(FORTUNE Magazine) – IT'S EARLY EVENING at the sprawling Missouri farm of August A. Busch III, and his after-work ritual is just beginning. In the family room the 50-year-old chief executive of Anheuser-Busch Cos. abstemiously samples beers shipped in that day from his 11 breweries. He looks for proper mixtures of barley malt, hops, rice, corn, yeast, and water. Then he calls in his assessments to his chief brewmaster, Gerhardt Kraemer. The night is young, but Busch will be rising before dawn. He is in bed by 8:30. At sunrise he is piloting his helicopter 40 miles east to Anheuser-Busch's St. Louis headquarters. He arrives by 6:45 and usually meets Kraemer for breakfast to discuss last night's brews in detail. Busch likes details, and he likes discipline. He lets little at Anheuser-Busch get by without his scrutiny. ''My father taught me the cardinal rule when I was just a child: Quality is first,'' he says. ''I really am a brewmaster. I watch the product on a daily basis in this corporation.'' Obsessed with his product, stern and steely August Busch is inspiration for anyone who wants to sell more and thinks he can't because his market has stagnated. Per capita beer consumption has been declining for years, yet Busch sells twice as much beer as he sold a decade ago, more beer than his two largest rivals combined, more beer than anyone else in the world. Anheuser- Busch does a lot of other things -- it bakes bread, freezes food, makes cans, produces yeast, and develops and sells real estate -- but most of the profits still come from the product Busch knows and loves best. The smooth-running giant that Busch built got a jolt this spring when it found evidence that three high-level marketing executives had violated the company's ethics rules regarding dealings with suppliers. Fanatical about the reputation of his company as well as the quality of its beer, Busch fired the executives, who deny any wrongdoing, and accepted the resignation of Dennis P. Long, the beer unit president and his close friend. Now, to the surprise of many on Wall Street, Busch is taking over the beer business personally for at least two years, lest anything impede its fearsome progress. The company's secret is no secret: Anheuser-Busch applies venerable marketing techniques more vigorously and imaginatively than the competition. Michael J. Roarty, 55, head of beer marketing since 1977, is charged with maintaining the standard. The company's most important technique is target marketing -- segmenting the market with a vengeance. Anheuser-Busch sponsors events and runs advertising specifically aimed at all sorts of different consumers: blacks, whites, blue- collar workers, computer buffs, auto-racing fans. One canny Budweiser commercial salutes waitresses and bartenders with the line: ''This Bud's for everyone that serves them up cold.'' Another, aimed at military beer drinkers but appealing to anyone with a patriotic streak, honors ''all the men and women in uniform who proudly serve this great country.'' Anheuser-Busch even has a commercial that salutes immigrants and features a successful Eastern European carpenter (''Like many before, you came here asking for just one thing, a chance''). The company divides the U.S. geographically into 210 markets, putting the bulk of its bucks into Los Angeles, New York, Boston, and the 33 other markets where 75% of the beer gets drunk. The regional strategy makes sense because Anheuser-Busch faces different competitors in different markets -- a lot of local brands, a strong Miller in the central states, Coors in the West. Anheuser-Busch's goal: To make its beer everyone's hometown beer. In target areas Anheuser-Busch takes a grass-roots approach. Working with wholesalers, which distribute beer locally, it backs softball teams, bowling matches, festivals, rodeos. Anheuser-Busch recently poured part of Budweiser's estimated $100-million ad budget into special commercials for consumers in Texas, New York, and California. A new spot that aims to keep young Californians loyal to Budweiser contains these lyrics: ''I could have lived in Kansas. I could have lived in Maine. But I made my home California, the land of fortune and fame . . . I'm a genuine Bud man.'' Busch, characteristically, gets deeply involved in his company's commercials. Once he insisted that an entire film crew return to Wyoming to reshoot a finished commercial because the horses looked too thin. Those who have worked with Busch say he has a sharp sense of what makes advertising work. Nine years ago, in a meeting to choose the new theme line for Budweiser, he selected ''This Bud's for you'' from a stack of about 20 possibilities. The other Anheuser-Busch executives attending the session doubted the slogan's longevity, but Busch got his way. The line has become one of the most successful beer tags ever. FOR HIS BUSCH BRAND, the company's least expensive beer, he rejected a campaign his ad agency had painstakingly created