Jackson contacts cultivated beer deal
Dad indirectly helped 2 sons through a friend
By Sabrina L. Miller
and E.A. Torriero
Tribune staff reporters
April 8, 2001 In 1995, Rev. Jesse Jackson asked his friend Ron Burkle to “look out” for Jackson’s grown children if the billionaire supermarket tycoon saw a financial opportunity for them, Burkle recently recalled.
That chance came a year later at a party in Burkle’s Los Angeles mansion, where Jackson was the evening’s featured speaker. By chance, one of Jackson’s sons sat down beside August Busch IV, scion of the Budweiser empire and Burkle’s best friend.
By 1998, with Burkle’s encouragement, Busch handpicked Yusef Jackson, then 28, to be the majority owner of a lucrative Budweiser distributorship on Chicago’s North and Northwest Sides, making him one of the youngest such owners in the country.
Amid criticism that Rev. Jackson wields his power to leverage benefits for his friends and family, Jackson, who once engineered a lengthy nationwide boycott of Anheuser-Busch, insists he had no role in getting two of his sons, Yusef and Jonathan, the distributorship.
But interviews with Burkle and dozens of people in the liquor industry now reveal a convergence of circumstances that led to the deal—including Jackson’s indirect role by enlisting Burkle’s support, in much the same way other well-connected people help their kids.
About the same time Busch first met Yusef Jackson, the beer giant, still smarting from the memory of Rev. Jackson’s boycott during the 1980s, was troubled by allegations of financial and racial problems at the Chicago distributorship. Some African-American employees in Chicago, complaining that they were being denied promotions and subjected to racial slurs, threatened to call in Jackson’s Rainbow/PUSH Coalition or the NAACP if their concerns were not addressed. The employees say they never had to follow through on those threats.
For Anheuser-Busch, the Jacksons were part of a solution to a thorny company controversy that threatened to become public. For the Jacksons—two young, educated professionals—the distributorship was a chance to put black ownership on a franchise of America’s flagship beer in an industry where less than 10 percent of the dealerships are minority-owned.
The Jackson sons largely have shunned publicity since they took over River North Sales & Service, and particularly in recent months, as their father faced increased financial scrutiny after the disclosure that he fathered a child out-of-wedlock with a former top employee.
But in his first extensive interview since that disclosure, Yusef Jackson provided some new details, including his portrayal of how the company was obtained, how many minorities work there and descriptions of his day-to-day role.
Left unanswered, though, is whether the Jacksons’ minority hiring practices represent a marked change from earlier owners, how much the pair collect in salary and how much the Jacksons paid for the distributorship.
Yusef Jackson will only say the price was fair. Estimates by outsiders have ranged widely—from less than $10 million to more than $15 million. Four industry analysts estimate the business today is worth $25 million.
Jackson, however, said the business doesn’t generate windfall profits, given Chicago’s especially competitive beer market.
“We have a monumental task here,” said Yusef Jackson, who, now 30, is president of River North.
“Every day we work tirelessly to climb that mountain to reach our goal. We work much harder than a lot of companies, a lot of people do. … That’s why we start early. That’s why we stay late.”
‘Bud’s a Dud’
Their father’s long, sometimes tangled history with Anheuser-Busch Inc. looms over his sons as they sell a product he once ridiculed.
In August 1982, Rev. Jackson began protesting that the company’s hiring and contract policies excluded minorities. His rallying cry—”Bud’s a Dud”—embarrassed the ultra-private Busch family.
While the effect of Jackson’s boycott on beer sales was negligible, Anheuser-Busch pumped $10 million into a minority distributorship ownership program prompted by Jackson’s efforts.
Eventually, company chief August Busch III—father of Busch IV— met privately with Jackson to discuss steps the company planned to take to increase the number of minority employees and contractors, according to Wayman Smith, Busch’s former longtime vice president of corporate affairs.
In later years, Anheuser-Busch sent clear signs of allegiance to the Jacksons.
