The name Coors carries two very different meanings: It's the beer Americans love to drink, and it's the family Americans love to hate. The catch is that you can't have one without the other. The beer the No. 3 seller in the United States is the product of devoted attention from four generations of a single-minded family. That single-mindedness has also led to public outbursts that at times have gotten the family in trouble with labor unions, blacks, gays, Hispanics, and women ever since German immigrant Adolph Coors Sr. opened the brewery in 1873. The family's controversial politics have been well documented in the popular press, but Family Business found that family leaders are just as outspoken about the way to keep a family firm going. They have a clear and detailed vision about putting family members through the corporate mill, withholding ownership until each person proves worthy.
The rugged opinions of past generations are reflected in the views of Bill Coors, 74, grandson of the founder and chairman of the $1.8 billion parent firm, Adolph Coors Co. A new, fourth generation is taking hold, however, one that is equally conservative but more diplomatic and self-conscious, It is led by Bill's polite 44-year-old nephew Peter, president of Coors Brewing Co., by far the largest of the entity's seven subsidiaries. Family Business contributor Dan Rottenberg sat down recently with Bill and Pete in the company's Golden, Colorado, headquarters to talk about the past, present, and future changing of the guard at Coors how to discipline the up-and-coming generation, how to weed out weak potential successors, and how to structure ownership to maintain family control.
FAMILY BUSINESS: The brewing industry has always been pretty much dominated by families. Are there secret formulas that have to be passed down, or why is it that families have prevailed?
BILL COORS: There's no such thing as a secret. Brewing technology is widely understood. It's very, very difficult to make a good glass of beer. It's more difficult to make a good glass of beer consistently, and more difficult yet to make about 11 million good glasses of beer a day, like we do here.
FB: But does being a family company make you a more effective brewer?
BILL: Well, it's been the family livelihood. It's a little like the old guild system in Europe. If your father was a brewer, you're a brewer, and your son's a brewer, and so forth.
PETE COORS: Unfortunately, that progression is getting harder. The fact that in recent years the number of family-owned breweries has dwindled is probably testimony to our tax laws more than anything else. And I suspect it's the same for all family businesses. It's become increasingly difficult to maintain control within a family over several generations.
FB: Well, even if tax laws were better, the fundamental problem in passing on a family business is making a smooth and timely transition. Often a succeeding generation doesn't have what it takes. The Coors family has transferred the business successfully for four generations now. Is there any systematized way you have of weeding out family members who aren't capable without hurting people's feelings?
BILL: The control here is such that you don't worry about hurting people's feelings. Anyone in the family who wants to can start here at the bottom and work their way up. I had a cousin, about 10 years older than I, who graduated college and came to work here. A month went by and it was payday, and there was no paycheck for him. He went in to see my grandfather and asked where his paycheck was. My grandfather said, "Well, I've been seriously considering charging you for working here."
My cousin could have reacted to that in a constructive way, but instead he got mad and quit.
FB: He couldn't take a joke?
BILL: It wasn't a joke. My grandfather was deadly serious. He was simply not going to have anybody around here who wasn't productive, And he meant it.
FB: Bill, you grew up knowing how hard it would be to take over, that you'd have to prove yourself more than nonfamily employees. Did this ever discourage you? Did you ever think you'd want to try another profession?
BILL: I never had a chance to decide. I was told what I would do.
FB: Pete, from your childhood, was there ever a feeling that you were going to do something different?
PETE: I had a lot of thoughts about doing other things. After I got out of graduate school, I had a couple of possibilities lined up, and in some ways I wish I had taken the time to get some outside experience. But my father requested that I work here, and I said, "Okay, I'll come." My first job was as a trainee in our waste treatment plant; I spent a year and a half sweeping floors, pushing yeast out of fermenters, and learning the business, and I was happy to be paid to do it. It did get frustrating after a while, though. If I had it to do over again, I'm not sure I could put up with some of the things I did.
BILL: Maybe we didn't know about your frustrations.
PETE: You probably didn't know about them.
