The Schlitz Mistake
15:55 Share

In the early 20th century, the Schlitz Brewing Company of Milwaukee, Wisconsin was the largest brewery in the world. However, by 1980, the company had fallen on hard times and was purchased by a competitor in a hostile takeover. The company was so bad that it eventually killed the company that bought them. However, the demise of Schlitz wasn't one of changing tastes or bad luck. It was a series of self-inflicted wounds.

Learn more about the Schlitz mistake and how a series of bad decisions killed one of the world's largest brewers on this episode of Everything Everywhere Daily. This episode is sponsored by Mint Mobile. One of the things I've noticed traveling around the world is how much more expensive American mobile phone plans are. In most countries I've visited, data and phone plans were very affordable. In the U.S., they tend to be really expensive.

Mint Mobile has solved that problem by offering some of the most affordable mobile plans that you can find. All Mint Mobile wireless plans are $15 a month when you purchase a three-month plan. Mint Mobile's secret is that they sell wireless services online. They don't have retail stores or salespeople. Moving to Mint Mobile is super easy. They use the same cell towers and networks as major carriers, and you can use your current phone and phone number.

To get this new customer offer and your new 3-month unlimited wireless plan for just $15 a month, go to mintmobile.com. That's mintmobile.com. Cut your wireless bill to $15 a month at mintmobile.com. $45 upfront payment required, equivalent to $15 a month. New customers on first 3-month plan only. Speed slower above 40 gigabit on unlimited plan. Additional tax fees and restrictions apply. See Mint Mobile for details.

This episode is sponsored by Quince. I speak from first-hand experience when I tell you that dressing properly is the key to surviving winter. For the ultimate cold weather necessities made from premium materials, you've got to check out Quince. I literally write almost every episode of this podcast when I'm sitting on the couch covered in my Quince Fisherman's Blanket. It's incredibly warm, it's heavy, and it looks great. It is the best blanket that I've ever owned and I love it.

By partnering directly with top factories and cutting out the cost of the middleman, Quince passes the savings on to you. Quince only works with factories that use safe, ethical, and responsible manufacturing practices. They use premium fabrics and finishes for that luxury feel in every piece. Luxuriate in coziness without the luxury price tag. Go to quince.com slash daily for 365-day returns plus free shipping on your order.

That's Q-U-I-N-C-E dot com slash daily to get free shipping and 365-day returns. Quince dot com slash daily. While Schlitz was a brewery and a brand of beer, this episode really isn't about beer or brewing per se. This is an episode about business. A business that destroyed one of the world's greatest brands through a series of horrible decisions.

Schlitz was certainly not the only business that harmed itself through bad decisions, but its decisions and decline were precipitous and very public. The story of Schlitz actually begins with a series of revolutions in Europe in 1848. The revolutions of 1848 were a series of political upheavals that swept across Europe.

Spurred by widespread discontent with autocratic governments, economic hardship, and demands for national self-determination, these revolutions erupted in over 50 countries, including France, Germany, Italy, and the Austrian Empire. The revolutions of 1848 in the German states failed to achieve their goals, leading to increased repression. Many German intellectuals and working-class citizens, disillusioned by the political and social instability, sought refuge in the United States, where they hoped to find greater freedom and opportunity.

The Germans mainly settled in the Midwest and they brought with them many German customs and traditions. In particular, beer and brewing. Beer had been brewed in the United States before this, but it was not the primary alcoholic beverage of choice. However, when the Germans began migrating to the US, they brought the knowledge of brewing and a demand for beer. One of these migrants was a man by the name of Augustus Krug.

In 1849, he opened a small tavern with a brewery attached to it in Milwaukee, Wisconsin, which had just achieved statehood the prior year. After his death in 1856, his bookkeeper, Joseph Schlitz, took over the operations and married Krug's widow, Anne Marie. Schlitz renamed the brewery to the Joseph Schlitz Brewing Company in 1858. Throughout the 1860s, Schlitz and other Milwaukee breweries were pretty small-scale.

But between 1871 and 1900, the Schlitz Brewing Company experienced remarkable growth and success, becoming a dominant force in the U.S. beer industry. A pivotal moment in this expansion was the company's response to the Great Chicago Fire of 1871, which destroyed many local breweries in Chicago. Schlitz quickly shipped beer to the city, establishing a strong market presence and earning goodwill among Chicagoans.

