THE BEGINNINGS
- Of Bavarian Brewery
THE BEGINNINGS
- Of Bavarian Brewery
ADS - From Newspapers
The background photo was the former Ohio Union Brewery before Prohibition. It became the Bruckmann Plant Nol 2 after Prohibition was repealed. Briefly, the plant was owned by Herschel Condon Brewing Co. in 1949 - 1950. It was then sold to Bavarian Brewing Co. in April, 1950, for possible use as a Warehouse and Garage for their Cincinnati Branch.
9. TURNAROUND EFFORTS (1953 - 1958)
For a 15-year period after WWII, Bavarian had been on the offense, enjoying increased sales and expanding their production. In the following years - beginning about 1953 - the brewer went on the defense. This was a period of greater competition, reduced sale and increased operating expenses. In particular, Bavarian needed to aggressively reduce costs to remain profitable and stay in business. But they were met with a headwind that had several different currents.
The acquisition of the Heidelberg Brewery in 1949 created multiple problems for Bavarian as their sales declined a few years later. First, they effectively duplicated their work forces and equipment without expanding their trade area, which led to higher labor costs without an increase of their potential customer base. Bavarian also placed substantial assets into Heidelberg (Plant No. 2), which lost significant value and were rather illiquid. By 1954, it was apparent that Bavarian no longer needed a second brewery. However, letting go of the second location would cause challenges with union workers they no longer needed.
The unions representing Bavarian's employees wanted the brewer to participate in a pension program, provide other fringe benefits and retain union workers in Plant No. 2. (Please see the photo on the side of the first Bavarian employee to retire with a pension.) Negotiations ensued, resulting in a settlement agreeable between the unions and the brewer. But it was also necessary to invest more capital into the brewery in order to reduce costs and for it to remain financially viable. More specifically, Bavarian needed to modernize and expand their main Plant No. 1, which required a capital expenditure estimated at slightly more than $1 million at the end of 1953. This also required more debt, revisions to organizational documents, and changes in management. Bavarian would also need to acquire adjacent property, new equipment and construct new buildings. At the same time, Bavarian was involved in litigation, trying to protect their Bavarian's Old Style Beer name against two larger brewers. One wanted to prevent the use of "Old Style" and another wanted to use the name "Bavarian" for a new and competitive brand. Since Bavarian's advertising may have been somewhat ineffective and partly responsible for their decline in sales, more funds needed to be devoted into improving this area and their overall marketing needed to be improved. Beginning in mid-1956, Bavarian would need to create an entirely new image and brand, which was introduced in 1957. These challenges are discussed in more detail as follows, accompanied by photos and other relevant images.
1954. On the left, Mr. Wagner, a truck driver, was the first Bavarian employee to retire on a pension. He is in the Tap Room with Joe Ponzer, Sales Manager.
MANAGEMENT CHANGES & OWNERSHIP
In January, 1953, there was some modest change in the officers of the Bavarian Brewing Co. The eldest son of William C. Schott (Will), Wm. R. Schott (Bill), became Secretary, while Will's youngest son, Louis, became Treasurer. Previously, Bill held both positions as Secretary and Treasurer, and Louis was the Assistant for both of these positions. The other officer positions remained unchanged: Will as Vice President, his brother Lou as President, and Ray Hoffman as the Vice President and General Manager. However, in November of 1954, Lou became Chairman of the Board and Bill became President, with Louis becoming both Secretary and Treasurer. Another significant development at that time, was that Louis L. Schott became a Director, replacing Joseph Vehr, who had served in that capacity since 1945. These changes meant that the four Directors for Bavarian - all members of the Schott family - were Lou, Bill, Will and Louis. Vehr left the firm in late 1954 and disposed of the few shares of stock he held in the company back to the Schott family, which were primarily placeholders so that he could be a signatory for payroll checks and other financing. Vehr's departure as controller was filled by Melvin Aichholz.
As Bavarian's production and profitability declined in the early 1950s, it appears the two older Directors were willing to step back to those that were younger, and the management of Bavarian was mostly left to Will's sons, Bill and Louis. (These brothers were also the grandsons of Bavarian's founder, Wm. Riedlin.) With the closing of Plant No. 2 and the new need for a consolidation and modernization program, significant changes were clearly on the horizon. The fate of the company would involve difficult decisions and shifts in goals in order to restore profitability. Such decisions were not left to both of Will's sons equally; as President, Bill had more influence. They were also not unanimously supported. Apparently due to a disagreement about the best course for pursuing modernization, Ray Hoffman, the V.P. and G.M, resigned in December, 1955.
In 1955, becoming unprofitable and in an attempt to conserve cash, Bavarian did not provide any bonuses to key employees, as they had each year for nearly two decades. Not surprisingly, some attrition occurred in response. Beginning in 1956, bonuses were awarded based on performance, replacing the older and somewhat arbitrary system for bonus compensation. The 16 key employees receiving such bonuses at that time were; Mel Aicholz, Perry Austin, Lyle Baker, James Caldwell, Herman Determan, Frank Hamilton, Harold Klink, Carl Moeller, Joseph Ponzer, Larry Rinck, Larry Schrand, Jack Shannon, C.H. Wimberly, Paul Wettig, John Wuest and Walter Zanis.