BILL: A number of years ago one of my nephews, Peter's cousin Adolph Coors IV, thought he wanted to work his way up into management, and we paved the way for him. But he found it wasn't for him. He left to do something else.
FB: You were once quoted as saying that if your nephews weren't up to the job, you would rather bring someone else in to run the company.
BILL: What I was saying is that no family company can promote people simply because they happen to be family members. I'm sure that my nephew thought in the back of his mind that because of his name Adolph Coors IV he ought to be the head of this company someday. I would have had the same thought if I'd had the same name. But if I had that as a goal in my life, I would have prepared myself a little bit better.
FB: Have there been situations where family members have decided they did want to work their way up, but they weren't up to it?
BILL: No, we haven't had that. Those who are interested make sure they're prepared, and if they're not, we see to it that they get prepared. Peter and his brothers have engineering educations what we consider the technical basis for holding down a job here. Peter's got his MBA on top of that.
PETE: I have a niece, Holly, the first of the fifth generation to work here. She had been working in marketing. She didn't really have the credentials she had a liberal arts degree-but we thought she had enough talent. She came to me a couple of weeks ago and said that she wanted to grow in the company. I said, "Well, we can do one of two things. We can take the slow boat and see if we can find you a supervisory job and teach you management. But maybe it would be a better idea if you went back to school." So she's decided to get a graduate degree in international marketing, then come back.
FB: Pete, what have you told your children from the time they were young?
PETE: I don't talk about the business too much. If they want to talk about it, I'll talk about it. If you ask David, who's 8 years old, what he wants to do, he says, "I either want to be a cowboy or work in the brewery with my dad." My oldest daughter is interested in foreign service. My second daughter is interested in interior design.
I'm going to equip them with the best education; I feel that's my responsibility. What they choose to do with that education is really up to them. If they want to come back here and go through the same process that we've all been through, and stick it out here, they're welcome. But it's going to be tougher for them, I think, than it was for us. This is a much more sophisticated, complex place, with a much more demanding management, frankly, than when I was coming up 20 years ago. I'm glad I don't have to go through the mill today.
BILL: In my day, 20 or 30 years before that, Peter, it was just that much simpler.
PETE: So it's going to be a real challenge for those kids, and the ones who really want to make it happen are going to have to be particularly talented. I hope that some of them will be. I know that all of them won't. But we've got a good chance. Heck, my dad's got 22 grandchildren. And Bill's son, Scott, is graduating from Stanford.
FB: Is he interested?
BILL: Yes, I think he is. I haven't pushed him. I've made him make his own decisions all his life.
PETE: He's worked here summers and he's been very well received. If we're lucky, and if the talent develops that I think can develop in the family, we should have a family member coming along about every 10 years. But there are a lot of "ifs" there.
FB: It strikes me that you've both taken a posture with your children that was different from that taken with you. You both indicated that your parents asked you or told you to join the company.
PETE: My father never told me that until I got through graduate school. Maybe he was waiting to see if I could get through school. But when I was a kid he never told me, "Hurry up and get out of school and come back here to work."
BILL: When Pete's dad [Joe Coors Sr.] graduated from Cornell, he went to work for DuPont.
PETE: He spent six years working for DuPont and then Borden's, and he has always said that they were very valuable experiences. I think particularly in this day and age that it would be very good for family members to find out what it is like to work in a company where your name isn't on the product.
BILL: Sort of prove yourself to yourself.
FB: How would you feel if there were no Coors family members qualified to follow you?
PETE: I don't know. Our obligation as the senior management of this company is to provide for the most effective and productive management succession. We went through a period when Bill and my dad kind of said that anybody could ascend, and for a while there was some infighting. Jeff [Pete's brother] and I became frustrated and sat down with the two of them and said, "We really want to run this company if you want us to. We can do one of two things. We can either continue in our current roles and wait until you guys either retire or die. Or, you can promote us into positions with more responsibility, and we can learn from you and you can help us. They thought that was a better plan, and so far it's worked out reasonably well. They are valuable as mentors, as a check and balance, and they don't interfere with us.
