Few companies soared as high – or fell as fast – as the Jos. Schlitz Brewing Co, “The beer that made Milwaukee famous.”
From the early 1900s to the 1950s, the title of largest beer producer in the U.S. alternated between Schlitz and rival Anheuser-Busch. Then Schlitz fell apart. The reasons are many and complex but, in a sense, the final act played out in a warehouse on North Teutonia Avenue.
It’s a story of larger-than-life personalities, of dazzling product and marketing innovations, and a final, stunning fall from industry leader to historical footnote.
Schlitz’s roots reach back to 1849, when German immigrant August Krug began making beer in the basement of his restaurant. Krug hired fellow immigrant Joseph Schlitz, then 20 years old, as bookkeeper. In 1856, Krug died and Schlitz took over management. Two years later, he married Krug’s widow and changed the name of the firm to Jos. Schlitz Brewing Co.
Following the Great Chicago Fire of 1871, which destroyed most of that city’s breweries, Schlitz opened a distribution center there and began the slow, steady expansion that made the company a national brand.
In 1875, Joseph Schlitz died in a shipwreck while on vacation in Europe. He had steered the company through a time of amazing growth. In 1849, its first year of operation, the company sold 500 barrels. At the time of Joseph Schlitz’s death, production had reached 70,491 barrels – an increase of 14,000 percent in 26 years.
Control of the company was placed in the hands of four Uihlein brothers, nephews of August Krug. The Uihlein family entirely owned the brewery until 1962, and maintained a controlling interest after the company became publicly traded.
In 1932, Milwaukee Sentinel writer Gunner Mickelsen profiled Alfred Uihlein, who, at 80, had just stepped down from the post of Schlitz president. For 60 years, Alfred had purchased every pound of hops and every bushel of barley that went into making Schlitz. Given a sample of hops, Alfred could tell with a quick glance, sniff, and touch, whether it had been grown in California, Oregon, Bavaria, or Poland, and in what particular region of those places it had come from.
When the Sentinel writer asked him to share the secret of his achievements, Alfred Uihlein said, “Well, I suppose we had ideas. One of them was that we must make good beer.”
The author of the 1932 Sentinel article, concluded his look at Schlitz with these words, “Native shrewdness, the ability to turn events to their own uses, a number of happy accidents, and the smile of the gods upon them, combined to speed the Uihleins’ unbroken, amazing rise.”
In the 1970s, the gods abruptly stopped smiling. During that decade, sales declined by 40 percent and the brewer fell from second largest to a tie for fourth place. Between 1973 and 1981, Schlitz, the country’s best-selling beer for most of the quarter-century following Prohibition, lost 6 of every 10 customers it had. Over the same period, the value of a share of company stock tumbled from $68 to $5.
What went wrong could fill a book and included an aggressive and expensive-to-defend three-year federal probe into marketing practices. Moreover, the marketing department, which once seemingly could do no wrong, floundered repeatedly in seeking a new direction for its advertising. Attempts at diversifying the company’s business turned into expensive fiascos. And Chairman Robert Uihlein, the fourth member of his family to lead the company, died suddenly of acute leukemia leaving a leadership vacuum.
Most damaging of all were problems with its core product. Seeking to maintain profitability by cutting costs, Schlitz reduced the amount of hops and barley it used. This required the addition of other ingredients to stabilize the beer and keep it looking and tasting good.
In 1976, many Schlitz drinkers hankering for a tall frosty brew were surprised to pour out a glassful of weird, murky slop. Although the beverage was safe, it looked awful. It took awhile to unravel what had gone wrong. In fact, Schlitz squandered a critical six months denying there even was a problem – only to abruptly change course and recall 10 million bottles and cans of beer.
What happened? At the time, the U.S. Food and Drug Administration proposed regulations requiring the listing of ingredients on beer labels. Schlitz was using enzyme-enriched silica gel to stabilize its beer. Worried about how consumers might perceive that ingredient, Schlitz replaced it with a product called Chill-garde, which could be filtered out before bottling, avoiding the need to list it on the label.
Incredibly, no one at the brewery checked how Chill-garde would react with another ingredient, a foam stabilizer. Mixed together, they triggered formation of protein chains, harmless but becoming more and more visible the longer the beer sat on the shelf.
An attempt to fix the issue caused a worse problem. Instead of switching back to the familiar silica gel enzyme, management decided to keep using Chill-garde and remove the foam stabilizer instead. With its already low barley and hop content, the beer quickly went flat. Tired of surprises, customers fled the brand never to return.
The downfall of Schlitz was the subject of an article by Jacques Neher, which appeared in the Milwaukee Journal in two installments in June 1981 under the ominous title, “What went wrong.” Neher concluded:
A classic tale of human failing, the Schlitz saga now serves as a reminder for those who might lose sight of the fact that a company – no matter how modern its plants, how endowed its balance sheet, or how lionized by Wall Street analysts – is really no stronger than the human beings who manage it.
The other half of the story is how the leaders of a family-controlled company failed to overcome their own self-interests to plan responsibly for the company’s future; of how these company leaders let the glitter of bigger profits overpower a more fundamental responsibility to serve the consumer; of how a marketing-oriented company lost its grasp of the textbook marketing concept.
In other words, the company should have remembered Alfred Uihlein’s secret of success from 1932, “We must make good beer.”
When the dust settled in 1981, Schlitz was looking to merge with, well, anyone. But at least its production woes were in the past and the company was still making beer at breweries in Milwaukee; Memphis; Los Angeles; Winston-Salem, N.C.; Longview, Texas; and Tampa, Fla.
The product may have returned to its former standard, but the corporate balance sheet was a train wreck. When its union contract came up for renewal, the company took a strong line in negotiations, offering Milwaukee workers no pay increase at all, while Miller and Pabst workers had just won $1 an hour increases in both the first and second year of their new contracts.
Pouring salt on the wound, Schlitz said it would cut union jobs not directly involving brewing, such as lawn mowing and snow and garbage removal. It would also close its city distribution center at 6800 N. Teutonia Ave., fire company drivers, and outsource deliveries to a Milwaukee beverage distributor. All told, about 200 jobs would be lost.
Local beer delivery had been a traditional function of brewery workers since the days of horses and wagons. For the rank and file at Schlitz, the plan to outsource distribution was the final straw. On June 1, 1981, more than 700 members of Brewery Workers Local 9 walked off their jobs. Two months later, with picket lines still in place, Schlitz announced it would end brewing operations in Milwaukee. When the news broke, an industry analyst, Donald W. Rice, correctly predicted the massive plant would never reopen.
“As of today, it’s just real estate,” Rice told local media.
Schlitz’s first brewery was on West Juneau Avenue between Fourth and Fifth streets. Where it ended 132 years later is harder to pin down. But if you had to pick one place, it might be a nondescript modern warehouse, which still stands – the former Schlitz city distribution center at 6800 N. Teutonia Ave. Here workers took a stand and Schlitz began fading from the city it once claimed to have made famous.