Will and his wife owned about 30 percent of the company, and their sons, Bill and Lou, each held about a 20 percent interest in trust for their families. Therefore, Will's family owned about 70 percent of the ownership in Bavarian, and Will and his sons had three of the four Director positions. Will's brother Lou was the other Director, and his family (consisting of wife Melba and daughter Melba Ann) owned the remaining 30 percent. For voting purposes, the closely-held family ownership of Bavarian was divided into different proportions among seven shareholders; Will, Lucia, Lou, Melba, Melba Ann, Louis and Bill.
A DECLINE IN SALES VOLUME & PRODUCTION
The acquisition of the Heidelberg Brewing Co. by Bavarian Brewing Co., creating Bavarian Plant No. 2 in early 1949, was viewed as a timely solution intended to meet Bavarian's growing sales. It helped Bavarian achieve its peak annual production of 336,157 barrels in their 1950 fiscal year, ending on September 30. In the following two fiscal years production declined about 10%, but was relatively stable at about 306,000 barrels for each of the 1951 and 1952 fiscal years according to audited accounting reports. Even though financial reports were unavailable for 1953 and 1954, overall production in 1953 was believed to be at least about 175,000 barrels for Plant No. 1 alone and about 75,000 barrels for Plant No. 2 creating a total of about 250,000 barrels. However, in Tim Holian’s book entitled "Over the Barrel" volume two, it was noted that that Research Corporation of America (RCA) statistics indicated Bavarian had a much more severe drop in production between 1952 and 1953, from 323,000 barrels to 200,000 barrels. This same drop was also mentioned in Rob Musson’s "Brewing Beer in the Queen City Volume IX." Even though there was a decline in Bavarian's production between 1952 and 1953, it was not as severe as cited by the noted publications. As mentioned, corporate financial reports indicated that barrel production in 1952 was 306,000 barrels, not 323,000. And, since Plant No. 2 (Heidelberg) was in full operation for all of 1953, barrel production in that year was most assuredly not just 200,000 barrels, but more likely at least 250,000 barrels. It was only after Bavarian began to close Plant No. 2 in 1954 that production dropped more precipitously, but nevertheless still remained above 200,000 barrels. An explanation for the production inaccuracies cited by RCA is that possibly only the production of plant No. 1 was noted in 1953, excluding Plant No. 2.
Bavarian's reduction in sales and production was believed to be due to multiple factors. Even though price was one factor, there was increased competition from much larger national brewers. Bavarian's advertising was also stale and needed to be revised. Further, there were increases in operating expenses caused by duplicate work forces at two nearby plants simultaneously. Due to these factors, Bavarian began to experience negative profits beginning in about 1954, while Plant No. 2 was still operating. Consequently, production not only declined because of demand, but to reduce costs to have more competitive prices and restore profitability. Even though Bavarian needed to close Plant No. 2 in late 1954, it still had capacity to produce up to about 240,00 barrels in its main Plant No. 1 at that time. However, another issue occurred in April 1955 when Bavarian experimented with some modest changes affecting their beers taste, making it a little "too hoppy," according to some customers. It was corrected near the end of that year, but it impacted sales for both the 1955 and 1956 fiscal years. Financial records indicate that production fell to a period low of 211,831 barrels in fiscal year 1956. However, due to a new advertising campaign and warehouse in 1957 (as explored in "(9A. Bavarian's New Look"), sales and production began to improve.
As noted, the major reason for Bavarian's relatively high expenses in comparison to its main competitors, was primarily a result of operating two plants in the same trade area concomitantly, which created a duplication in their work force, equipment and bookkeeping. By 1950, all of Bavarian's local competitors had been operating only one plant and making investments to reduce their production costs. Unfortunately, Bavarian's investment in Plant No. 2 had the opposite effect for a few years. Other critical issues were that the overall demand for beer in the early 1950s - in Bavarian’s Tri-State market area (Ohio, Kentucky and Indiana), and more generally throughout the U.S. - was highly competitive and were reaching a plateau with limited growth prospects. This meant that in order for a brewery to increase its sales, it was difficult to raise prices, and it was necessary to cannibalize sales from other breweries. Lower production expenses would allow a brewery to more effectively compete on the basis of cost and spend more on modernization and marketing. Without these advantages, Bavarian found itself at a competitive disadvantage. However, in an effort to revitalize their sales, they made some modifications to their advertising between 1953 and 1957, as explained below. Most importantly, Bavarian's management realized that it was necessary to make fundamental changes to their production model, as explored in the section on Consolidation and Modernization Program.
REVAMPING ADVERTISING
Bavarian had used "A Man's Beer" as their main advertising slogan from 1946. Along with slumping sales and changing times, Bavarian realized they needed to modify their advertising message to reach more customers. As shown by the coaster and ad below, beginning around 1953, their slogan was changed from “A Man’s Beer” to include "...and Hers Too!" (See below.) But "A Man's Beer" slogan was not completely dropped until 1955.
