The origin story of the beer that made Milwaukee famous and the character behind it.

Dave Young:

Welcome to the Empire Builders Podcast, teaching business owners the not-so-secret techniques that took famous businesses from mom-and-pop to major brands. Stephen Semple is a marketing consultant, story collector, and storyteller. I’m Stephen’s sidekick and business partner, Dave Young. Before we get into today’s episode, word from our sponsor, which is, well, it’s us, but we’re highlighting ads we’ve written and produced for our clients. So here’s one of those.

[Colair Cooling & Heating Ad]

Dave Young:

All right, Stephen, you’ve got to join with me here. You ready? One, two, three, four, five, six, seven, eight. Schlemiel, Schlimazel, Hasenpfeffer Incorporated.

Stephen Semple:

Schlemiel, Schlimazel, Hasenpfeffer Incorporated. Any Laverne and Shirley fans? We just [inaudible 00:01:44] ourselves.

Dave Young:

Cue the music.

Stephen Semple:

There’s a whole probably three generations that are going, “What the hell are they talking about?”

Dave Young:

“What are they doing?” Welcome back to the Milwaukee Beer podcast.

Stephen Semple:

Yeah. There’s been a few Milwaukee Beer installments.

Dave Young:

Little bit.

Stephen Semple:

But you know what? For those who don’t know the reference, y’all go to YouTube, Laverne and Shirley, and you’ll get it.

Dave Young:

Just Google, Laverne and Shirley opening song. It’s fun. And they were two roommate, young women that worked at a brewery in Milwaukee, right?

Stephen Semple:

Yeah.

Dave Young:

Hilarity ensues. And you and I were in Milwaukee not too long ago, and we walked around and saw the statue of Colonel Pabst, and then we walked over to the Schlitz brewery. We didn’t get in. They weren’t open that day. So we’re talking about Schlitz today, right?

Stephen Semple:

And I’m surprised you said colonel given the whole story has [inaudible 00:02:36].

Dave Young:

Is it colonel? Is it captain?

Stephen Semple:

He was captain. He was steamship captain, remember?

Dave Young:

Oh, God. Captain Pabst.

Stephen Semple:

How could you forget?

Dave Young:

Send the hate mail to Dave at… Colonel, captain. So what rank was Mr. Schlitz?

Stephen Semple:

He was just a Mr. Schlitz.

Dave Young:

Just mister. Okay.

Stephen Semple:

Yeah. Yeah. The Joseph Schlitz Brewing Company, as you mentioned here, as a brewer based out of Milwaukee. And we actually talked a little bit about them in an earlier episode on Pabst, episode 76. We refer to Schlitz. We need to do this podcast to close that part of the story because there was a lot of things that happened between Schlitz and Pabst in the early days. And Schlitz in the early 1900, it became the largest beer producer in the United States. And it held that status on and off through the 1950s. So they’re a big deal. They were a big deal. In 1982, ironically, it was sold to Stroh’s, and then in 1999, Pabst bought it. So these two competitors eventually ended up being under the same umbrella. But in this heyday, big deal. It was number one beer in the United States.

Dave Young:

It will, and as their advertising slogan said, it’s the beer that made Milwaukee famous.

Stephen Semple:

Yeah. There you go.

Dave Young:

I want to know what beer made Milwaukee thirsty because that city was thirsty for beer.

Stephen Semple:

There’s a lot of breweries. A lot of big breweries have come out of Milwaukee. It’s quite remarkable. I think it’s the German heritage of Milwaukee that makes that happen.

Dave Young:

[Inaudible 00:04:14].

Stephen Semple:

Send hate mail to me. But it started as Krug Brewery and was founded by August Krug in 1894. And when August Krug passed away, the brewery was struggling, and he left it to his widow along with $8,000 in debt. And at this time, the business was being run by his nephew and a bookkeeper, Joseph Schlitz, and they’re really trying to keep things together. And at this time, Schlitz is not only working as a bookkeeper, he is also working as the manager. And he offers to help run the brewery. And he actually ends up helping run the brewery, and then he turns the nephew into the bookkeeper, and Schlitz ends up marrying the widow and then changes the company name to Joseph Schlitz Brewing Company. And that happens in 1858.

