As a case study of the decline of a family business, the story of the Stroh Brewery Company must be up there with the best. Founded in 1850 in Detroit by German emigre Bernhard Stroh, by the early 1980s Stroh was the third biggest brewing company in America in terms of sales. But cracks were emerging at Stroh in the 1970s and these became bigger and bigger over the next two decades. Eventually the business was sold and by that time most of the Stroh family fortune had been wiped out.
The story of the decline of Stroh is well known. But a newly released memoir written by a family member brings a new dimension to the story through a very personal and up close account. Beer Money: A Memoir of Privilege and Loss, written by a fifth generation of the family Frances Stroh, brings to life the trials and tribulations of a family dealing with the fall of their wealth and influence in an often moving way.
The story is the complete opposite to the often anodyne accounts of triumphant family business success stories that abound these days. For this reason alone it is worth reading. But it’s also a brilliant portrayal of the fleetingness of wealth and how wrong decisions can see a fortune disappear. At the front of the book, Frances uses a quote from Ernest Hemingway's The Sun Also Rises, which is apt for the decline of Stroh: “‘How did you go bankrupt?’’ Bill asked. ‘Two ways,’ Mike said. ‘Gradually and then suddenly.’” Members of multi-generational families running millions of dollar companies should read Frances’ account - because there is much in it they can learn from, and even identify with.
Frances’ father Eric Stroh was a fourth generation member of the family that started the brewery business. According to Frances’ account, Eric was a reluctant worker at the family business and instead probably should have followed his passion for photography. He worked without a great deal of success in the marketing department of Stroh, until he quit in 1985.
But dividend cheques continued to roll in and paid for a wealthy existence for the family in Grosse Pointe, a wealthy suburb of Detroit. Grosse Pointe is where most of the city’s automobile tycoons lived, including many of the Fords. As Frances says in the book: “Money was everything in Grosse Pointe. You couldn’t live there if you didn’t have it, and some had a lot more than others. The social hierarchy favored the richest, oldest families who had settled in the area and built Detroit from the ground up - the same families who lived on my street, whose children attended my private school, and who swam at my club.” It could be a paragraph from The Great Gatsby.
Eric spent a great deal of his fortune on collecting expensive cameras, antique firearms and furniture, and rare guitars - the most prized of which was a Martin guitar signed by Eric Clapton. Eric was also a big drinker. And Frances’ portrays dark family moments linked to her father’s alcoholism throughout the book. Charlie, one of Frances’ three brothers, was often at the receiving end of his father’s dark moods and this left deep scars. He ended up near destitute and with a serious drug problem, tragically dying in an accident in Dallas in 2003.
Frances talks with much pathos throughout the book about her family, which includes her mother Gail, and two other brothers, Whitney and Bobby. But perhaps the figure that most stands out in Frances’ account is her father. And the seeds of his demise is probably best summed up by what Frances says earlier on in the book: “I alone knew that my father had abandoned his dream to be a career photographer in order to join the family business…” Divorced from Gail, Eric ends up dying a broken man, but not before marrying one of Frances’ high school contemporaries and having some fun along the way.
The family’s saga is intertwined throughout the book with the slow decline of the family business. There are some great passages about this like when Frances’ uncle Peter and senior manager in the business says at a family get together: “‘We have to grow or go...we’ll borrow the money.” From that moment on, you sense, Stroh is saying goodbye to the best values of a family business - debt free and a strong adherence to stakeholder values, all of which had seen Stroh through difficult times in the past.
The end finally comes for Stroh in 1999 when the entire business is sold to the beer companies Miller and Pabst. “The family was crestfallen, our 150-year brewing tradition gone, just like that,” Frances says in the book. Proceeds from the sale went to pay off debt and pension liabities, what was left was invested in the dot.com bubble, “only to take an instant nosedive with the ‘dot-bomb’.” Frances quotes her father in the book, talking about the demise of Stroh. “We should be a Harvard textbook case study on how not to run a business.” Today, given the popularity of family business courses at prestigious business schools, maybe they are...
Frances and her brothers are eventually told by the family’s lawyer, Bill - portrayed as the ever trusted advisor - that they won’t be beneficiaries of any trust money. He says to them: “Each of you will have to seriously consider what you will do for income…” Suddenly, the entitlement of the fifth generation is no longer.
The looming presence all the way through the book is Detroit - and the demise of the once great city that coincides with the fall of Stroh. As Frances said: “My family’s arc was eerily parallel to Detroit’s; we’d boomed together and now...we were failing together.”
Maybe if Stroh had been based in San Francisco, where Frances now lives, or another prosperous city, its fall wouldn’t have been so swift. But there were many bad decisions taken by members of the family that exacerbated the decline and the book details some of them. There was also just bad luck.
So many family businesses thrive because of their great products, their commitment to stakeholders and adherence to good governance. But they also thrive because of a certain amount of luck. As Beer Money so poignantly portrays that luck can turn and unravel a business and a family slowly and quickly at the same time. Family businesses should never forget that...