What if I could sell beer where there is less competition? What if I could ship beer to the west?
Dave Young:
Welcome to the Empire Builders Podcast, teaching business owners the not so secret techniques that took famous businesses from mom and pop to major brands. Stephen Semple is a marketing consultant, story collector, and storyteller. I’m Stephen’s sidekick and business partner, Dave Young. Before we get into today’s episode, a word from our sponsor, which is, well it’s us, but we’re highlighting ads we’ve written and produced for our clients. So here’s one of those.
[Frank Gay Ad]
Dave Young:
Welcome to the Empire Builders Podcast. Dave Young alongside Stephen Semple. And there’s a chance that this might just become a beer podcast.
Stephen Semple:
There you go. That would be kind of fun.
Dave Young:
There’s so many people that have built beer empires, right?
Stephen Semple:
Yes.
Dave Young:
And so when you told me that we’re going to be talking about the king of beers.
Stephen Semple:
The king of beers.
Dave Young:
I’m thinking, “Ah, no, we’ve already done Sleeman’s. They’re not the King of Beers. Colonel Pabst wasn’t a king.” So obviously we’re talking about Budweiser.
Stephen Semple:
That’s right. Is it?
Dave Young:
Is that right? Isn’t that the king of beers?
Stephen Semple:
That’s right. That is the king of beers.
Dave Young:
Okay.
Stephen Semple:
Isn’t it amazing you can sit there and say, “King of Beers,” and everybody understands it’s Budweiser. Right?
Dave Young:
And I don’t know that they’ve said that. Have they said that out loud? Anytime-
Stephen Semple:
Yeah. I believe-
Dave Young:
They still say-
Stephen Semple:
I think it’s been a while since they’ve done it, but I remember they used to do the king of beer ads and they would take the cap and they would, remember, turned it around and-
Dave Young:
Oh, yeah.
Stephen Semple:
The top so it would look like a little crown. Remember how brilliant those were? Yeah. I don’t think I’ve seen a king of beer add for a while, but in my heart, when I hear king of beers, I still think Budweiser.
Dave Young:
It’s stuck. It’s stuck.
Stephen Semple:
Yeah. Yeah.
Dave Young:
Then it’s Clydesdales. All kinds of things. Boy, they’ve been a powerhouse. If we’re going to talk about an empire, let’s find out how this one was built.
Stephen Semple:
And if you think about it, the best selling beer in the United States is Bud Light and Budweiser’s number three. So when you’re number one and number three in a beer category in the US, that’s big man. And what we know is they sell huge amounts of beer around the world. You go anywhere in the world, they’re there. So they’re massive. And Budweiser was introduced in 1876 and today there’s 18,000 employees working for Budweiser. And in the 1800s, beer was actually a really big deal. Wells, the water was often bad. People drank beer because it was fermented and boiled and frankly, it was safer to drink beer than water.
Dave Young:
And not so full of alcohol that it would just mess up your day.
Stephen Semple:
Right. Right. Yeah. Absolutely. And at the time, beer was served just a few miles from where it was made. Was very local, it didn’t have good shelf life, didn’t travel far. And one of the biggest places for brewering was St. Louis. St. Louis had an enormous number of breweries. In fact, at the time, there was one brewery for every 600 people in St. Louis.
Dave Young:
That’s all right.
Stephen Semple:
So it started off being owned by Eberhard Anheuser who had immigrated from Germany in 1857. And he owned several businesses including a really successful soap maker. And in fact, the beer business for him was a sideline and it was really struggling. It was not actually doing that great. Well, you think about it. How much competition did he have? A lot.
Dave Young:
A lot.
Stephen Semple:
Right?
Dave Young:
Yeah.
Stephen Semple:
Right? So he had this beer business and it was kind of struggling and basically Eberhard wanted to unload this side hustle. And so he approached his son-in-law, Adolphus Busch, and he said, “Hey. I want you to take this over. I want you to run this thing.” Now here’s the funny thing is, Adolphus Busch didn’t like beer. He knew nothing about beer and he didn’t like beer. He didn’t drink beer. And now he’s taking over this brewery, which is kind of funny because people listening to the podcast will have heard ads for one of our client’s mother’s Brewery who, the founder’s Mom doesn’t like beer. So it’s kind of funny. So we’ve heard this story before.
He was a business person and the first thing he looked at is he said, “St. Louis was a really important railway hub.” So he wanted to explore how to make beer in St. Louis and sell it somewhere where there was less competition ’cause there’s all this competition in St. Louis bought big railway opportunity. And he’s looking at the West, which is opening up, and he says, “Boy, if I could ship beer to the west, he’d be the only game in town,” and this would be awesome. So he invented the refrigerated freight car. So they created and invented the refrigerated freight car using ice. And so he has to borrow money to pioneer this new refrigeration system. He also decides he wants to reformulate beer. He wants to change it to taste to something more American and also using more American product and American grains and corns and things like that than-
Dave Young:
So what was it before?
