Falstaff Brewery Foretells the Future

In 1963 Joseph Griesedieck, Sr. (“Joe Sr.”) was the third generation to head up Falstaff Brewing Corporation in St. Louis, MO. He chaired its Executive Committee and was on its Board of Directors. Griesedieck, an engineering graduate from Cornell University, started as a trainee in the fermentation and brewing halls and by 1963 was in senior management.

He authored that year an article in the Financial Analysts Journal, see here, a gem from JSTOR, the scholarly research database. It is called Brewing Crosses the Threshold.

The audience was financial analysts who reviewed industry group performance and assessed publicly-listed securities. Clearly Joe Sr. wanted to impress them with the recent growth and bullish prospects of the brewing industry and his own company, traded on the NYSE but still family-managed.

The article is upbeat, confident, and secure in its projection that American brewing had many sunny years ahead, and by implication Falstaff, one of its leading lights. In 1963 Falstaff was the third-largest brewer in America, selling 6M/bbl per annum. It built a stable of breweries by acquisition, reaching into different parts of the country.

The Griesedieck clan were originally from Catholic Westphalia and had come to America at Civil War’s end. They started in the malting business and moved into brewing, running a number of breweries under different names. The American patriarch Anton fathered Papa Joe, Joe Sr.’s grandfather, and it is Papa Joe who laid the post-Prohibition foundation of Falstaff.

He had purchased the iconic Falstaff brand from another brewery, Lemp, that had stopped operating with the advent of Prohibition. Papa Joe had confidence that Prohibition would one day end and the famous St. Louis brand would again be welcomed by the market.

In 1963 Joe Sr. explained the changes the post-Prohibition industry had to confront:

In the years since the hardy pioneers quaffed their homemade brew, beer has had its ups and downs. Some of the downs, particularly prohibition, made the going pretty rough. In fact, with repeal, a complete industry was – in effect – born anew. Changes in consumer habits and distribution methods had to be caught up with at the same time the industry was analyzing the changes of the future.

There have been many such changes. Among the major ones are the rapid rise of the supermarket as a family shopping center; the growth of convenience packaging and cash-and-carry trade; the increasing popularity of beer among women and its acceptance as a family beverage of enjoyment and moderation; and consumer reliance on national and semi-national brands for quality and dependability.

…. During these recent, somewhat hectic years, competition in the industry has been honed to scalpel-sharpness, forcing some marginal and less efficient brewers to throw in the towel. To survive, brewers have had to demonstrate flexibility in meeting changing marketing conditions. And successful marketing has had to have the backing of strong management leadership. The total effect, however, has been a strengthening of the relative positions of the brewers who have operated profitably during this period, plus a new status – a “streamlined look”- for an industry that traditionally has been regarded as a bit old-fashioned in its development. Today, scientific management methods are as much a part of brewing technique as the fermentation processes. The men who make the beer are a young and energetic group, specialists all, and the tools with which they work are the most efficient to be had.

Electronic data processing has been harnessed for brewing efficiency. At Falstaff, for instance, orders from all eight breweries funnel to a control center in St. Louis over leased wires. Here EDP takes over verifying the accuracy of orders, signalling urgent needs for materials and supplies, and arranging a weekly production schedule for each plant exactly tailored to each week’s demand in each distribution area.

He also noted the trend of consolidation but saw it as positive, to gain efficiencies in the face of ever-rising costs and taxes and ensure the capital investment necessary to remaining competitive. He noted that many smaller concerns couldn’t keep up and fell by the wayside.

He doesn’t give any hint of being worried that his company would be taken over. Rather, it was the other way around: Falstaff was regularly acquiring breweries, including a modern St. Louis plant in the mid-1950s formerly owned by cousins, the Griesedieck Brothers Brewery.

But fate intervened: in 1975 a controlling interest in Falstaff itself was purchased by Paul Kalmanovitz, the premier U.S. brewery corporate raider of the time. “Mr. Paul”, as his employees called him, invested $20M in exchange for one-third of the equity and, crucially, voting control.

