The Risk Of Being Satisfied With The Status Quo

After Prohibition ended, there were two prominent family breweries in St. Louis, the Busch family (that controlled Anheuser-Busch) and the Griesedieck family.  The Griesediecks, at that time, operated two different breweries, Griesedieck Bros. Brewing Company and Falstaff Brewing Company.  The two entities would later become one company under the Falstaff name.  While unknown today, in the 1960’s, Falstaff outsold Budweiser by a 50% margin in St. Louis in a battle of the local beer brands and, at the height of its popularity, it was the third largest selling beer in the United States—a fact, that, most likely, surprises many of us!

What Changed this Happy Status Quo?

Back in 1953, the owner of the St. Louis Cardinals baseball team was a local St. Louis tax attorney, Fred Saigh.  Pleading no contest to a tax evasion charge, Saigh was sentenced to 15 months in prison. Fearing that his fellow owners would strip him of his franchise, Saigh agreed to sell the team.  Although, the St. Louis Cardinals team was more popular than the St. Louis Browns of the American League, the Cardinals did not own its own stadium.  It leased playing time at Sportsman Park, which was owned by the St. Louis Browns.

Saigh had attempted to sell the team to a group in Milwaukee that included Frederick C. Miller of the Miller Brewing Company.  The initial offer was rejected; the possibility, however, was left open that the team might still remain in St. Louis, if a suitable buyer could be found.  At the time, the Griesedieck Bros. Brewing Company was the major advertising sponsor of the St. Louis Cardinals radio network, which was heard in a dozen states, but they did not make an offer.

While the Griesedieck family remained in the stands, August ‘Gussie’ Anheuser Busch, Jr. stepped up to the plate to buy the Cardinals for the Anheuser-Busch Company, striking a deal with Saigh to keep the team in St. Louis.  Within a few short years, the A-B brewery also bought Sportsman’s Park from the Browns (who ended up moving to Baltimore to become the Baltimore Orioles).

Hitting it Out of the Park!

When Anheuser-Busch purchased the St. Louis Cardinals, it was a distant third in beer sales nationally, behind Miller and Schlitz (both of whom were based in Milwaukee and, ultimately, only Miller would survive.)  As the owner of the St. Louis Cardinals, however, Anheuser-Busch began to transform the world of beer marketing by utilizing its baseball franchise.  Sports fans became a new and distinct category of customers, driving marketing and sales, not only in St. Louis, but as part of the company’s national brand strategy.

By 1957, within four short years of purchasing the St. Louis Cardinals, Anheuser-Busch became the number one beer seller in the United States, and it has remained on top, ever since!

That same year, as sales declined with the loss of the Cardinal broadcasting rights, the Griesedieck Bros. Brewing Company was bought out by Falstaff (ran by their cousins) and beer was no longer produced under the GB name, only Falstaff.  Falstaff, after peaking in 1966 to reach third place in national sales, declined over the years and its beer ceased being produced in 2005.

It’s a fascinating story, how the beer industry was forever changed by that one fateful decision by Anheuser-Busch to buy the St. Louis Cardinals, while its cross-town rivals, Falstaff and Griesedieck Bros. Brewing Company, saw neither the opportunity for their growth, nor the danger of their demise.

The Only Thing You Can Count on is Change

The lesson to be learned is that there is no such thing as a stable market.  Every decision that you make, or don’t make, and every decision, which your competitors make, or don’t make, actually changes the status quo of the marketplace.  The marketplace, like the ocean, is in constant flux.  It may look the same day after day, or wave after wave, but a market, like the sea, is always changing.

Too often business owners and management executives rely solely upon their own perspective.  This is inherently risky.  What if the Griesedieck brothers at GBBC, or their cousins at Falstaff, had brought in an outside consulting company to evaluate their opportunity to purchase the St. Louis Cardinals?  The Griesedieck family certainly possessed the resources to purchase the team,  which was sold to A-B for less than $4 million.

Unfortunately, the Griesedieck family members only saw the status quo, and, more fatefully, they were satisfied with that status quo.

After all, they were pillars of the St. Louis community and they owned two of the three largest breweries in the area. They were satisfied with their successes and they never believed, for a moment, that failing to make a decision would put them at risk.

While this is a story of how buying a baseball team changed the character of the Anheuser-Busch Company and sports marketing, overall, the tale of these two competing brewers should be illustrative for every business owner of the fact that the market is always changing.

No business can remain successful, over the long-term, without change.

Learning from History

The best way for business owners to protect against making the wrong decision is to bring in a third-party expert to provide them with the objective perspective about their business, which they are unable to provide themselves.  A Business Analysis is like a physical check-up.  It helps to reveal vulnerabilities, so that the right decisions are made, today, to ensure success for tomorrow.

The Griesediecks were successful business people. They survived Prohibition and they built two different thriving breweries. They thought that this status quo would continue and that their business would continue to prosper. An outside perspective was required, but they never saw the necessity.

They were at the top of their game.  They were confident, due to having always been successful in the past, but, by acting alone, they lacked objectivity.  Moreover, they never even thought that they were vulnerable.  As we now see, in the clarity of hindsight, an objective, third-party business analysis might have opened their eyes and saved their family business. If it happened to them, as the producer with the third most popular beer in the nation, it could happen to anyone.

While situations will be different for every client that we meet, there is one constant that we can share with our clients—change or the market will pass you by, putting everything that you have worked for at risk, for either you or your children.  The need for an objective third-party business analysis may not be readily apparent to most business owners, but the history of mistakes made by the management of Falstaff teaches us that this service is an important hedge against unforeseen risk.

Former Falstaff executives would gladly raise a frosty glass of Falstaff in toast to that principle, but sadly, they can’t.