Bavarian sponsored a variety of television programs to better advertise their brand. As shown on the invitation below, these included A Favorite Story, Monday Night Fights and Abbott & Costello. However, their main emphasis was on the radio programs that covered news, sports and music. In the photo below, nearly all the radio and TV announcers involved with the programs Bavarian sponsored are gathered together in the Bavarian Tap Room. The brothers Wm. R. Schott and Louis L. Schott are seated 3rd and 5th from left, respectively.
c. 1954. Above is a coaster and to the right is an ad in a local paper. Note the women in the ad is similar to those in the photo above. Source: Schott Family Collection.
1954. Most of the men mentioned in the invitation above are shown gathered around a table in the Bavarian Tap Room. The exceptions are two Bavarian Directors and brothers seated at the table, third from the left, Wm. R. Schott, President, and Louis L. Schott, Secretary / Treasurer. Source: Schott Family Collection.
Particular attention is given to the man seated second from the left in the photo above, Paul Dixon. As mentioned in 8B. Bavarian’s TV/Radio Shows, Dixon had just finished his own his own national show for a year on Dumont Television in New York on April 8th, 1955, appearing in this photo about a month later, on May 5th. Becoming homesick, he returned to Cincinnati to have his own show with Avco Broadcasting on WLW-T, which appealed to housewives. The show featured Bonnie Lou and Colleen Sharp. Dixon was not mentioned in the "invitation" ad shown above, which appeared in March of 1955, because he was still living in New York at the time. However, it is believed that Bavarian's Beer was one of his show’s sponsors shortly after he returned to Cincinnati to launch his own show. The show ran for 20 years, until 1974. (See Cincy TV/Radio Talents.)
Bavarian had been working with the local ad agency of Ruthrauff & Ryan, coordinated by William R. (Bill) Schott with Bavarian. However, in late 1954, it was decided that a newly established local firm, Peck-Heekin, would be used instead. This resulted in a new theme: the full version was "The Promise of Flavor... at its Finest." However, it was sometimes separated as "Its A Promise..." and “Flavor... at its finest" in 1955. (Please see Bavarian's Ads: 1946-1956.A decision was also made for Bavarian to discontinue their television sponsorship of Midwestern Hayride in December, 1954, which had begun around 1949. Instead, Bavarian sponsored Monday Night Fights, which had previously been sponsored by Wiedemann's (that company took over Midwestern Hayride in turn, effectively swapping sponsorships with Bavarian’s). To support their new TV program, Bavarian released a series of posters featuring fighters which were taken from old lithographs created by Currier & Ives. One of these is shown on the side. For additional examples, please see Posters.
c. 1955. This Audiodisc record above was used to provide the Bavarian jingles at WKRC that can be heard by clicking play buttons on the right.
To accommodate their revised marketing, particularly with their new logo emphasizing flavor, new music jingles were developed for Bavarian. They were played on local stations from records like the one shown on the side. There were four tracts at different lengths on this album. The first one below is nearly a one minute tract, and next to it is a shorter tract of 20 seconds that emphasizes the saying Bavarian used "...It's a Promise" - that Bavarian's beer has flavor at its finest. Below them are two shorter tracts.
Lighted Cafe Signs
Another important form of advertising for all brewers, including Bavarian, was lighted cafe and bar signage. The most common were neon and backlit signs, the latter becoming more common in the 1950s because it allowed for more variations in size, colors and design. Besides lighted signs, other types of advertising used were Non-lit Signs, Pictures / Posters and Back Bar items.
Entertainment
& Sales Meetings
To help supplement marketing efforts, it was important for Bavarian to host sales meeting and entertain clients and distributors. Shown on the side are various distributors in front of a Bavarian's trailer and an old car, which may have been a 1908 Buick. As mentioned in the section on the 1946-1952 period, sales meetings were often held at local hotels and restaurants. Below is a photo taken at the Netherland Hotel, along with the photo jacket in which it was placed.
1954. The older man in the center is Adolphe Menjou, an actor who hosted My Favorite Story on WCPO-TV sponsored by Bavarian Brewing Co. He is accompanied by Bavarian Executives including Joe Ponzer, Sales Manager, on his right, and on the far right (r. to l.) are Wm. R. Schott (President) and Ray Hoffman (V.P. & G.M).
Company Parties & Athletic Teams
Even before Prohibition, Bavarian had provided company outings and parties to show their appreciation for the workers and increase company morale. (See period 4. The Early 1900s.) This tradition continued with the Schott Family management and ownership. Shown below are pictures from a summer event held in the mid 1950's at Mergard's, an innovator in bowling alleys. They had five locations in the Cincinnati area, and the pictures below capture a summer party at Mergard's 25 W. 7th St. location in Covington, KY. (Please see the match cover below.) This location is now occupied by Braxton Brewing Co. Additional annual company wide events included a show held in an auditorium before Christmas for employees and their families, where the talents of employees and their children were showcased. Additionally, some of the different brewery departments would also host their own events at times.