Stephen Semple:
It wasn’t corns before. It tended to be other products, right.
Dave Young:
Okay.
Stephen Semple:
But he also sort of felt like to him, he wanted to make something American.
Dave Young:
Okay.
Stephen Semple:
Right? So he brought in Carl Conrad who wanted to make a version of beer called lager. So lager hadn’t been being made in America. But instead of creating the European lager, he decided to put an American spin on it because basically all the Europeans were restricted by the Bavarian Brewing Act. Like they all worked on that act. And he decided, “Screw that. This is America. We don’t have to be governed by that act.”
Dave Young:
We don’t have that. We don’t have those rules. Yeah.
Stephen Semple:
We don’t have that rule. So he wanted to use American ingredients. And he came up with an American twist on a beer recipe he found in Budějovice, Czechoslovakia.
Dave Young:
There we go.
Stephen Semple:
There we go. The origin of the name, Budějovice, Czechoslovakia. So they named the beer Budweiser. So in 1876, a bud is born.
Dave Young:
A bud. Just a little bud.
Stephen Semple:
Just a little bud. And they started shipping it far and wide and they were the first to ship refrigerated ale and sales surged and then they fell. And he was like, “What the heck? Why did they fall?” And at the time, beer was sold out of a barrel. So they would barrel the beer and they would ship it. And what they found is it was being watered down.
Dave Young:
And we’re talking literally a wooden barrel.
Stephen Semple:
Literally a wooden barrel like you would ship a whiskey. That was how they were shipping the beer. And what was happening is the bars would water it down or they would fill the beers with these other cheaper beers. So there is no way to ensure quality control. And this really bothered them because he’s like, “We’re making this American beer and it’s this new taste and it’s different and it’s all these other things and we really need to control this.” So he decides he’s going to bottle beer. Had never been done before. In fact, bottling of liquids had not been done. And there would be a label and there would be a cap, but it was going to be a big investment because it was a novel idea because basically they were going to have to figure out how to pasteurize things.
And he had been reading Louis Pasteur’s work. But what he also realized is if we pasteurize this and we bottled it and we capped it, it would make the beer even further shelf stable so they could ship it even further.
Dave Young:
Oh. Wow.
Stephen Semple:
So they could ship it further and control the quality and control the branding.
Dave Young:
And do you even need to refrigerate it if you’re shipping it in a bottle?
Stephen Semple:
I believe it still needed to be refrigerated. Yeah.
Dave Young:
Okay.
Stephen Semple:
But not to the same degree. And so they built the bottling facility. They built a bottling facility. You know what?
Dave Young:
That’s no small feat and-
Stephen Semple:
Actually when you think about it, no, you wouldn’t have to refrigerate it when you bottle it. That’s right. No you wouldn’t need to.
Dave Young:
I think Coors, one of their big things, I don’t know if it still is, but it was refrigerated all the way from the factory to the store. It’s not a big issue to this. The fact that he built a bottling factory.
Stephen Semple:
Yeah and it was the first mass produced bottled drink of any kind in the world. And this became so successful that Adolphus Busch was made partner and that’s now how it became Anheuser-Busch Brewing Company.
Dave Young:
Stay tuned. We’re going to wrap up this story and tell you how to apply this lesson to your business, right after this.
[Empire Builders Ad]
Dave Young:
Let’s pick up our story where we left off and trust me, you haven’t missed a thing.
Stephen Semple:
So the thing I found really interesting about this, so first of all, again, how often do we see this? It’s somebody from outside. This guy was not a beer drinker. Didn’t like beer, didn’t drink beer, was handed this thing. And then he looks around and he goes, “Wow. There’s just way too much competition in this market. Where can I go?”
Dave Young:
Yeah.
Stephen Semple:
But, Dave, you always like talking about what’s the unleveraged asset? But he looked at it, the unleveraged asset was railway hub.
Dave Young:
Yeah.
Stephen Semple:
So he figured out how to leverage that strategic asset and create the ability to ship. And then ran into another problem and overcame it with bottling, but I also like the whole thing that even though he wasn’t a beer drinker, he wanted to create an American beer.
Dave Young:
Yeah. So I think the other thing here is that imagine if he was a beer drinker and a beer aficionado. His focus probably would’ve just stayed on having a better beer than the other 600 breweries in St. Louis. “I’ve got to beat them at their own game.” And he’s like, “I think I’ll just keep making beer and I’ll sell it somewhere where there aren’t 600 brewers.” And so he had the mind of a problem solver, not a brewer.