Dave Young:

He marries the widow. She has to probably change her name to Schlitz. And why not just… You know like Krug? Was that it?

Stephen Semple:

Yes, Krug. Yeah.

Dave Young:

Didn’t you think, “Oh, that’s a terrible name for a beer. Let’s go with Schlitz”?

Stephen Semple:

Because it’s so much better.

Dave Young:

He marries the company, changes the name.

Stephen Semple:

He marries the company, changes the name, and the goal is now to become the largest in the area. He wants us to become the largest brewer in the area, but they’re still heavily in debt. And he needs to get rid of the debt and grow. And he wants to sell outside of Milwaukee. And if you remember from the Pabst episode, there were 35 brewers in Milwaukee, and Pabst had just bought South Side Brewery to become the biggest in the area. So Pabst said, “Just on this acquisition to become the biggest in the area.” And Schlitz here is going, “Well, no, I want to become the biggest in the area.” So Joseph Schlitz needs to find an opportunity to sell their beer. And it’s 1860 and war is looming.

Dave Young:

Civil War. Yeah.

Stephen Semple:

Correct. Yes. And there’s Union soldiers building on the border and soldiers need beer. So he decides to sell beer to these soldiers because the Mississippi River’s not that far away. So he sells the beer down the Mississippi River on barges with ice to sell it to the Union soldiers. He ramps up production tenfold doing this. And by 1865, Schlitz is selling 4,400 barrels of beer and is on the way to become number one as long as the war continues. But we know the Civil War is about to end. And once this happens, sales grind to a halt. So once again, he needs to find a new market outside of Milwaukee. Another opportunity presents itself.

Dave Young:

Stay tuned. We’re going to wrap up this story and tell you how to apply this lesson to your business right after this.

[Empire Builders Ad]

Dave Young:

Let’s pick up our story where we left off. And trust me, you haven’t missed a thing.

Stephen Semple:

So once again, he needs to find a new market outside of Milwaukee. Another opportunity presents itself. October 8th, 1871, we talked about this in Pabst, the Chicago Fire happens.

Dave Young:

Oh, yeah.

Stephen Semple:

These levels over 17,000 buildings, including 19 breweries. And remember in this day, beer is also a substitute for water for a lot of people. So it’s super important. But Joseph Schlitz is a little bit slow to act on this opportunity. Captain Pabst beats him to it. Gets there first. But Joseph doesn’t want to be outdone. So what he decides to do is sends rail cars full of water and beer to give away for free to the needy. Give first away for free people, develop a taste for it, then they bought his beer.

Dave Young:

Mm-hmm. And they remembered that he gave him some water and some beer.

Stephen Semple:

And this is when he created the tagline because he got a lot of press around this, “The beer that made Milwaukee famous.” And they become the number one beer in Chicago because they fill this hole lost by the Chicago breweries. So while he was later than Pabst getting to the game, he outmaneuvered Pabst with this whole idea of giving away beer and water for free, developing that taste and that brand loyalty.

And as we know from both the Pabst episode and the Budweiser episode, around this time, shelf life for beer is a really big deal. Trying to figure out how to extend the shelf life. So Joseph decides to go to Europe to find a barley substitute as a way to extend the shelf life. So if I remember from Pabst, what they did is they figured out how to use corn and created American lager. Budweiser created bottling and pasteurization. What Schlitz wanted to do was find a barley substitute and he decided to go to Europe to do it. So in 1875, he heads off to England, his ship crashes on lands and the boat sinks, and he dies along with 335 other people.

Dave Young:

So you’re not going to tell me what he found instead of barley, because he didn’t.

Stephen Semple:

He didn’t. So now the brewery… Remember we talked about the nephew?

Dave Young:

Mm-hmm.

Stephen Semple:

August Uihlein, that’s him. Now the brewery is in his hands. He gets everyone together to develop their own long-lasting lager. Now his brother had just come back from Copenhagen with this batch of yeast. And so, they create this beer called Schlitz Bohemian. You’re probably going, “Never heard of it.”

Dave Young:

No. No.