They made the best of this opportunity by expanding production and creating a foothold in the second largest market in the country. The company also embraced innovative marketing strategies, adopting the slogan, The Beer That Made Milwaukee Famous, which helped build national recognition. Schlitz further expanded its reach by pioneering the use of brown glass bottles to prevent beer spoilage from sunlight, ensuring consistent product quality during transportation.

These efforts, coupled with a burgeoning rail network and a growing immigrant population that valued German-style lager, allowed Schlitz to expand its distribution well beyond Milwaukee. As a side note, the vast majority of all beer sold today are lagers, yet lagers were almost nonexistent until the railroads and refrigerated cars developed as lagering required cold temperatures. The rise of lagers as the dominant style of beer could probably be its own episode someday.

By 1902, Schlitz had become the largest brewer in the world thanks to its national distribution network and consistent quality. One reason they could claim the title was that European breweries were usually very small and local, and the American market, with its railroad network, encouraged consolidation. Other Milwaukee breweries, such as Miller and Pabst, were also some of the largest breweries in the country. Throughout the first two decades of the 20th century, Schlitz retained its lock as the nation's top brewer.

When Prohibition was passed in 1920, it spelled the death of many breweries in the United States. Schlitz, like many breweries, survived by producing non-alcoholic beverages such as malt syrup. However, they had something else going for them. In 1926, the state of Wisconsin passed a referendum allowing for the production of near beer, that being beer with an alcohol content below 2.75%.

This meant Schlitz and other Wisconsin breweries were able to keep much of their operation functioning, albeit at a much smaller scale. Following Prohibition in 1933, Schlitz rebounded quickly and regained its dominant position in the beer market. It introduced new innovations such as canned beer in 1935, further increasing its market share.

During World War II, Schlitz beer was shipped overseas to U.S. troops, helping to boost morale on the front lines. The company's active support for the war effort and its continued production of beer for both civilian and military consumption reinforced its reputation as a patriotic and reliable brand.

By the end of the war, Schlitz had solidified its position as the leading brewery in the United States. The company leveraged its wartime innovations and goodwill to expand further in the post-war period, positioning itself for continued success during the booming consumer economy of the late 40s and 1950s. So by 1950, Schlitz was riding high, having experienced half a century of brewing dominance in the United States.

In 1952, Schlitz Brewing produced 6.35 million barrels of beer, the most beer ever produced by one company in a single year as of that point. It was to be the apex of the Schlitz Brewing Company. Their first major misstep took place in 1953. The Milwaukee Beer Strike of 1953 was a pivotal strike that significantly impacted the city's brewing industry, affecting six major breweries in the city, including Schlitz.

Brewery workers, represented by the International Union of United Brewery, Flour, Cereal, Softdrink, and Distillery Workers, went on strike to demand wages that were on a par with those being paid at East and West Coast breweries. The brewery workers demanded a raise of 25 cents an hour, as well as a reduction of working hours and more benefits. At its peak, the strike involved thousands of workers, bringing beer production in Milwaukee, the country's premier brewing hub, to a virtual standstill.

The strike lasted for 76 days, disrupting supply chains and leaving empty shelves, frustrating consumers and distributors. During this period, competing breweries from outside Milwaukee, in particular Anheuser-Busch and St. Louis, capitalized on the gap by expanding their market presence and capturing customers previously loyal to Milwaukee brands. For the first time in decades, Schlitz had lost their position as the nation's largest brewery.

Schlitz and Anheuser-Busch traded positions as the leading brewer throughout the 1950s, but by 1957, that title had been firmly taken by Anheuser-Busch. Schlitz lost their market dominance because they didn't want to pay the same wages that most other breweries were paying for two and a half months. Extremely short-sighted in the big scheme of things. Back in 1875, Joseph Schlitz was killed in a shipwreck when on a trip to Germany.

The brewery, in accordance with his will, was then managed by the four Ulilein brothers, August, Henry, Alfred, and Edward. The Ulilein family acquired the company in 1887 and it remained in the family for most of the 20th century. In the late 1960s, the company's president and chairman was Robert Ulilein Jr. Ulilein decided that if he couldn't compete with Anheuser-Busch on market share, he could at least give Schlitz higher profit margins. This is when things started to go downhill for Schlitz fast.

In the 1970s, the Schlitz Brewing Company implemented a series of aggressive cost-saving measures to increase their profit margins. Schlitz began replacing traditional brewing ingredients with cheaper substitutes. For example, instead of using 100% barley malt, they incorporated corn syrup as a cost-effective alternative. And while this saved money, it negatively affected the beer's flavor and body. Schlitz drinkers began to notice that something had changed, and it didn't change for the better.