Athletic Sponsorships
To support the athletic interests of employees and to provide some added publicity, Bavarian also sponsored baseball and bowling teams. The baseball team they supported was in the very competitive semi-pro Buckeye League, which often included teams from the other brewers. The league extended the competitive nature of different Cincinnati area brewers from business to recreation and sports. To maintain good relationships with local cafes and distributorships, Bavarian would occasionally joint-sponsor baseball teams with these institutions. A very successful team that was sponsored by both Stanley Distributing Co. and Bavarian Brewing Co., known as Stanley's Bavarian, played in the late 1940s and early 1950s. Afterwards, these teams used only the Bavarian name. They were very successful and won various championships. For more information about the amateur and major league teams that Bavarian supported, please visit Sponsorships. In addition, Bavarian sponsored a softball team and a bowling team.
On the far left is a store window with championship trophies won by some of Bavarian's baseball teams, along with a promotional display for Bavarian's Old Style Beer. The nearest photo was a jacket award ceremony at the Bavarian Brewery for the 1955 Bavarian's Buckeye League Champions. Please enlarge it. Note the "Man it satisfies" wall poster behind the team.
CONSOLIDATION & MODERNIZATION
By late 1952, Bavarian became aware of the burden that Plant No. 2 could have on their profits. When operating expenses increased significantly and profits declined substantially in that year, even though sales and production were stable, it became evident that substantial changes were needed. In mid-1953, the V.P. and G.M., Ray Hoffman, was asked to analyze the situation and prepare a proposal. Options considered were; 1) do nothing, 2) liquidate the company or 3) adopt a Consolidation and Modernization Program. (Another option may have been going public and accessing the capital markets, but this alternative was evidently not considered.)
The Bavarian Directors decided to pursue the third option - consolidate and modernize - at a Special Board Meeting in September, 1953. According to a cost study prepared in conjunction with this proposal, by disposing of Plant No. 2 and consolidating all operations at Plant No. 1, annual net savings of $354,000 could be achieved, before deducting loan interest. However, this would require the construction of a new building at a cost of about $700,000, along with approximately $500,000 in new equipment and other costs, bringing total expenditures up to roughly $1.25 million. To construct the building, it would be necessary to acquire the adjacent ice cream plant on the north side of the brewery at an estimated cost of about $35,000. The new structure was envisioned to include beer and bottle storage, new corporate offices, general storage facilities and a garage for trucks. New equipment proposed included material handling equipment, replacement of the wood fermenting tanks, and a new yeast room, along with a range of other purchases.
Two companies were contacted to prepare designs for these improvements. Bavarian had transferred a considerable portion of their profits into surplus earnings over the years, which could have covered close to the entire estimated program cost. However, self-funding this amount would not leave sufficient funds available for working capital or cover potential operating losses and other costs. Consequently, the firm's legal counsel, Richard Todd, explored alternative financing options for Bavarian by contacting a local bank and a few insurance companies, requesting a loan of $1.25 to $1.5 million. Unfortunately, the amount requested was too small of a loan for an insurance company. At the time, Bavarian had an existing loan with Fifth Third Union Trust. The bank’s representatives advised Todd that they considered the brewer's working capital too small for a sizable loan. But if several hundred thousand dollars of surplus earnings were converted to capital stock, the bank indicated that they would be able to provide a loan of about $600,000. Still, before any future financing could be obtained, it was necessary for the brewer to change its capital structure by amending some of its corporate provisions, as discussed below.
Amending the Articles of Incorporation
In Article IV of its 1938 charter, the brewery had been formed with $152,000 in capital common stock. Bavarian increased this amount to $302,000 in December, 1945, primarily due to the addition of 1,500 shares of preferred stock. Both the common and preferred shares were at a par value of $100, but the preferred was non-voting and carried a 5% annual dividend payable quarterly. However, Bavarian needed to considerably increase its capital account. They transferred $1,064,000 of its accumulated surplus to its capital account to create a total of $1,140,000. Correspondingly, the total number of common shares were increased from 760 to 11,400 shares at a par value of $100 each. As a result, the holder of each share of common stock received 14 more shares. Including $150,000 of preferred stock, the total capital stock of the company thus became $1,290,000. A major concern about the transfer of surplus earnings was whether or not the IRS would consider it taxable. In early 1954, notification was received that the common stockholders would not incur any taxable income. Accordingly, Article IV was modified to allow the aforesaid increase in Bavarian's capital account at a special shareholders meeting in May of 1954.
Another change that Bavarian needed to make was to increase its corporate indebtedness. Article VIII had originally limited the corporation's debt to $80,000 in 1938, an amount that was raised to $600,000 in 1946. But in order to finance future expansion, Bavarian needed to have greater borrowing capabilities. Apparently, the provision addressing corporate debt did not need to state a specific limit. To avoid modifying this provision again in the future, the level of permitted indebtedness was changed to “unlimited” by a special shareholders meeting in August of 1954. (Please see the original corporate Articles.) While the above noted articles were being changed in 1954, refinements were being made to the original proposal for consolidation and modernization, as presented below.