By 1977 Mr. Paul shut the St. Louis head office and brewery of Falstaff, firing most of the workers and managers. The surviving management was moved to San Francisco, CA to work with Mr. Paul’s General Brewing which had absorbed Falstaff. Falstaff’s farther-flung breweries were closed in subsequent years. Thenceforth Falstaff beer was manufactured in another of the breweries later acquired by Mr. Paul.

The last to be bought, Pabst, is still a successful, mass-market brewer albeit owning no significant brewing operations: most production is contracted out. Mr. Paul died about 20 years ago and other hands now own Pabst. Falstaff beer itself has been off the market since 2005.

Some of the drama associated with the takeover is described in the article “The Falstaff Brewery, St. Louis” by Chris Naffziger, published in Brewery History in 2015, see here.  

According to the article, by the early 1960s the seeds of Falstaff’s fall were sown in that the company had bought aging breweries whose per-barrel production cost well exceeded that of highly efficient breweries such as Anheuser-Busch.

Also, a costly anti-trust lawsuit in Rhode Island in the early 1970s, connected to the purchase of Narragansett Brewery in 1965, drained the coffers of funds needed to modernize. Naffziger wrote:

Ironically, the logic of survival of the fittest advanced by Joe Sr. in the 1963 article, when Falstaff seemingly was impregnable, did the company in a scant dozen years later.

In terms of beer itself, as a drink, there is not a single word in Joe Sr.’s article, that is about its taste or the different styles of beer. Beer is assumed to be a given thing, with national brands having the highest quality and appeal. The interest and challenges lay in other areas, with the goal of economic efficiency foremost.

Fermentation and brewing are mentioned briefly but only as subjects of further refinement by scientific processes.

The article reflects the perspective of the committed business technocrat. There seems some affection for beer whose long history he outlines briefly. But he implies that the lore of the brewmaster and his special skill is more for public consumption,  i.e., its marketing value, than anything important.

Joe Sr. did hint at a major business breakthrough, one he was not at liberty to discuss. Perhaps it dealt with continuous fermentation, heavy brewing, or some other technological innovation. More plausibly perhaps, the future purchase of Narragansett Brewery in Rhode Island was already being planned.

He certainly did not envisage the craft revolution and that rich, heavy-hopped beer, the type Griesedieck ancestors made in the 1800s, would return to American brewing and enrich (some of) its innovators. Yet another irony: Ballantine India Pale Ale, an important progenitor of American and world craft brewing, was in the Falstaff stable from 1972 due to Ballantine brewery purchase by Falstaff.

Of course, Joe Sr. was not alone in viewing beer this way. Mr. Paul, for this part, never moved in that direction either with no evident harm to his interests. Such was the temper of the times: no one was thinking of “the beer” except to have white-coated scientists make it at the lowest possible cost. In fact, most U.S. beers by then were rather peas in a lager pod.

In the Brewery History article a brother of Joe Sr., a Monsignor (in the priesthood), expressed bitterness at Mr. Paul’s ruthlessness, and derision for what he viewed as his uncouth manner. Joe Jr. was also interviewed extensively but is more nuanced in his assessment of Mr. Paul, a man he clearly admired in many ways. Chris Naffziger sums up the antimony as the perspectives of morality vs. business.

As someone who has been involved in the business world for decades, I see it like Joe Jr. Business is a complex process, never completely amoral, never completely profit-driven. Different businesses reach a balance suitable for them but at a certain point, sustained profitability is a sine qua non.

As Naffziger notes, maybe the right way to view it is Mr. Paul did the dirty work no one else at Falstaff was willing to do and had he not done so, the company would have gone under anyway.

I wonder if Joe Jr. had his father’s 1963 article in mind when assessing the legacy of Falstaff and the various responsibilities for what went wrong.

N.B. Some years ago Griesedieck descendants in St. Louis founded a business to offer St. Louis two beers under their name and the “GB” shield used by the old Griesedieck Brothers Brewery (both made under contract, I understand). See details in their website here including some absorbing history on their brewing ancestors and Falstaff. This is a commendable continuation of important local brewing history, related to Falstaff Brewery but not using the Falstaff brand as such. The name still belongs to Pabst.