How to Kill a Beer Brand

Brewmaster Kirby Nelson began brewing the last batch of Schlitz beer – once the best-selling beer brand in the world – at 12:30 p.m. on May 23 at the Wisconsin Brewing Co. in Verona, Wis.

People die, businesses fail. But the Schlitz brand was murdered by a Harvard Law School graduate who thought cutting costs was the way to beat Anheuser-Busch at the game of brewing beer.

In the early 1950s, Joseph Schlitz Brewing Co. was the largest brewer in the world, pumping out 6.35 million barrels of beer inn one year. It's marketing theme was, "When You're Out of Schlitz, You're Out of Beer." Miller Brewing Co. was No. 2.

But August A. Busch Jr.,, didn't intend for Anheuser-Busch to remain the No. 3 brewer. Adolphus Busch had trademarked "The King of Beers" for Budweiser in the 1940s, and, after World War II, Busch Jr. had embarked upon expanding A-B's national footprint. "Gussie" Busch had opened A-B's $34 million brewery in Newark, N.J., in 1951. A year later, A-B would open a $25 million plant in Los Angeles.

In response to A-B's moves, Schlitz, the world's largest brewer, and Pabst together spent $35 million for new West Coast breweries.

Back when A-B was planning to open the Neward plant, Milwaukee was synonymous with beer. Indeed, Blatz beer advertised that, "I'm from Milwaukee and I ought to know." But the more than 7,100 workers at six major Milwaukee breweries – Schlitz, Pabst, Miller, Blatz, Gettelman and Independent Milwaukee – weren't paid as well as brewery workers on the East and West Coast.

Unionized Milwaukee brewery workers had proposed a new contract with provisions designed to put them on equal pay and hours with workers on the East and West Coasts. But led by Schlitz, the Milwaukee Brewers Association, which represented all the local breweries, would not budge. Schlitz and Miller had breweries elsewhere so they weren't hurting as badly as other breweries which didn't/ Finally, Blatz Brewing Co. negotiated its own contract.

So, on May 14, 1953, they walked out. As the strike ground on, pubs and retailers looked elsewhere for beer. The 1953 strike was the first time – ever – that everyday consumers in Wisconsin were seen drinking beer from outside the region, including imported from distributors in Peru, Ind., and Peru, Ill., where Star Union Products Co. was brewing "Star Model Beer."

The strike lasted 76 days, and could have lasted longer; after all, Schlitz and Miller had breweries outside the city so they were still getting income even if smaller local breweries weren't. Finally, after 76 days, Blatz Brewing Co. broke from the Employers Association, negotiated its own deal and the others had to follow suit.

A-B was ready to jump. When the strike ended on July 29, A-B was the largest American Brewer, a position it would trade with Schlitz several times, but by 1957 the die was cast: Anheuser-Busch could call itself "The Great American Brewer."

But as devastating as the 1953 strike was, decisions totally unrelated to labor are generally credited with setting Schlitz on the path of oblivion.

In 1967, pressured by Anheuser-Busch, Schlitz President/Chairman Robert A. Uihlein Jr. decided he would make his company more profitable than A-B. His first action was to adopt something called "accelerated batch fermentation," which cut the brewing time to 21 and then to 15 days from 25, much shorter than the 32 to 40 days of lagering (storage) for Budweiser.

In 1971, Uihlein took another step to cut costs, instructing his brewers to replace some of the malted barley used to make the beer with corn syrup and to substitute cheaper hop pellets for fresh hops. Both moves were intended as cost-cutting moves and to be made incrementally so drinkers wouldn't notice.

The cost of goods sold went down enough that in 1973 Schlitz could boast it had the most efficient breweries in the world. It's profit-to-sales ratio and utilization of its plant, in terms of capacity against actual production, were both substantially above average. Market share was growing rapidly, outpacing either A-B or Miller Brewing Co.

But while finances and production efficiency are important, sales are more important. And for food and beverages, at the end of the day it's how a product looks and taste that matters.

This wasn't the first time Schlitz had messed with a beer's formula. In 1964, Schlitz had acquired Primo Brewery in Hawaii, and by 1971 Primo had a 70% share in Hawaii. Schlitz decided to mess with success and halted full brewing at the Primo plant. Instead, it shipped dehydrated wort – the sweet starter liquid for beer extracted from the mashing process – from its Los Angeles brewery to Hawaii for fermentation.