FB: Coors grew steadily since its beginnings in 1873, but it has mushroomed into national prominence only in the last decade. Sales have more than doubled since 1980. Until the company went public in 1975, the family owned all the stock; now it holds 54 percent. You now have a two-tier stock setup: there's Class A, which has voting rights, and Class B, which is nonvoting.
BILL: The family holds all the Class A stock. Class B has certain statutory voting rights. For example, we're in the process of making Adolph Coors Company a holding company. It will have seven stand-alone companies in its stable. [Coors Brewing makes up more than 75 percent of the parent company; it is now a subsidiary, along with six others that produce items from aluminum to packaging.] That kind of change takes a vote of all the stockholders, and that includes Class B. But only the As can elect our directors.
The holders of the A stock are the trustees of my father's trust, the Adolph Coors Jr. Trust, all family members. There's myself, my brother Joe Sr., and his three sons-Peter here, and Jeff, and Joe Jr. All five are on the board of directors. [There are nine other trusts, some "generation-skipping," that provide financially for various members of the extended family.]
FB: Is there any stipulation that if one of you leaves, you can't vote the A stock?
BILL. That's at the sole discretion of the trustees. If one of the trustees leaves, the other trustees have the power to remove his voting rights.
There's another point that just occurred to me. The nature of family trusts is such that members of the family who produce can be rewarded. The trustees have discretionary powers as to the distribution of the trusts' earnings. My father's trust has about 30 potential beneficiaries, but the power of the trustees is such that we can decide to give all the income to as little as even one beneficiary. The earnings don't have to be given to any of us, as a matter of fact.
PETE: They can be reinvested to benefit the company.
BILL: The trustees really do have sole discretion, and it makes a great deal of sense.
PETE: It provides an opportunity to reward those who are willing to make the sacrifices necessary to keep the family business running.
FB: What has the history been? Is there a formula for distributing the proceeds?
BILL: No, no. It's an arbitrary thing.
FB: The five of you basically evaluate all the beneficiaries' contributions to the company?
BILL: Well, of course, it all depends on who the beneficiaries are. In many cases, they are family members with no connection to the company. We're really conservators, in a way, with an obligation to carry out the wishes of the donor. If some grandchild is not living a particularly admirable or constructive life, the donor has no interest in supporting that kind of lifestyle.
FB: Did the decision to go public spring from your father's trust?
BILL: Well, you see, taxes were due.
PETE: We had to raise $110 million. He and his wife died in the same year.
BILL: We were hit with a double whammy. My grandfather's trust, which he put together in 1923, closed out with my father's death in 1970, and so it had to be distributed. Then my mother died five months later, so we had both the trust and my parents' estate going through the inheritance tax wringer. At that point we had little choice [but to go public]. It is not realistic to think in terms of a company buying itself back from the United States government every generation. The inheritance tax laws have been softened some, but in those days we were talking about a 77 percent inheritance tax and another 3 percent estate tax.
FB: Given the control of the trustees, do each of the family members in the company answer to a chain of command, or is there a general sense of consensus among you?
PETE: We answer to the board of directors only, which includes the five of us plus four Coors executives who are not part of the family.
FB: Your business is at a point that most family companies never reach the fourth generation and nearing the fifth. What can be passed on from your experiences to other families who are in it for the long haul?
PETE: The key to our family business is the discipline and the demands that the senior family members have placed on those coming up in the organization. You won't see anyone named Coors out in fancy cars and yachts acting like playboys.
We've been taught to be serious about our jobs. We've been taught a meaningful work ethic, and we won't tolerate any family member who doesn't have that. If there are no family members who can live within those rules, then we won't have any of them working here.
FB: Is there anything you would add by way of advice to those who are working in third- or fourth-generation family companies?
PETE: To the senior members of the family, you must be patient but demanding. And be impatient and intolerant of younger members who don't want to work at it.
For the younger members: You've got to be patient and willing to do what's necessary to learn the business and to make sacrifices until it's your turn at bat. There were times when I was real frustrated about having a tough and seemingly slow climb up the ladder. It's not easy. Family relationships are encumbered by emotional attachments that make it very difficult at times to be as rational as you'd like to be.