Stephen Semple:

Yeah, yeah. Didn’t sell well. At this time, this new idea, Schlitz Bohemian, doesn’t sell well. Pabst is out selling them by crazy. But when his brother was in Copenhagen, he discovered this idea of tide houses. Now tide houses became illegal in 1933. But basically, here’s when you get this independent operator who is contracted with only one brewer.

Basically, they started buying saloons or making deals with saloons where they would only sell their beer. This creates a monopoly. Giving all these deals to tie to them, going and buying all sorts of saloons and only selling their product. This creates a monopoly that does get outlawed in 1933, but not before Schlitz finally passes Pabst in 1902. And Pabst passes them, and then they get passed by Bud, goes back and forth. And in 1982, it’s sold Stroh’s for $500 million, which is now owned by Pabst ironically. So there’s all of this that’s tied together. But what I found interesting was Schlitz, to me, there was a couple of lessons. One was he saw this opportunity with the war, which was interesting, saying, “Okay. I can take advantage of that.”

Dave Young:

Bring beer down the river and sell it to the soldiers that there, sure.

Stephen Semple:

Yeah. He was constantly thinking outside of his area. Even when he was late to the game, what the opportunity happened in Chicago, he didn’t let that defeat him. He actually figured out a way to out-maneuver Pabst with this whole idea of, “Let’s actually give away a sample.” If you really think about this is like sampling.

Dave Young:

Absolutely.

Stephen Semple:

Sample of the beer. “They developed a taste for my beer. They then buy my beer.” And while I don’t like the idea of monopolies or the creation of monopolies, it’s still this whole, “Went somewhere else, went to Copenhagen.” Now it was to find a different brewing method. But while in Copenhagen saw, “Here’s how the saloons operate in Copenhagen. They’re tied to a brewer. Wow. Isn’t that really interesting? We should do that here.” And again, it would’ve been very easy to dismiss that because it’s often easy to dismiss the things that we see somewhere else saying, “Oh, that won’t work here.” So they were always open, very open to the opportunities outside of their space. And I admire them for that. Keeping their eye open for these opportunities and whatnot in terms of how to grow.

Dave Young:

That’s amazing. It’s the first I’d heard of, you called it flag houses?

Stephen Semple:

Tide. Tide houses.

Dave Young:

Tide. Tide houses, not flag. Well, what I find interesting about that, that made me think is he said they were outlawed, but Coke and Pepsi do that today. They’ll go into a restaurant, and they’ll want to be the exclusive soft drink. I don’t know how that works.

Stephen Semple:

Pepsi actually followed the Stroh’s playbook because they bought a lot of the fast food chains.

Dave Young:

Yeah. Yeah.

Stephen Semple:

They bought a lot of the fast-food chains. And those fast-food chains can only sell Pepsi. I don’t know the legalities of this enough to sit there and say, “Hey, why is it work for the soft drink companies? It got outlawed in the beer industry.” But let’s face it, Coke and Pepsi learn this trick from somewhere.

Dave Young:

Oh, absolutely. And I have to think that it’s probably a regulation that was put in place in the alcohol industry that just didn’t affect everything else. As we know, they regulate alcoholic beverages in a way different way than they do just about everything else. So interesting. Interesting.

Stephen Semple:

So there’s a few lessons here that we can learn from. One was the power of product sampling. He used product sampling very well to beat Pabst in Chicago, even though they were not the first to the market. Also the importance of distribution. When you have a product that goes on shelves. And what they saw as the importance of distribution was tying up these saloons. But they understood that distribution was a real key to this business.

Dave Young:

Great story.

Stephen Semple:

Yeah. And we had to cover it because it helps us now close the Pabst, Budweiser, Schlitz because they all were doing things at the same time.

Dave Young:

So what’s next on the Milwaukee Beer podcast?

Stephen Semple:

We have to dig a little bit for that. Budweiser was St. Louis, so we did step a little bit outside.

Dave Young:

Yeah. For those of you that are following the Laverne and Shirley thread, it was a spinoff from Happy Days. So dig into that too, while you’re at. Thank you, Stephen.

Stephen Semple:

Thanks, Dave.

Dave Young:

Thanks for listening to the podcast. Please share us, subscribe on your favorite podcast app, and leave us a big fat juicy five-star rating and review. And if you have any questions about this or any other podcast episode, email to questions@theempirebuilderspodcast.com.