Schlitz introduced its silica gel to stabilize the beer and prevent it from becoming cloudy. Although harmless, the use of silica gel became a public relations issue when it was revealed, as consumers and competitors began to question the purity and quality of Schlitz. To address the changes in the beer's texture caused by the altered recipe, Schlitz then used more additives designed to enhance foam retention.

Schlitz adopted a faster brewing process designed to shorten fermentation times. This change, known as high-gravity brewing, involved brewing beer at higher concentrations and then diluting it with water before packaging. While this reduced costs and increased efficiency, it also compromised the beer's taste and consistency. Perhaps the biggest and most damaging change had to do with labeling laws.

labeling laws were going to be put into effect in the United States and Schlitz would then have to put silica gel on their label, which they felt would hurt sales. So they switched to a product called Chilgard, which was also a clarifying agent. However, Chilgard caused a substance to float on the top of the beer, which was considered to have the consistency of snot.

Schlitz told consumers that the snot-like substance was totally harmless, but that really isn't the response that Schlitz drinkers were looking for when they had snot in their beer. In 1976, over 10 million bottles of Schlitz beer had to be recalled, resulting in a financial and reputational disaster. Any one of these changes to the product and the brewing process might have been overlooked. However, the fact that so many of them took place in such a short period of time led to consumers abandoning the product in droves.

In order to try to correct things, Schlitz hired the Leo Burnett Advertising Agency in Chicago to develop a new ad campaign for the company. In 1977, they launched one of the most infamous ad campaigns in television history. The commercials depicted tense, dramatic scenarios where characters exerted intense pressure on others to drink Schlitz. For example, in one ad, a group of rugged, intimidating men confronts a patron, strongly suggesting that Schlitz is the superior beer.

The tone was often aggressive, with an air of implied menace that, while intended to be humorous, made many viewers uncomfortable. The ad suggested that choosing a better beer other than Schlitz was almost a moral failing or a dangerous decision. The campaign backfired spectacularly. Instead of appearing confident or assertive, the ads were perceived as threatening and alienating.

Critics and viewers mockingly referred to the campaign as the Drink Schlitz or I'll Kill You ads, emphasizing the overly aggressive messaging. The ads only ran for 10 weeks, but that was long enough to do damage. By this time, Schlitz had fallen to fourth in market share, falling behind Miller and Pabst as well. And by this point, the damage couldn't be repaired.

In 1981, Schlitz was hit with another strike that lasted four months. It resulted in them closing their Milwaukee Brewery, which was the oldest and least efficient brewery that they owned. In 1982, the Joseph Schlitz Brewing Company was sold to the Stroh Brewing Company, a Detroit-based competitor in a hostile takeover. Stroh struggled to revive the Schlitz brand, and the company itself eventually faced financial troubles, in no small part due to the debt incurred by buying Schlitz.

In 1999, Stroh's assets were sold to the Pabst Brewing Company, which owns the assets of the brand today. The Schlitz brand has seen a modest revival. In 2008, the Pabst Brewing Company reintroduced Schlitz with its pre-1970s formula, marketing it as a nostalgic high-quality beer. This effort aimed to reclaim some of the brand's former glory and appeal to older generations who remembered the original Schlitz. One of the interesting problems in reintroducing Schlitz was that the pre-1970s recipe had been lost.

That recipe was never part of any of the company's sales because it no longer existed. They interviewed former brewers and conducted research into the purchase of ingredients from the old brewery to recreate the original recipe for the 2008 launch. Today, the Schlitz mistake has become a case study in business schools on what not to do. It's a cautionary tale illustrating how short-sighted decisions can destroy even the most iconic brands.

The Schlitz mistake serves as a reminder that quality and consumer trust are always paramount to long-term success. The executive producer of Everything Everywhere Daily is Charles Daniel. The associate producers are Benji Long and Cameron Kiefer. I want to give a big shout out to everyone who supports the show over on Patreon, including the show's producers. Your support helps me put out a show every single day.

And also, Patreon is currently the only place where Everything Everywhere Daily merchandise is available to the top tier of supporters. If you'd like to talk to other listeners of the show and members of the Completionist Club, you can join the Everything Everywhere Daily Facebook group or Discord server. Links to everything are in the show notes.