of this approach was demonstrated first in Ohio, when 70 legislators of both parties, nearly half of all legislators, were defeated in one election.  It was demonstrated again when Congress overrode President William Howard Taft’s veto of the Webb-Kenyon Act which prohibited the transportation of even a small amount of alcohol beverages for individual consumption into states with Prohibition laws.

With the Anti-Saloon League’s influence growing, Wheeler struck alliances with proponents of other causes, most notably the suffragette movement.  That was an easy call; in many respects; the suffrage and temperance movements had been intertwined.  Frances Willard and the WTCU campaigned for both causes. Susan B. Anthony became involved in the suffrage movement when she was denied the right to speak at a temperance convention in 1852 in Albany, N.Y. “The only hope of the Anti-Saloon League’s success lies in putting the ballot into the hands of women,” she said in 1899.

With ASL supporting the suffragettes’ cause, they in turn supported the drive to obtain passage of a Prohibition amendment which was ultimately successful in 1919 when the 18thAmendment passed.  The next year, the 19thAmendment was adopted, giving women the right to vote.

Adoption was helped along by World War I.  The hatred of all things German was immense, both in the U.S. and in England, where the royal family changed their surname to Windsor from Saxe-Coburg-Gotha in 1917, the third year of the war.  Prohibition advocates associated brewers with names such as Pabst, Schlitz, Blatz and Miller with Germany.  A Senate investigation found that during the 1910s, the National German-American Association (NGAA) had energetically opposed Prohibition – and most of NGAA’s money came from beer barons and some of it had been used to secretly purchase newspapers in several cities.

When the 18th Amendment was adopted, the alcohol beverage industry was the fifth largest business in the United States.

Of course, a constitutional amendment also needs legislation to make it effective.  That legislation was the Volstead Act, which had several holes, the most important being that one could keep and drink liquor in one’s possession as of January 16, 1920.  This loophole allowed the Yale Club to stockpile a supply large enough to last the 14 years Prohibition was in force. Farmers and others were allowed to “preserve” their fruit by fermentation.  Medicinal liquor was allowed.  Doctors became rich writing prescriptions at $3 each, and pharmacists did well selling “medicinal” brands such as Old Grand-Dad, Old Forester and Johnnie Walker. Sacramental wines could be sold, and one California vintner’s product was blessed by the Catholic Church.  He sold it in 14 varieties, including port, sherry, tokay (a famous, usually sweet white wine of Hungary, made from the Hungarian Furmint grape), and cabernet sauvignon.

And then there were the rum runners.  Prohibition prohibited the U.S. manufacture of alcoholic beverages (with the exceptions noted) but couldn’t do anything about producers such as Hiram-Walker and Joseph E. Seagram & Co. in Canada, Bacardi in Cuba or Dewar’s in Scotland.  They couldn’t sell their products in the U.S., but they could – and did – sell to intermediaries who would secretly import them into the U.S.

The government wasn’t collecting a penny of tax on any of the alcohol sold in the U.S.  During his 1932 campaign, Franklin Roosevelt estimated making beer alone legal would generate hundreds of millions of dollars for the federal treasury. Roosevelt took office in March 1933, and by December 5, Utah became the 36th State to ratify the 21stAmendment, driving a stake through the heart of Prohibition.

From 1933, when Prohibition was repealed, to the early 2000s the distilled spirts segment of the industry was associated in the minds of many people with the rum runners, moonshiners and speakeasies of the Al Capone era, otherwise known as Prohibition.

Roosevelt’s campaign theme song was “Happy Days Are Here Again,” and there is almost no question most Americans were glad be rid of Prohibition.  Among the unintended consequences of Prohibition: Amusement and entertainment industries declined; restaurants, which depended on alcohol for much of their profit, failed; the closure of breweries, distilleries, and wineries, as well as saloons, led to the loss of hundreds of thousands of jobs; government tax revenue plunged (in New York, almost 75% of the state government’s revenue was from liquor taxes).   And Prohibition totally corrupted many police departments.  (Burns, 2011).

After Prohibition, pre-Prohibition evils were almost totally identified with the distilled spirits industry.  Beer was the workingman’s beverage of moderation, and wine was identified largely with ethnic dinners, or, in the case of sparkling wine such as Champagne, with celebration.  But it was liquor that was most closely associated in the American mind with the bad things of Prohibition:  Moonshine, not beer, was produced by distillers in the hollows of rural Kentucky and Tennessee; there had been rum runners, not beer runners.