Modifying the Consolidation & Modernization Program
During the first half of 1954, additional efforts to expand the production facilities at the main plant were considered by Ray Hoffmann, V.P. and G.M. On July 1,1954, he proposed that the Directors approve a first phase, involving the purchase of certain equipment that would boost production and reduce costs. He also recommended that specific real estate properties should be acquired adjacent to the brewery, expanding its total area.
A loan of up to $150,000 to finance these efforts was approved. Additional collaboration occurred during the remainder of 1954 to refine Hoffmann's consolidation program with two of Bavarian's officers: William R. Schott (Bill), Secretary, and Louis L. Schott, Treasurer. The original program was modified to emphasize the need to maximize cost reductions while minimizing both investment and risk to the stockholders. The final program was prepared and presented by Wm. R. Schott, not Hoffmann, at a Board meeting on September 28, 1954. This seemed to be a turning point in the management for Bavarian, with the two noted brothers were assuming more responsibility from this time forward. Less than two months later Wm. R. Schott became President; the sole non-family member who was a Director, Vehr, left; and Louis L. Schott became a Director, assuming both Secretary and Treasurer positions. Hoffmann resigned at the end of 1955. The results of these efforts, and subsequent changes in consolidation and expansion efforts in the following years, are discussed in greater detail below.
New Equipment
The machinery and equipment that Ray Hoffmann recommended to be purchased in July, 1954, amounted to a total of $68,664, and included: $22,000 for the palatalization of the Cincinnati Branch with fork lift trucks and pallets; $28,664 for a (Super Semco 50) filler at the main plant, which would increase the line feed from 153 to 180 pints and 64 to 78 quarts per minute; and, $18,000 for two wort clarifiers, saving 5 barrels per brew. In September, 1955, an additional $65,000 for new equipment was approved, consisting of $26,000 for new labelers, $5,000 for a new bookkeeping machine and $34,000 for miscellaneous improvements to Plant No. 1. In the summer of 1956, a flat top line was approved for a cost of $23,000, which eliminated the use of Bavarian's cone top cans processed through the Bottling Dept.
Acquisition of Adjacent Real Estate
In order to consolidate operations from Plant No. 2 into Plant No. 1, it was necessary to expand the main brewery site and accommodate new and more functional buildings. This required the acquisition of a major parcel, previously owned by another entity and used as an ice cream factory, and ultimately some other parcels, shown below.
c. 1955. The aerial photo on the left and site plan on the right display the Bavarian Brewery before the construction of a warehouse in 1957. Please click the images to enlarge.
When Hoffman made his recommendations for strategic purchases in July, 1954, he also called for the acquisition of real estate properties adjacent to the brewery. The amounts and properties included: $14,000 for two houses located on W. 12th Street, immediately east of the Mill House and Bavarian's offices, which were available for purchase from Lummel Realty Co. and would allow for some off-street parking; $7,500 for the house located to the west of the boiler room; and the ice cream plant (previously proposed for about $35,000) and/or a property owned by Mrs. Rehkamp, which was located north of the bottle shop.
A few months later - on September 28, 1954 - Bavarian purchased the Monarch Ice Cream Company building located at 520 Lehmar Street. The final sales price was $60,000, about $25,000 more than expected, and the property was to be made available for Bavarian's use by March 1, 1955. The new brewery structure would be connected and built on the west side of this property. It is identified as Parcel c in the schematic shown below. It is also believed that the two residential properties east of the Mill House were acquired, labeled Parcel e. The house west of the boiler plant may have been purchased, as well, identified as Parcel d. The total cost of these real estate expansions reached at least $75,000, and may have been closer to around $100,000. As shown, in the aerial photo, these acquisitions complemented the earlier purchases of Parcels a and b. By 1957, the main Bavarian Brewery site was significantly larger than it had been twenty years earlier - and was conducive to greater expansion.
Closing & Liquidating Plant No. 2
A formal decision to dispose of Plant No. 2 was made by Bavarian's Directors at their meeting on September 28, 1954. It was decided that this plant would be closed effective November 1, 1954. However, it was to be kept in stand-by condition and could be reopened, if needed, until the spring of 1955. A study by W.F. MacConnell & Co. indicated that the minimum amount this property should bring in sales was $250,000. As it turned out, this plant was not reopened; it was listed for sale in 1955 and sold in late 1956. For more information about this plant and the history of Heidelberg Brewing Co., please see Plant No. 2 / Heidelberg.
Cincinnati Branch Sale / Leaseback
On September 28, 1954, a decision was made to sell this property for not less than $150,000 and lease it back to Bavarian under a long-term lease in late 1954 or 1955. As noted previously, the Cincinnati Branch, located at 1212 Streg Street, was ultimately purchased in 1950 for $172,500. Performing this sale/leaseback helped Bavarian to reduce their lending needs while maintaining their key distribution center in Cincinnati. In 1958, with limited office space at the main brewery, arrangements were made to establish additional offices at this branch for the marketing group, including Louis L. Schott, Marketing Director, Larry Rinck, Advertising Manager, and a small support staff.