Islanders said the change had worsened the taste of their favorite beer, and Primo's sales share dropped to just 20% share in 1975 from 70% in 1971. Schlitz resumed full brewing in Hawaii, but Primo's sales never fully recovered.

Because Schlitz wasn't brewed as long under ABS as other beers, it had to add silica gel to prevent a haze from forming when it was chilled. Schlitz began to worry the U.S. Food & Drug Administration would require brewers to list ingredients on their labels, and its use of silica gel would stand out when compared to its rivals who aged their products longer. They were certain Anheuser-Busch would seize upon this "unnatural" ingredient and contrast it with its "all-natural" ingredients in Budweiser and Michelob.

Indeed, rivals already claimed the use of silica get meant it was selling "green" or too-young beer, Schlitz changed the meaning of ABG to "accurate balanced fermentation" from "accelerated batch fermentation."

But changing the name didn't solve the problem. While one observer said the changes made the beer appear to have thing while flakes or, in the immortal words of one observer, to look like "snot," Uihlein argued the haze wasn't harmful to drinkers and not much of the beer would be kept at the temperatures at which the haze would form.

Schlitz had advertised itself as the "most carefully brewed beer in the world." But consumers noticed the change; The beer tasted thin, flat and sour, earning nicknames like "seawater." Sales dropped, consumers started returning cases of beer, and, in 1976, the company made a secret 10-million-bottle recall of beer at a cost of $1.4 billion.

Around this time, Uihlein was diagnosed with leukemia, died a few weeks later. Eugene Peters, an accountant, became CEO, and Daniel McKeithan, a geologist and the divorced husband of a big shareholder, was named chairman.

Uihlein's tinkering with the product had been disastrous for the brand's image, and the company began to lose its second-place rank to Miller Brewing, which had grown faster. In a panic, in 1977, Peters and McKeithan hired Leo Burnett, one of America's top admen, to create a new "high impact" television campaign.

It featured an aggressive looking boxer who, when asked to swap his Schlitz for another brew, responded, "You want to take away my gusto?" Consumers found it threatening. Another ad in the campaign featured a wilderness man who, when asked to swap his Schlitz, said to his cougar, "say hello to your lunch" as the big cat lunges at the camera.

As if all this wasn't enough, in 1978, Schlitz was charged in a 747-count indictment with misdemeanor violations of the Federal Alcohol Administration Act in connection with the alleged payment of about $3 million in bribes and kickbacks in exchange for exclusive or priority pouring rights at major venues like Wrigley Field, Chicago's O'Hare Airport and Conrad Hilton Hotels. It was also charged with felony tax fraud for illegally deducing the cost of these bribes on its federal income tax returns for 1972, 1973 and 1974.

It pleaded guilty to a single count of criminal conspiracy and a count of failing to keep accurate records for tax purposes and agreed to pay $761,000 in penalties, and the government dropped the remained 746 counts.

The original massive Schlitz Brewery in Milwaukee closed in 1981, although operations continued elsewhere. Strok Brewing Co. purchased the company in 1982 for $500 million in an all-cash deal.

Stroh was the nation's seventh largest brewer when it purchased Schlitz, and Stroh hoped the purchase would give it a national footprint. But the deal was massive leveraged; Stroh's own net worth was just $100 million vs. the $500 million it paid for Schlitz.

Instead, saddled by the resulting debt, Stroh, a family-owned Detrout brewer since 1850, was purchased by Pabst, in 1999. which ceased Schlitz production after its sales dwindled to the level that it no longer met the minimum required by Anheuser-Busch and production ceased in May 2026.

Lessons Learned:

• Brands are the sum total of everything people know about a company, a product or a person. Corporate managers need to understand what is most important about that brand.
• In the case of beer (or wine or spirits), as the Schlitz case illustrates, it's the quality of the product, which is expressed by the taste/mouthfeel, how the product appears when served.
• It's also worth remembering that, generally, people react more positively to friendly people than to hostile people, which is why the advertising was such a mistake.
• Beer (or wine or spirits) should be associated with happy occasions.
• Finally, the 1953 strike gave drinkers of Milwaukee brands the opportunity to try those of other brewers.
• The underlying theme of this case to us seems to be that Uihlein had a philosophy of scarcity that led him to make critical decisions that permanently hurt the quality and reputation of his products, that led him to lead his fellow brewers into a strike that, except for a few years, allowed Anheuser-Busch to become America's No.1 brewer.