Stephen Semple:
That’s a really interesting observation ’cause we see this so often where people come into something and because of their knowledge in the industry, they get trapped in that place.
Dave Young:
Yeah. Whether you’re a jeweler, anything else. If you’ve got blinders on and all you can see are your competitors and doing better than them, you’re not going to see opportunities the way Busch saw them. Right?
Stephen Semple:
Yeah.
Dave Young:
You’re going to look at things through a completely different lens. And so to have that outsider’s viewpoint, “I’m not a beer drinker, but I’m going to figure out how to sell a lot of beer. I’m going to make a beer that I think Americans are going to like and be able to call their own,” and now you can leverage the hell out of that.
Stephen Semple:
And I think also not being a brewer made it easier for him to abandon the Bavarian Brewing Act that everybody was so married to, saying, “No. I don’t need to do that.” Because the Bavarian Brewering Act was a stamp that said, “This is really high quality.” He went, “Yeah, but it also says you got to use these ingredients. We can still make something high quality and use different ingredients and make it our own.” I think him not being a brewer made that easier because he wasn’t married to that.
Dave Young:
Well how many Americans care about the Bavarian Brewing Act?
Stephen Semple:
It’s kind of one of these funny ones that keeps coming back and forth ’cause then when the craft brewers, fast forward 100 years and craft brewering starts coming in and it’s one of the things that they hang the hat on. It’s really that act on its own is an interesting history. But you’re right. He looked at this not as a brewer, he looked at this as a business person and he said, “I’m in this market. I’ve got massive competition.” Others would solve it by saying, “I’ll make a better product.” And he looked at it and said, “Well maybe I should go somewhere. Can I go somewhere where there’s less competition and can I leverage what’s around me?” Which was the railway system.
Dave Young:
And he solved another problem that when the bartenders that received these barrels start selling it, they’re watering it down. This is the same problem that plagued the whiskey industry.
Stephen Semple:
Yep.
Dave Young:
Right? They’d send a barrel out on a wagon to the old West and the bartenders would just water it down and color it with different things and add all kinds of weirdness to it. They would add acid to give it a little bite.
Stephen Semple:
Right.
Dave Young:
But I think what Busch did was he also had to have looked at some other growing industries in the US that also solved a little bit of that problem. So packaged goods. What’s being shipped that is in a form that you don’t want somebody to mess with? So you create packaged goods and you sell things instead of selling things in bulk where people are scooping it out of a barrel or you’re talking about a commodity. So he decommoditized beer.
Stephen Semple:
Yes he did.
Dave Young:
So you have to sell it in a packaged size that a consumer wants to buy and can afford to buy. Nobody can afford to buy a barrel of beer.
Stephen Semple:
Right. But they can afford to buy a bottle of beer. And then I also extended the branding ’cause now the label is in the customer’s hands and all those other things. So very, very innovative and when you come across somebody who creates the first mass produced bottling of a liquid, that’s pretty bold. Man, that’s thinking big. We’re going to do this thing that no one has ever done before.
Dave Young:
I look at any manufacturing plant that’s making things like bottles and then filling them, I’m always amazed because whoever designed and built that just thinks bigger thoughts than me and it’s like, “I don’t know how you do it, but I’m amazed.” I watch videos all the time of industrial processes and things like that ’cause this stuff just amazes me.
Stephen Semple:
So you’re a big fan of How I Made This?
Dave Young:
Well, I think I’ve watched every one of those. Yeah.
Stephen Semple:
So now we know Dave’s secret pleasure.
Dave Young:
I love the example of someone that thinks bigger thoughts.
Stephen Semple:
Yeah. Yeah.
Dave Young:
Right. And Busch, “Oh, I put it in a barrel and I put it in a train car that had ice in it and it got to the bar in great shape and the God damn bartender watered it down.” Probably took his name off of it. And so you-
Stephen Semple:
Who knows what they did.
Dave Young:
To control it. Yeah.
Stephen Semple:
Yeah. Yep. But this is what he figured out and this is what he did and became the king of beers.
Dave Young:
And I’d say, based on everything you’ve told me, deserved to become the king of beers.
Stephen Semple:
Yeah. It was a pretty amazing story.
Dave Young:
And in part two we’ll find out how he got it into every bowling alley in the world. What a great story. Thank you for sharing that one, Stephen.
Stephen Semple:
Thanks David.
Dave Young: Thanks for listening to the podcast. Please share us. Subscribe on your favorite podcast app and leave us a big fat juicy five star rating and review. And if you have any questions about this or any other podcast episode, email to [email protected].