Engaging an Engineering Firm to Create Plans & Confirm Costs
In the original 1953 consolidation proposal, the firm of Schatz, Elliston, Hall, McAllister and Stockwell, located in Cincinnati, was one of two firms recommended to design a new building. They were hired in early 1954 to develop detailed plans for the construction of a new building at the main plant and to estimate accurate overall costs. As mentioned, the younger Bavarian officers and brothers, Wm. R. (Bill) Schott and Louis L. Schott, became more involved with the consolidation program. As a result, the original plans proposed by Ray Hoffmann, the V.P. and G.M., were scaled back a few hundred thousand dollars as approved by the Board on September 28, 1954, and costs were forecasted at no more than $850,000. The estimated annual savings were projected to be $288,000 after depreciation and interest payments, but before taxes, based on an annual production of 300,000 barrels. The noted program would require additional financing of approximately $200,000. Despite this significant reduction from the original proposal, an article in the Cincinnati Enquirer appearing a week later, on October 3, 1954, indicated that Bavarian was planning an expansion of $1.5 million, according to Hoffmann.
The New Warehouse
& Plans for a New Bottling Department
Instead of building a large multi-use building - a plan originally proposed by Ray Hoffmann in late 1953 - the two younger Schott brothers collaborated with Ray Hoffman in the ensuing months to modify these plans. Instead, it was decided that a smaller warehouse building would be constructed and connected to the building formerly belonging to Monarch. It was hoped that construction of this building could begin in 1955 or 1956. Especially after the closure of Plant No. 2 in late November and its sale in late 1956, a new warehouse was sorely needed.
The warehouse’s construction was delayed, in part because it took longer than anticipated to acquire the Monarch property, the site where the warehouse was to be built. Shortly after this necessary parcel was acquired in 1956, more detailed plans were officially created; construction began on the new warehouse in early 1957, as shown by the photos above. The warehouse was constructed on the north side of Lehmer Street. The aerial photos above show other perspectives of the brewery complex and the 11,000-square foot warehouse under construction in approximately May of 1957. The warehouse was completed in June of that year. In order to lower their operating costs and gain capacity for increased sales, Bavarian believed they also needed a new Bottling Plant. Funds were approved to design such a building in 1958.
COMPETITION
The Other Local Brewers
There were over 15 brewers that operated in the Cincinnati area after Prohibition, mostly starting between 1933 and 1935. But only six remained by the early 1950s. The names and years of brewers that closed were: Old Munich (1937), Foss-Schneider (1939), Vienna (1940), Schaller (1941), Clyffside (1945), Delatron (1946), Jackson's (1947), Cincinnati Brewing (c. 1948), Heidelberg (1949), Bruckmann (1949) and Herschell Condon (1950). The six brewers remaining were Redtop, Burger, Schoenling, and Hudepohl in Cincinnati and Bavarian and Wiedemann situated in Northern Kentucky. In about 1956, shortly after the photo on the side was taken, Redtop went out of business, leaving five breweries. Bavarian had been about the third-largest of these in 1950, but by 1957, their ranking declined as their sales decreased.
1956. Obtained from slides used in Bavarian's Advertising & Packing Program. Source: The Schott Family Collection.
A similarity with most of the Cincinnati area local breweries, especially after excluding Redtop because of its closure, is that their labels were rather similar. The remaining five beer brands all used white backgrounds and brown bottles, as shown in the photo above. The flagship beer for all the remaining beers were lagers, but most had an ale and most had a secondary beer brand.
National Brewers
Some of the large regional and national brewers had a presence in Cincinnati even before Prohibition, such as Pabst. In order to penetrate markets with local brewery favorites, the national breweries drew on a number of economic advantages. They could engage in more advertising, offer discounts, provide special promotions and obtain advantageous relationships with distributors. The allegiance Cincinnati area residents showed to local breweries began to fade, especially after 1950 and in the following two or three decades thereafter, as the national brewers took advantage of broader advertising on TV, radio and magazines. The national brewers also offered both premium and discount brands to penetrate different market segments. In particular, their lower-priced beers helped abscond market share from local brewers. One such beer offered by Anheuser-Busch, as an alternative to Budweiser, was Busch Bavarian Beer, introduced in the early 1950s. This was particularly troublesome for the Bavarian Brewing Co. when they learned that this beer would be introduced into their market area around 1954. Not only would the name of Busch Bavarian Beer conflict with Bavarian's Old Style Beer, but the Anheuser-Bush beer would be offered at a lower price than what Bavarian could offer. Consequently, Bavarian believed their survival depended upon defending their beer name against Busch Bavarian Beer, and filed suit against Anheuser-Busch.
BAVARIAN BREWING LITIGATION
vs. Anheuser-Bush
Billed as a battle of David versus Goliath in local papers, Bavarian sued Anheuser-Busch (A-B) in September, 1955, for name infringement and trademark violations involving Busch Bavarian Beer. Bavarian also sought damages from improper trade practices used against them by A-B. The trial began on October 15, 1956 in the U.S. District Court in Cincinnati, OH, with Judge John H. Druffel presiding; it lasted nine days. Clarence B. Des Jardins was the attorney for Bavarian Brewing Co. It was established that the brewer had obtained a trademark for their use of the name "Bavarian's" in 1947. The attorney for A-B, Wallace H. Martin from New York, contended that Bavarian was a type of beer, that anyone should be able to use that name commercially, and that there were several brewers already using the term Bavarian (Style or Type) in their beer names. A-B was seeking to have the trademark for "Bavarian's" cancelled on the basis that it was improperly issued.
