He knelt before his father, and in a scene played out on jumbo screens for hundreds to see, Anheuser-Busch Chairman August Busch III-a man not known for his soft side-teared up and hugged his son.
Honoring your father is one thing. Mr. Busch, president of Anheuser-Busch's domestic brewery since July 2002, needs to prove he has that father's fortitude. It's his task to guide the U.S. brewery-which posted $2.03 billion in net income in 2004, 91% of the company's total-through its thorniest challenges in decades as the king of beers loses share and volume to aggressive wine and spirits marketers and a rejuvenated Miller Brewing Co.
By turning the tide, the Fourth would make a solid case for succeeding CEO Patrick Stokes-who will be 65 in 2008-to become the fifth-generation Busch to sit on the throne. But if he falls short, the long-planned succession of Mr. Busch, 40, is in question.
"It would certainly be a feather in his cap if he could get through this difficult patch," said Matthew Reilly, an analyst for Morningstar, not hazarding a guess on the likelihood of Mr. Busch's ascent. "Is it a slam-dunk?" asked Mark Rodman, a longtime industry consultant. "Hell, no."
Question marks already hang over the private Mr. Busch, who declined to comment for this story. It's too early to tell whether some of the initiatives he's led-including new products such as Budweiser Select and B-to-the-E and aluminum bottles-will pan out. He lacks international experience at a time when foreign expansion is crucial for the company's growth prospects. He's haunted by his playboy reputation and role in a car wreck 20 years ago that left a young woman dead.
In an age of increased scrutiny on corporate governance, handpicked successors no longer get a free pass, regardless of their last name. While the family's name is on the door, the Busches are not significant shareholders. August Busch III holds a mere 1.2% stake in the company. "It's not a private company," noted Bill Leach, an analyst for Neuberger Berman, which owns A-B shares.
And while the lean, 5-foot-10, August Busch IV has things in common with his father-they bear a strong resemblance, are licensed pilots and have a penchant for cowboy boots-supporters and critics agree he's not as strong a leader. And the elder Busch has stepped up his involvement with the company in the past year, executives close to the company said.
That said, few compare to the elder Busch, who in 1975 led a boardroom coup to oust his own father, Gussie. The coup came as A-B wobbled in face of Miller's initial push behind Lite. The Third beat back Miller. His achievement in driving A-B to a 50% share of the domestic market qualifies him as one of the great executives of the past half century. He did it by surrounding himself with savvy marketers, exhibiting a relentless drive and pushing wholesalers to focus solely on A-B brews.
The Fourth, meanwhile, though he holds black belts in three martial arts, is considered by all to be a nice guy-perhaps too nice. Reminiscent of his good-time grandfather.
"The question is: Can he be strong enough when he has to be?" said one executive close to the company. "Does he have the fortitude to lead the leading brewery in the country?"
Certainly, he has plenty of advantages. His name, obviously, is a big one. The Busches are an integral part of the company's culture. "It borders on a foregone conclusion that August IV will take over the reins of the company," said industry consultant Manny Goldman.
Indeed, family ties play a strong role in the company. The Third and other executives have children in leadership posts.
"If there was a conclusion to draw from all this, it would be that St. Louis is a small town," watchdog group Corporate Library said in a report on the company's board.
Mr. Busch knows the company intimately. He was fed a thimbleful of Busch beer when he was a day old and has sat in on meetings since he was a child. He's seen as having a shrewd marketing mind and is a champion for product innovation. He also appears to be growing into his role under the mentoring of his father and Mr. Stokes.
"Speaking to him now vs. five years ago there's a difference in his understanding of the beer business and his savvy," said one close follower of the company.
Wholesalers-a critical component of A-B's success-also are warming to him. They appreciate the brewer's decision to cut back some of the red tape of their contracts. And they also find his manner warmer and more open than his father's. "His dad asks questions [but] a lot of the time you're not sure if he's interested in the answer," said a West Coast wholesaler. "The Fourth cares."
And, in a development that calmed some wholesalers, the younger Mr. Busch, reputed for a taste for nightlife, is now engaged. An announcement was made at the recent wholesaler meeting (a St. Louis Post Dispatch writer gushed that the "movie-star-handsome" family scion was taken).
The man who might be king is the elder Busch's son by his first marriage. His parents divorced when he was a boy. But the hard-driving CEO of A-B had his son sit in on brewery business at an early age.
The Fourth first came into the public eye in 1983 when he was a 19-year-old student at the University of Arizona. It was under tragic circumstances. His car ran off the road after he left a bar and his passenger, Michele Frederick, was found dead at the scene. The police found Mr. Busch at his townhouse.
Blood and urine samples taken from him were lost or damaged. Charges were never pressed. Mr. Busch claimed he didn't remember what happened during the accident and denied alcohol was a factor.
After graduating from St. Louis University he went to work at the brewery, holding posts as a brewing apprentice and in packaging and shipping. He went into the marketing side in 1989, overseeing the ill-fated Bud Dry, noted for its "Why ask Why?" campaign.
But he did make a mark when he took on marketing for Bud and eventually the entire A-B portfolio. He demonstrated a knack for ads that would appeal to young adults-even if frogs, ants and "Whassup" failed to turn around Bud.
He won the respect of ad executives for his feel of advertising and his willingness to learn. "He had outstanding instincts ... for creative, for finding the right tone," said one who worked with him. "He was also a terrific student, he listened, he observed, he wanted to watch how things were done." Another said he is loyal to people who do good work for him. "He's appreciative and grateful."
Speculation swirled around whether the Fourth would succeed his father when he stepped down as CEO three years ago. But the job went to company veteran and Senior Exec VP Mr. Stokes, the first non-Busch to run the company in over 120 years. The Fourth, who is surrounded by an entourage at public appearances, was elevated to president of the domestic brewery. Executives close to the company said the plan long had been to give the Fourth more seasoning.
SAME OLD SITUATION
Mr. Busch was 38 when he became president of the company-the same age as the Third when he led the boardroom coup. And the Fourth's challenge now-facing down surging competition-is analogous to his father's situation then.
Once again Miller-which represented 18.5% of industry shipments in 2004 vs. 49.4% for A-B, according to industry newsletter Beer Marketer's Insights-is a thorn in the company's side. Miller marketing campaigns taking shots at No. 1 brew Bud Light have stymied its growth. Meanwhile, spirits marketers are picking off young-adult drinkers and wine companies are stealing middle-aged consumers.
Mr. Busch is aware of the challenges, he acknowledged earlier this year at a conference sponsored by industry online newsletter Beer Business Daily. In a speech he said the industry is at a critical juncture and decisions made now will define the industry for decades to come, said an executive who attended the meeting.
It's his job-though by all accounts the Third is highly involved-to get the company back on track. To that end the brewer is stepping up discounting, running marketing campaigns targeting Miller and experimenting with new products like Bud Select or B to the E.
It's too early to tell whether these efforts will pay off, and plenty of skeptics doubt they will. But one thing is certain. Their outcome is as critical. Said an executive with close company ties: "This is a telling time for the Fourth."
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