In 1974, the United States was in a recession. Industries were reeling from an inflationary spiral and a bear market on Wall Street the previous year. Brewers, like Anheuser-Busch and Schlitz, watched wholesale prices of barley, hops, and rice rise 34%. Regardless of the economic challenges, beer was in high demand, but that did not translate into increased profits. In order to maintain profitability, Schlitz’s CEO Robert Uihlein implemented cost-cutting measures. Schlitz was able to increase production, meet consumer demand, and watch its stock prices soar. The result of the cost-cutting measures made Schlitz the number one brewing company edging out Anheuser-Busch. Uihlein was quoted as saying, “we are the company with momentum now.”
Then a hushed rumbling started among consumers. Phrases like “it tasted funny” or “off-taste” or “looked disconcertingly like mucus” were whispered around bars and taverns that sold Schlitz, “the beer that made Milwaukee famous.” Uihlein made a strategic decision to do nothing and avoid a costly recall. Then finally, in September 1975, Schlitz secretly removed more than 10 million bottles and cans of beer due to consumer complaints. Schlitz tried to repair the damage, but it was too late. Schlitz’s reputation had been ruined and sales never recovered. In 1981, a former Mayor of Milwaukee asked, “How could that big of a company go under so fast?”
Schlitz, at one point in its history, sold more beer than Anheuser-Busch, but as a result of greed and poor leadership, it sacrificed quality. The cost-cutting measures Uihlein implemented were quick fixes and not real solutions. Schlitz lost consumer focus.
Higher education is facing a similar situation. While the United States is recovering from another recession, higher education is being pressured to demonstrate its affordability, accessibility, and academic benefits to more students than ever before. There are three lessons that higher education can learn from Schlitz’s cost-cutting disaster.
- Brew Time. In order to meet consumer demand while reducing costs, Schlitz decided to shorten the brewing time from 40 to 15 days. During the brewing process, a protein is produced that causes a hazing effect. Generally, this haze goes away naturally during a longer brewing process. Due to the shortened brewing time, Schlitz had to use an artificial gel silica to counter the hazing effect.
In order to meet growing demand, many higher education institutions are offering degrees in shorter periods of time. 21st century learners, who are used to seeking out YouTube and Wikipedia for answers, want the shortest path to a degree. It’s no longer just about the education experience. As we are learning from Schlitz, while meeting student demands are important, it should never be at the expense of quality.
- Label Envy. Schlitz brewery managers were fearful that the FDA would soon require ingredients to be listed on the label and they would be exposed for using “unnatural ingredients.” To avoid this humiliation, Schlitz started using another artificial anti-haze additive, called Chill-Garde. Chill-Garde could be filtered out prior to bottling and, therefore, wouldn’t need to be listed on the label.
Higher education needs student enrollments in order to sustain itself. Advertising is key to an institution’s enrollment success, but, as we have read, omitting or stretching the truth is a short-term fix and not a long-term solution. Institutions may get away with “little white lies” for a while, but once caught, an institution’s reputation is lost forever.
- Schlitz Snot. In addition to using Chill-Garde, Schlitz also added Kelcoloid to the bottles and cans, a commonly used foam stabilizer. Little did the brewing technicians know that the Kelcoloid reacted with Chill-Garde to form little white flakes in the bottles and cans. The white flakes became worse the longer the beer sat on the shelf. Ultimately, the flakes would clump together and form a sort of mucus or “snot-like” consistency.
Higher education needs to deliver a consistent product. Many institutions are having to face reality and implement cost-cutting measures; however, the wrong decision can leave a bitter taste behind. Students invest their time, effort, and financial resources with the expectation that they are receiving a valuable product.
At the time, no one could have predicted that a few simple cost-cutting measures could bring down a beer giant, but it did. Higher education is facing pressures and opposition daily and while cost-cutting measures may make sense at the time, there is a bigger picture that goes beyond funding sources, faculty tenure, and student unions. Institutions must not lose sight of their mission and purpose of educating the leaders of tomorrow. A reactionary decision today can have long-lasting and sometimes unintended consequences. There is no reward without risk and there is no innovation without quality.
How does your institution take risks without leaving a bitter taste?