During the trial, August A. Busch, Jr., known as Gussie, testified that the sales of Busch Bavarian would be expanded not only into the Cincinnati area, but all over the world, if successful. During the trial, Bavarian's President, William R. (Bill) Schott, explained that his firm was aware that other brewers used the term Bavarian, but did not file objections because these other brewers were operating in different market areas and, consequently, were not competitive with Bavarian's Beer.
In March of 1957, a decision was rendered that Busch Bavarian Beer would not be able to sell its beer in Bavarian's Tri-State market area, which was hailed as a victory for Bavarian locally. However, it was actually neither a complete win nor loss for either brewer. That was because the decision allowed A-B to use the Busch Bavarian name everywhere else, and A-B did not need to pay any punitive fines or penalties for allegations of unfair trade practices. Further, both sides needed to pay their own legal costs. After the decision, both companies considered possible appeals. But after the Bavarian Directors met with Gussie at his mansion in St. Louis, sometime in 1958, continued litigation between the two firms was abated. This meeting also provided Bavarian with an opportunity, and a dilemma. (See 9B. The Gussie Busch - Bavarian Meeting.)
vs. G. Heileman & Co.
A couple of years before the A-B suit, in January of 1953, Bavarian also filed suit to defend the name of their beer against G. Heileman & Co. in LaCrosse, WI. Heileman was attempting to obtain exclusive use of the term "Old Style," which Bavarian had been using in their main brand “Bavarian's Old Style Beer" since March, 1946. It also appears Bavarian received a trademark for their name in 1947, months before Heileman applied to register "Old Style." Even though Heileman had used the term "Old Style Lager" before Prohibition, it appears that in the 1940s they were primarily using the name Heileman's Beer, with Old Style Lager as a secondary term. (Please see the cone top can on the far left.) Congress had also passed the Lanham Act in 1946, regulating trademarks, after passing similar acts in 1881 and 1905. This suit became the first application under this new act. The brewers requested federal examiners to resolve this matter, leading to a final hearing in May of 1954. A verdict was rendered in Bavarian's favor on July 23, 1954. D. Bailey, with the Patent Office, ruled that other brewers had also used the term "Old Style" and that it was too generic of a term to legally protect exclusive use by one brewer.
On November 18, 1955, Heileman launched an appeal to the commissioner of patents, overheard by assistant commissioner Mrs. Daphne Leeds. She reversed the decision in favor of Heileman, allowing them to register the name of "Old Style." Leeds claimed that the most important factor was the "psychological evaluation of what is likely to happen in the public minds in the market place." For instance, if people most commonly refer to the beer as "Old Style”—as supported by numerous witnesses in the appeal - then that should support a “psychological principal” as a main factor in determining a trademark. Another issue was the significance of the secondary meaning of the name, such as Heileman's Beer versus Old Style (Lager), and the use of "Old Style" in Bavarian's Old Style Beer. Leeds claimed the paramount question was not whether the use has been (substantially) exclusive; rather, it depended on whether the term identified and distinguished the applicant's goods from others.
Several other firms had also used the term “Old Style,” but Heileman had threatened to file suit or made other arrangements with these firms to stop them from using this term. It appears Bavarian was the largest and last brewer remaining to oppose Heileman on this issue. It should be noted that, at this time, Heileman was distributing their beer across several states but not nationally, and they were not selling their beer in the states within Bavarian's market area. However, the decision by Leeds would allow Heileman to use the "Old Style" name nationally - preventing Bavarian from using it.
On December 15, 1955, Bavarian brought suit in U.S. District Court, seeking to reverse the decision made by Leeds. Coincidentally, Bavarian had filed suit just a few months earlier to prohibit Anheuser-Busch from using "Bavarian" in their new Busch Bavarian Beer. That meant Bavarian was involved in two simultaneous litigations to protect the name of their beer - which must have provided some time-consuming distraction for Bavarian's management and prevented them from focusing solely on their brewing business. The costs involved in litigation were also mounting, and may have limited Bavarian’s efforts to modernize and increase their advertising at a time when Bavarian's sales were declining. Finally, in February, 1956, Bavarian representatives and attorneys met with their Heileman counterparts in Chicago, where Bavarian was discouraged from further court action. It was agreed that Bavarian could use the "Old Style" name in its trade territory over the next five years, while gradually decreasing the size of the typeface for this term on its labels, and that it would not distribute its beer outside of a four-state area.
