It took the Stroh family over a century to build the largest private beer fortune in America. And it took just a few bad decisions to lose the entire thing
As with many of America’s great fortunes, the Stroh family’s story starts with an immigrant: Bernhard Stroh, who arrived in Detroit from Germany in 1850 with $150 and a coveted family recipe for beer. He sold his brews door-to-door in a wheelbarrow. By 1890, his sons, Julius and Bernhard Jr, were shipping beer around the Great Lakes. Julius got the family through prohibition by switching the brewery to ice cream and malt syrup production. And in the 1980s, Stroh’s surged, emerging as one of America’s fastest-growing companies and the country’s third- largest brewing empire, behind public behemoths Anheuser-Busch and Miller. The Stroh family owned it all, a fortune worth at least $700 million, according to Forbes. Just by matching the S&P 500, the family would currently be worth about $9 billion.
Yet today, the Strohs, as a family business or even a collective financial entity, has ceased to exist. The company has been sold for parts. The trust funds have doled out their last pennies to shareholders. While there was enough cash flowing for enough years that the fifth-generation Strohs still seem pretty comfortable, the family looks destined to go shirtsleeves-to-shirtsleeves in six.
“We made the decision to go national without having the budget,” sighs Greg Stroh, a fifth-generation family member and former Stroh Brewery employee. “It was like going to a gunfight with a knife. We didn’t have a chance.” His analysis comes tinged with inevitability. It wasn’t. A handful of family-owned regional brewers such as Yuengling and Schell’s continue to thrive, while others, like Olympia and Hamm’s, sold out. And the Strohs’ biggest rivals during the 1980s and 1990s, the Coors, who also aspired to turn their no-frills, regional suds into a national powerhouse, remain in the top 100 on the Forbes America’s Richest Families list.
The Strohs chose a different path, a saga that serves as a powerful reminder: Hard as it is to build a family business designed to last in perpetuity, it’s shockingly easy for any successor to tank it.
For its first century, the Stroh beer business, based in Detroit, grew by following the basics: respect your customers; respect your employees. The former meant catering to Midwest working-class tastes at working-class prices (the family watered down Bernhard Stroh’s precious recipe, after hops and wheat shortages in World War II left Americans accustomed to weaker brews). The latter by treating every employee like an honorary member of the clan. John Stroh, who oversaw a dramatic sales surge in the Eisenhower years, “was known for walking in the brewery and knew everyone’s first name,” his grandnephew Greg remembers. “Employees would run through walls for the family.” As if to connect the customers and the business, the Stroh signature was emblazoned on every bottle, topped by a family crest with a lion. Sales surged in lockstep with post-war Detroit, from 500,000 barrels in 1950 to 2.7 million barrels in 1956.
The mammoth changes came in the early 1980s. John Stroh had moved into the chairman’s role in 1967 and handed control of the brewery to his nephew, Peter, who became CEO in 1980. Like John, he had a plan to grow, but not incrementally: He would do it by acquisition. In 1981, Stroh bought New York-based brewer F&M Schaefer, which, like Stroh, was founded by a German immigrant in the mid-1800s and also offered low-priced suds to its regional fans (famous marketing line: “The one beer to have when you’re having more than one”). The next year, in what family members describe as “the minnow swallowing the whale,” Peter Stroh bet the family business, borrowing $500 million (the book value of the Stroh business was $100 million at the time) to buy Joseph Schlitz Brewing of Milwaukee.
Suddenly Stroh was the third-largest brewer in the US, with seven plants and a national footprint. Forbes valued the company at $700 million in 1988, listing the Strohs with one of the largest family fortunes in the US at the time, shared by 30 relatives.
But Peter Stroh’s grand vision of a thriving US-wide brewer failed to materialise. It largely missed the boat on the biggest industry trend in a generation: Light beer. And Stroh’s core product—cheap, watery, full-calorie beer—was a commodity. But saddled with debt, Stroh couldn’t afford to match the ad spending of its bigger rivals, Anheuser-Busch and Miller. Unable to spur demand through marketing, Stroh turned to price, introducing a 15-pack for the price of 12 cans and a 30-pack for the price of 24. The latter had legs, but it wasn’t enough to outrun the shrinking margins.
As with too many families with more money than direction, drugs and alcohol followed. Frances Stroh was kicked out of boarding school after she was caught drinking. Her three brothers also got kicked out of different schools. In an excerpt from a memoir about the family that Frances is writing, she describes one incident during her college years when she was snorting cocaine with her brothers while the rest of the family was downstairs having Christmas dinner at their Grosse Point Farms home.
(This story appears in the 08 August, 2014 issue of Forbes India. To visit our Archives, click here.)