Beer Money: A Memoir of Privilege and Loss(53)
“We can thank the United Auto Workers for bringing Michigan to its knees,” one of my cousins piped in.
“The unions certainly haven’t helped us,” John agreed. “If U.S. manufacturing had remained affordable for the Big Three, this wouldn’t be the ghost town that it is.”
Passing the buck, it seemed, had reached epidemic proportions in this family, and I wanted some accountability. “John, did we ever consider moving our headquarters elsewhere?” I asked. “After the Detroit brewery was closed in the mideighties, for example, and we had breweries all over the country?”
“No one had a crystal ball, Franny,” John responded smoothly. “And uprooting management was not exactly an attractive option.”
He went on to deliver the complexities of the bad news with a confident sort of complacency that seemed to belie the dire circumstances in which we found ourselves. The business—now a holding company called Stroh Companies, Inc. (SCI), with a basket of declining assets—would cease to exist within a certain number of years, and no one knew the exact number. Dividends would cease even sooner.
As the automotive industry had declined and businesses had moved out of the city, so our real estate holdings had plummeted. Stroh River Place had been our most disastrous investment, representing a loss of close to $300 million, some of which had been bank loans, triggering foreclosures on the hotel and the apartment building. As for the office building we sat in, at 50 percent occupancy it was now worth but a tiny fraction of what the family had invested in it.
John moved on to the next line item: Spain. The Spanish government was suing us for a tax they believed we owed on our Spanish brewing interest—Cruz Campo—which we had sold to Guinness in the early nineties. For years, we’d been fighting the tax in the Spanish courts; if enforced, it would have totally wiped us out. In the meantime, the SCI board had voted to pay a substantial portion of the company’s remaining equity out to the shareholders.
“So save your money,” John advised ominously. “We’ll be dissolving the company soon.”
My relatives masked their panic by taking studious notes or simply staring ahead with blank expressions. Like my father, most of them had enjoyed quarterly dividend checks for as long as they could remember. Some had been saving; some hadn’t. In our branch of the family, with my father as the only shareholder, my brothers and I had never received SCI dividends, and probably never would. I looked across the room and noticed that my father and Elisa were just coming back from a cigarette break, giggling like teenagers, as if utterly oblivious to the bad news.
“Elisa and I are having a ball spending your inheritance,” my father loved to tell me. I knew he wasn’t joking, but now even his own money supply was on the verge of tapping out. The company had been imploding while quarterly reports sat in an unopened pile on my father’s kitchen counter, he and Elisa busy spending the dividends before the checks had even arrived.
Next, John moved on to our biotechnology interest, Apex Bioscience, the company Uncle Peter had founded in the early nineties with $100 million of SCI funds. Just a few years later, John would sell this division to a German venture capital firm for nothing but a minor equity stake in lieu of proceeds. On an annual basis, the Germans initiated additional funding rounds in which we had to participate in order to keep our stake intact.
“Should we invest more funds in biotechnology?” John asked the group. The venture capitalists were raising money for a phase-two drug trial. We weren’t ever asked to vote, or even to give our opinions. “They’re asking for a minimum investment of two million dollars. We haven’t committed at this level in over a year.” Clearly John was stumped, and the board always deferred to the family, meaning to John and Pierre, cousins who’d inherited board seats from their fathers. For the very first time, John was turning to the family for direction.
We wrote our votes on scraps of paper and put them into a hat. I voted in favor of the investment. What difference did it make? We were going down so fast we couldn’t count our losses. And while it was a gamble, Apex Bioscience was the only investment in our portfolio that had any potential at all. As my father sometimes said, “We should be a Harvard textbook case study on how not to run a business.”
“Family-owned and operated since 1775,” our beer labels had boasted, but that was exactly our problem: in our system, fathers promoted their sons, sons who too often had neither attended business school nor proven themselves in other corporate settings. Running a regional brewery was a far cry from running the beer giant we’d become in the eighties and nineties. And . . . we’d simply blown it.
When Alan Bond, the Australian financier, had made the Stroh Brewing Company a billion-dollar offer in the mideighties, our family-run board turned him down. Within just a few years we were taking less than half that number from Coors, only to watch them back out of the deal. Our fire sale to Miller and Pabst in the late nineties had been the ultimate humiliation. At the last moment, Pabst backed out of the Stroh Brewery’s pension liability and still we’d agreed to the sale, shouldering that liability ourselves.
Like most family members, I’d watched our business decline year after year from the sidelines. I could see now that many of these strategic pitfalls might have been avoided, had seasoned professionals been at the helm. Family-owned and with a family-run board, we’d been in way over our heads once we became the third-largest North American brewer. Anheuser-Busch and Miller—number one and number two, respectively—were publicly traded companies with diversified boards and shareholders who kept a sharp eye on strategic decisions. Stroh shareholders, unless they happened to sit on the board, had no voice at all. These meetings were nothing more than elaborate smokescreens designed to foster a sense of agency, however false, among the rest of us.