The beer company donated regularly to Jackson’s organizations, including $10,000 for his Citizenship Education Fund in 1997 and sponsorship—at an undisclosed price—of the evening gala at his Rainbow/PUSH Coalition convention last summer. Anheuser-Busch gave $3,000 to U.S. Rep. Jesse Jackson Jr.’s 2000 political campaign. In 1996, they made a $1,000 contribution to his campaign, two years before the company gave his brothers the chance to purchase the Chicago distributorship.
Suggestions of a link between Rev. Jackson’s boycott and the sons’ eventual opportunity to buy the distributorship are “ridiculous,” said Smith, who handled minority affairs issues for Busch for two decades.
Yusef Jackson also dismisses such implications.
“I was 12 during the boycott,” Yusef Jackson said. “At that time in my father’s history he had been approaching a lot of companies—Coca-Cola, 7UP, various stores on the South Side of Chicago to be more inclusive in their hiring practices. That’s very much a part of my history, to encourage people to be inclusive.”
Problems in Chicago
Budweiser may be the “King of Beers” in much of America, but Anheuser-Busch products don’t fare as well in Chicago—grabbing roughly 20 percent of the market compared with nearly 50 percent nationally.
Part of it is tradition: Chicago has been a Miller town for much of the century.
Another reason stems from Anheuser-Busch’s union problems through the years that offended working class beer drinkers, according to industry sources in Chicago.
For decades, Anheuser-Busch owned its own Chicago distribution network. In 1989 the company decided to carve metropolitan Chicago into three independent territories.
River North got the exclusive right to sell Budweiser, Bud Light and other Busch products in the bars, stores, sports stadiums and restaurants on the North and Northwest Sides.
For a big city beer business, River North is second-tier in terms of sales, beer industry officials said. It generates roughly $30 million to $40 million annually in gross sales while distributing 2.5 million cases a year, beer industry analysts said.
Still, the revenue is cash—a plus in any business. And River North’s territory covers some of Chicago’s trendiest bars and biggest venues, including Wrigley Field and the United Center.
Before the Jacksons, the company installed at the distributorship helm J.C. Alvarez, a Hispanic company spokeswoman at Busch’s St. Louis headquarters, and Donald Niestrom Sr., a white Chicagoan with decades of experience in the beer business.
Neither Alvarez nor Niestrom responded to requests for comment for this report.
Almost from the start, the pair clashed, former employees said.
Over the next few years, tensions grew as allegations of financial irregularities and racial discrimination surfaced at River North, according to several former and current employees.
At least four black salesmen complained to Anheuser-Busch in St. Louis about what they viewed as specific incidents of racial discrimination by River North’s management, the employees said. The employees said they threatened to boycott, picket, and call Rainbow/PUSH Coalition, the NAACP and the Equal Employment Opportunity Commission unless blacks were promoted.
“We had threatened to call Jesse Jackson,” said Finnist Lewis, an African-American former salesman.
But James McCoy, another African American who was controller of the distributorship, said he was always treated fairly and the problems at River North revolved around the conflicts between Niestrom and Alvarez.
A team of corporate auditors, officials and Anheuser-Busch attorneys descended on the Chicago distributorship to look into the complaints, according to several former employees. Anheuser-Busch officials did not respond to specific questions posed by the Tribune, including inquiries about the turmoil employees described.
By late 1997, former and current employees said, Anheuser-Busch had severed its relationship with Niestrom and Alvarez and temporarily installed a general manager as it looked for a buyer for River North.
Black employees, meanwhile, continued to complain about a lack of promotions, according to Lewis. After Lewis was promoted to territory manager in early 1998, the complaints were dropped, Lewis said.
By then, August Busch IV and Yusef Jackson were in final negotiations over the future of River North.
The family friend
The Los Angeles dinner at which August Busch IV and Yusef Jackson first met in 1996 was the first step in what would become more than a year of talks about the Jacksons taking over the distributorship, Burkle said.