So, it was understandable that following Repeal, the liquor industry took a low-key approach.  Seagram’s first advertisement wasn’t to sell whiskey; it was to assure the public that “We don’t want bread money.”  That led to praise from Reader’s Digest: “A new high in liquor advertising has been reached.” (U.S. Senate Committee on Interstate and Foreign Commerce, 1938).

The industry itself inadvertently contributed to that perception by a voluntary agreement not to advertise on broadcast media.  That worked well during the radio era when most alcohol beverage advertising was restricted to magazines.  There wasn’t much one could do in terms of advertising other than show a person or two, smiling, holding a beer (or wine, or cocktail), or simply show a bottle.

But when television became a major factor in American life, brewers moved swiftly to embrace it, led by Budweiser and its Budweiser Clydesdales.  For more than 30 years, television ads showed the Budweiser Clydesdales prancing out the gates of Grant’s Farm, the Busch family estate outside St. Louis, pulling a beer wagon loaded with cases of Budweiser. During all this time, viewers never saw a spirits ad.

TV turned out to be an extremely powerful form of advertising and slowly distilled spirits producers saw their market share erode. By the time they decided to do go on TV, their informal decision made in the 1930s might as well have been law.

Making that decision may have been an example of Thompson’s Uncertainty Model. As Avtgis, Rancer and Liberman note (2012, p. 219), “uncertainty (can be) a primary influence on decision making.”  Would television advertising spur new talk about liquor’s seedy past?   In the mid-1980s, I approached Marty Bart, senior vice president for sales at Joseph E. Seagram & Sons, the largest distiller in the world at the time, during a press briefing.  I noted that distilled spirits was losing market share, and suggested spirits should be on television.

Bart went pale and looked like he was going to have a stroke.  “You don’t know what you’re suggesting,” he said. “The (Bronfman)  family goes back to rum-running.  They’ve worked hard to become respectable.”

Indeed, the family had carefully cultivated an image of respectability.  It must be remembered that for much of the first half of the 20th Century, anti-Jewish sentiment was a major factor in Western civilization.  The widely publicized visit by George Washington to the Touro Synagogue of Newport, Rhode Island, is often cited as an "establishing a precedent for protecting religious liberty and pluralism in the United States that persists to this day" (Tal, undated). In a letter written the same day as his visit, Washington promised the synagogue more than religious tolerance: "It is now no more that toleration is spoken of as if it were the indulgence of one class of people that another enjoyed the exercise of their inherent natural rights." He promised that "the Government of the United States, which gives to bigotry no sanction, to persecution no assistance, requires only that they who live under its protection should demean themselves as good citizens in giving it on all occasions their effectual support."

Washington’s letter was written at about the time of the rise of  the “Jewish question” in France after 1789.  Indeed, France has been considered the cradle of antisemetic ideology that shaped the history of Europe in the 20th Century.   The Bronfman family that owned Seagram traced its roots to Yechiel Bronfman, a tobacco farmer who emigrated to Canada from Russia with his wife and children in 1889 to escape the anti-Semetic pogroms of Imperial Russia.

One of those children was Samuel Bronfman who would become the head of the Seagram Company.  The family made a fortune supplying  rum runners during Prohibition in the United States.  That fortune, in turn, enabled the Bronfman family to become “perhaps  the single largest force in the Jewish charitable world” (Popper, 2005).   One of Samuel’s children was Edgar M. Bronfman. In his obituary, the New York Times noted he was president of the World Jewish Congress.  At its high point, in 1956, one of every three bottles of liquor sold in the U.S. was a Seagram product.  (Kandell, 2013)  Among their philanthropies, in addition to the World Jewish Congress, Hillel International, the Mount Sinai Medical center, New York University Bronfman Center,

Would going on television hurt that carefully cultivated image?  The Bronfman’s didn’t want to take that risk, and so spirits didn’t move into TV for another 15 years.

Ultimately, spirits did begin advertising on TV, a decision which graphically illustrates James March’s view of decision making as part art and part politics.  (Avtgis et al, 2010, p.  225). There was no way spirits producers could avoid uncertainty as they reached a decision.  To add to their angst, this was occurring as Mothers Against Drunk Driving (MADD) was becoming a powerful force.  From the mid-1980s until the turn of the century MADD drove federal policy on alcohol.  Avtgis et al note that “decision making … occurs in the present, not in the future.  Any decision I make is based on information in the here and now” (p. 224).  Ultimately, spirits executives got the courage to go on small stations in small markets and to move forward from there.

Hoffman & Ford discuss organizational change in the conventional manner of downsizings and realignments.  But organizational change can also reflect a change in mission or in the face an organization presents to the public. And that organization can include, in fact, an entire industry.

Next Week: The Case Study