Comparison of the Trade Name Litigations
There were inherent contradictions in the two Bavarian litigations discussed. Bavarian was unable to use "Old Style" in their Bavarian's Old Style Beer brand at all - even in their primary market area where Heileman did not distribute their beer. In contrast, Anheuser-Busch (A-B) was not restricted from using "Bavarian" in their new Bavarian Busch Beer anywhere, but only within Bavarian's main trade area. Consequently, it appears that the legal considerations used in these two trademark decisions may not have been applied consistently. Otherwise, it would seem that Bavarian should have at least been able to use "Old Style" in their trade area and that Heileman would have been unable to sell their Old Style beer in Bavarian's trade area. Or, that A-B would have been prevented from using "Bavarian" in the name of their new beer nationally. Consequently, the argument could be made that legal rulings favored larger brewers over smaller ones, which placed Bavarian at a courtroom disadvantage. Furthermore, the larger firms were better able to "lawyer up" and endure long-lasting trials with highly skilled lawyers, which was too expensive for their smaller rivals to afford. In essence, what these two litigations may have exemplified, is that the legal deck was stacked against smaller brewers, like Bavarian, in favor of larger ones. It is estimated that over the four years these two cases were litigated, Bavarian spent about $150,000.
Despite the effort A-B went through to have the right to use their brand Busch Bavarian Beer, in 1979 they dropped the term "Bavarian" and just used the name Busch Beer.
RENAMING BAVARIAN'S OLD STYLE BEER & CREATING A NEW IMAGE
(Besides the discussion below, please see more detailed information about Bavarian's New Look in section 9A.)
Rather than spend more legal fees and another year or two to contest the Heileman trademark decision, Bavarian agreed to the above-mentioned settlement agreement. Even though they had up to five years to change their label, they decided instead to go through the process of changing the name of their beer rather quickly. This was much more complicated than simply choosing a new name and changing their label. Everything associated with Bavarian's former beer name would need to be redesigned, which required an entirely new advertising campaign and packaging program. It would ultimately take nearly a year before Bavarian’s "New Look” was unveiled. The brewer had been using local advertising firms as noted, coordinated by Wm. R. (Bill) Schott. Since Bill was primarily focused on consolidating and modernizing the brewery, especially after the departure of Ray Hoffmann at the end of 1955, Bavarian's Board appointed Bill's brother, Louis L. Schott, to spearhead this effort. Louis was appointed Marketing Director in June of 1956, while also continuing to carry out his responsibilities as Secretary and Treasurer.
The Bavarian's Old Style Beer label on the far left was used from the spring of 1946 until May 0f 1957, when it was replaced by the Bavarian's Select Beer label shown to its right. The old-style lettering was replaced with a cleaner, more modern typeface, and the traditional trademark with the lions was removed. The flags on the newer label include an hourglass to represent Time, a crown to represent Tradition and a hand with grain to represent Skill.
The original Consolidation and Modernization Program did not take into account the added cost for Bavarian to modify their brand name and create a new image for their beer and firm. The non-recurring costs for this change, including design and research costs, set-up charges, die charges and the cost of obsolete labels and supplies no longer needed, amounted to $70,084 in 1956-1957, and $16,190 in 1955-56, for a total of $86,274. This excluded an increase in recurring advertising of over $100,000. Recurring expenses were slightly higher due the new labels using more colors, but the more significant increase was due to union demands that raised labor costs by $130,000 annually. Ultimately, these sums - combined with the brewery’s litigation costs - restricted Bavarian’s financial ability to pay for their modernization efforts, specifically for the construction of a new bottle shop.
The development of a new design for Bavarian's required a great deal of work and coordination over a period of more than two years. In addition to making changes to its labels, it was necessary for Bavarian to change their crowns (bottle caps), cans, crates, cartons, signs, advertising material, business cards, stationery and more. They also needed to repaint their fleet of trucks; and to phase out their "Old Style" beer for their "Select" beer among all driver-salesmen and numerous distributors. In addition, an entirely new advertising campaign was launched, using print, radio and TV to promote their new image. The updated design of the Bavarian's bottle and can are shown on the side. For more detailed information about this project, visit 9A. Bavarian's "New Look."
T I M E L I N E
To place the events described above in perspective, following are some major events that occurred in the Bavarian Brewery Time Period 9: 1953 - 1958:
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Dwight D. Eisenhower is elected President (1953-1961)
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Korean War ends (1953); Cuban Revolution begins (1953)
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Dow Jones In. Avg. reaches its high before the ‘29 crash (1954)
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Ray Kroc purchases McDonalds; Disneyland Opens (1955)
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Rosa Parks & the Montgomery bus boycott (1955)
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Interstate Highway Act (1956); Civil Rights Act (1957)
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Soviets launch Sputnik (1957); NASA formed (1958)
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Cuba becomes Communistic & Fidel Castro rules (1958+)
For a summary of all the periods in the history of the Bavarian Brewery, please see the entire Timeline.
SOURCES:
Newspapers.com and Cincinnati Enquirer
Holian, Timothy J., Over The Barrel Volume Two
Robert A. Musson, M.D., Bavarian Brewing and the rest of Northern Kentucky, Volume IX, pgs. 53 - 63.
Wm. H. Mers & Co. CPAs Auditors Report for the Bavarian Brewing Co., ending September 30, 1952 and 1957.
Riedlin and Schott family items and information.
Trousdale, C.B., A History of the Bavarian Brewery, 1954
The background photo is the Bavarian Brewery plant in the early summer of 1957.