Burkle, 48, also had a key role in assisting Rev. Jesse Jackson after Jackson’s former employee, Karin Stanford, gave birth to the married civil rights leader’s child. At Jackson’s request, Burkle’s investment company hired Stanford. And Burkle, a board member at a mortgage company’s parent corporation, suggested the company to Stanford when she needed a loan on a new home.
For years, Burkle has thrown salon-style parties at his home, inviting celebrities—including UN Secretary General Kofi Annan and Jimmy Carter—to speak before 50 or 60 of his friends.
In 1996, Rev. Jesse Jackson was invited to speak at such an event on the need to include minorities in the business world, and Yusef accompanied his father. Among the guests was August Busch IV, the 37-year-old Anheuser-Busch marketing head whom Burkle talks to daily and describes as his best friend.
Yusef Jackson, then a lawyer at Mayer Brown & Platt in Chicago, said he and Busch hit it off, discussing topics from sports to politics to growing up in the shadow of famous fathers. “We had a lot of common themes in our lives together,” Jackson said.
Right after the event, Busch told Burkle that he had enjoyed his conversations with Yusef Jackson, Burkle said. “Is that someone we should work with?” Burkle recalled Busch asking him. Burkle said yes.
About a year earlier, Burkle said, Jesse Jackson had spoken to him about his own finances, saying he had never planned much for his family’s financial future and asked Burkle to watch out for his sons. “I had told Rev. Jackson that I would look out for them,” Burkle said. “I said I would try to help if I saw an opportunity.”
Burkle defends the Anheuser-Busch deal, saying it was a case of networking, not one of favoritism. “People do business with people they know,” he said.
Henry Gray, a former Chicago whiskey wholesaler who is African American said, “Keep in mind, that the Jacksons didn’t choose Augie Busch. Augie Busch chose them. [Busch] got one of the best names there is in Chicago.”
Rev. Jackson declined to comment for this story. In the past, he has vehemently rejected the notion that he had anything to do with his sons’ business deal. He also has expressed irritation at what he considers a suggestion that his sons—a University of Virginia law school graduate and a Northwestern University Kellogg School of Management graduate—were less than qualified for the beer deal.
“If Bush can be president, why can’t Yusef and Jonathan have a distributorship?” Rev. Jackson said in March at a meeting of the Chicago Association of Black Journalists.
August Busch IV did not respond to requests for interviews. Instead, Anheuser-Busch issued a one-paragraph statement praising the Jacksons as “young, aggressive, creative, dynamic” business people.
“Today’s beer drinkers come from many different ethnic backgrounds,” the statement said. “We believe it makes good business sense for our wholesalers, who represent our business locally, to know and understand their local customers and we work to recruit qualified minority owners for our wholesalerships.”
Inside River North
Yusef Jackson said his interest in the “beverage industry” dates back 15 years. “When I was growing up, we’d attend the street festivals,” he said. “What was attractive about the industry to me was that I associated those products and those companies with fun times. Then you saw the drivers and the helpers as they rolled the kegs. It appeared to me from the outside as a kid a very interesting team dynamic that I wanted to be a part of.”
Yusef Jackson, who declined to reveal his salary, owns 67 percent, and Jonathan, who is 35 years old, owns 23 percent and is vice president, public records show. Donald Niestrom Jr., son of the former owner, owns 10 percent. Niestrom Jr., the general manager, has some 20 years’ experience in the beer industry.
The allegations of racial discrimination and fiscal mismanagement that hung over the distributorship in the past appear to be gone, several former and current workers said. Yusef Jackson describes his approximately 100 employees this way: 53 percent white, 27 percent black, 19 percent Hispanic and 1 percent Asian. Half of the company’s sales force, he said, are women.
Yusef Jackson said he is satisfied with that minority representation and views it as a key to increasing beer sales.
Still, despite Yusef Jackson’s efforts to increase sales, several sources in the beer industry and local liquor business say Anheuser-Busch has made no great gains under the Jacksons and continues to lag behind in the city’s competitive beer war.
Tribune staff reporters Ray Gibson and Monica Davey contributed to this story.