Oh Schlitz! 3 Lessons on Cutting Corners
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 percent. 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 price soar. The result of the cost-cutting measures made Schlitz the number one brewing company. 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 recalled 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.
As the United States enters another recession compounded by a global pandemic, higher education is facing a similar situation. Institutions face increased pressure to demonstrate affordability, accessibility as so many enter the online space, and academic quality resulting from these transitions. Amid projections of low enrollment and decreased budgets, there are three lessons that higher education can learn from the Schlitz cost-cutting disaster.
Brew Time. To meet consumer demand while reducing cost, Schlitz shortened its brewing time from 40 to 15 days. During brewing, a protein is produced that causes a hazing effect. Generally, this haze goes away naturally through a longer brewing process. To mitigate this effect, Schlitz decided to use an artificial gel silica to counter the effect and compensate for the decreased brewing time.To anticipate students’ needs in this economic climate, many higher education institutions are planning to offer courses and degrees in shorter periods of time. Twenty-first century learners, who are used to seeking out YouTube and Wikipedia for answers, seek the shortest path to achieving their academic goals. They are no longer solely focused on just an educational 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, would not need to be listed on the label. Higher education needs student enrollments in order to sustain itself. Advertising is key to an institution’s success, but, as we know all too well, omitting or stretching the truth is a short-term fix and not a long-term solution. It is important to transparently communicate accurate program information and outcomes with students and the public. 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, 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 quality product. Many institutions are experiencing increased and unexpected costs as many transition online and may be tempted to 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 education.
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 challenges daily trying to navigate the unknowns within a new academic year. 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 for 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.
