Third Act: A-B's struggles bring back The Chief

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Thirty years ago, August Busch III led a boardroom coup that ousted his father at Anheuser-Busch. Now he's pulling the strings again, trying to right the brewer that has stumbled under the watch of his son, August Busch IV.

The elder Busch, who stepped down as CEO three years ago and became chairman, has grown increasingly involved this year in the company's marketing, wholesaler relations and other aspects of management. He's doing so as the No. 1 U.S. brewer struggles in the face of mounting competition from spirits and a rejuvenated Miller Brewing Co.

The latest example: He was present last week when a number of A-B agencies presented ideas for No. 1 brand Bud Light. Among them: abandoning the "Going great lengths for the great taste of Bud Light" positioning that has guided the beer's advertising since 1993.

For Mr. Busch-known as the Third, or Chief-sitting in on agency pitches "isn't something that happens every year," said one executive close to the brewer. "It's not something that happens every five years."

Yet his re-emergence isn't a surprise to insiders, as the man who built A-B into a dominant brewer has been increasingly active behind the scenes since January. "The helicopter's been on the roof," said one executive familiar with the brewer, referring to Mr. Busch's preferred mode of transport.

Mr. Busch the elder was the driving force behind the A-B marketing this summer that decried rivals Miller and Coors as un-American, executives said.

He also drove the marketing shake-up that moved Bob Lachky to exec VP-global industry development, from VP-brand management. He talked tough at wholesaler meetings in August and has been visiting distributors and bars.

Passing the reins

Mr. Busch passed the reins to longtime lieutenant Patrick Stokes in 2002. August Busch IV was promoted to president of the U.S. brewery. The elder Busch never completely walked away, however, and he's stepping up his involvement as A-B grapples with arguably its toughest competitive environment since the 1970s.

The beer industry is losing middle-aged imbibers to wine and twentysomethings to spirits.

Miller Brewing, a thorn in A-B's side during the 1970s, once again has become a legitimate, albeit much smaller, challenger since it was acquired three years ago by South African Breweries.

Also, there's a sense among analysts and other A-B observers that A-B's advertising has been weaker than in the past.

The "Whassup" campaign-the brewer's last breakout hit-aired in 1999. Recent internal research at the brewer showed its advertising has low recall, executives said.

A-B has fought back by discounting its brands and rolling out new products. By cutting price, it has taken share from Miller in supermarkets in recent months. A-B didn't respond to requests for comments.

Pressure cooker

But A-B's financial performance is suffering.

A-B last week reported earnings that came in below analysts' expectations and took down its 2005 guidance. A-B's market share of beer shipments for the first nine months stood at 49%, down a full point from the year-earlier period.

Mr. Busch's increased involvement has made what's always an intense environment even more of a pressure cooker. As his nickname suggests, the Chief is renowned for his forceful personality.

He and his son often work in tandem but also have disagreements-creating tension for all.

While having a highly successful executive return to the fold can create internal upheaval, it can be positive, said James Schrager, a professor of strategy and entrepreneurship at the University of Chicago: "The risk is doing nothing and watching the company sink further and further."

Matthew Reilly, an analyst for Morningstar who follows A-B, noted, "It's a bad sign in that he'd only be doing it if something's wrong. But it's no secret that there's something wrong."

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