and said he wanted cowboys. The American cowboy best projects American values, he said. The ad agency's president reminded Busch that other companies were already using cowboys in commercials, and the image might not seem fresh. Busch didn't care. Today, seven years later, the Busch brand is growing fast and still using cowboys. Busch requires that certain items appear in each commercial: a real cowboy (no actors), a black stallion, a bubbling stream, the sound of a beer tab popping, the ''head for the mountains'' musical theme. ''Consistency of message,'' says Busch. ''That's a Marlboro lesson.'' So is the cowboy. Busch has long been fascinated by the cigarette advertising of Philip Morris, owner of Miller, his archrival. The commercials, the slogans, the softball team sponsorships are what admen call pull marketing -- getting consumers to pull the product through the distribution chain by taking it off store shelves. Anheuser-Busch is also a master of push marketing -- getting its products onto those shelves in vast quantities in as many outlets as possible. Anheuser-Busch's distribution is the strongest in the business. Some major wholesalers probably take home more than the $1.3 million that Busch earned as chairman last year (one of the richest wholesalers is Frank Sinatra, who owns Somerset Distributing in California). The company wants its wholesalers to feel personally attended to, so it puts top executives in charge of the most important target states. Busch handles California, the biggest-volume state, and visits the distributors at least twice a year. ''It's mainly a morale builder,'' says sales vice president James Hunter III, who oversees the wholesalers. The distributors love it. The company also demands more from distributors than any other brewer. Each year every wholesaler is asked to suggest a special local promotion for each brand. Anheuser-Busch often covers half the cost, and it almost always outdoes its rivals. Example: Last summer Robert Montana, 47, president of Clare Rose Inc., a distributorship on Long Island, New York, and Michael LaBroad, 30, then the Michelob Light product manager, launched Michelob Light Concentration Day to boost flat sales. On June 4 all 30 of Clare Rose's trucks delivered only Michelob Light. The Michelob Light brand team from Anheuser-Busch's corporate headquarters donned tuxedos and rode the trucks with two Playboy Playmates, who handed out photographs of themselves to retailers. The tally: 21,000 cases sold (the amount typically sold over 20 days) and placements in 400 new accounts. Now Clare Rose's Michelob Light volume is running 7.4% ahead of last year, and Anheuser-Busch is holding Concentration Days in other markets. To help distributors sell, Anheuser-Busch offers courses throughout the U.S. on everything from ''Draught Beer Basics'' to ''Dynamics of Business Reading.'' The company arranges group discounts on purchases of trucks, - insurance, and IBM computers, which about a third of the wholesalers use to order beer. Special software helps them optimize shelf space. In general, best-selling Budweiser goes at eye level, and Bud Light beside Miller Lite, whose consumers Anheuser-Busch wants to snatch. Michelob belongs near the imports, which attract the same young, upscale drinkers but cost more. Such perks and programs have made Anheuser-Busch's wholesalers a loyal bunch who feel they can outmarket anybody. But if loyalty lapses, wholesalers sometimes get hammered. A distributor who decided to sell a rival brewer's brand relates, ''The company launches 2,000 torpedoes. They don't tell you not to take it -- you're an independent businessman. But they come in and criticize, find fault, say that you need new trucks or more supervisors.'' Steven Shevick, 41, former general manager at Wayne Densch Distributors in Orlando, Florida, says 22 Anheuser-Busch field managers descended upon his operation and rode his trucks for a week last fall when his company decided to distribute Heineken and Amstel Light. Shevick says he and Densch got called to St. Louis to talk with Anheuser-Busch top management about selling the rival products. Some Anheuser-Busch executives clearly feel uncomfortable discussing the muscle tactics they use on wholesalers. The chairman doesn't mince words. ''There are a few wholesalers who let the word greed into their vocabulary,'' he says. ''It's our responsibility to the other wholesalers and this company to make sure that their share of market is not eroded.'' ANOTHER ILLUSTRATION of Anheuser-Busch's marketing muscle is its omnipresence in pro sports. The company owns baseball's St. Louis Cardinals, and they play in Busch Stadium, which the chairman can peer down on from his ninth-floor office window. The company puts 70% of its estimated $450 million of annual advertising spending into sports programming and has exclusive advertising deals with 21 of 24 major league baseball teams, 21 of 28 National Football League franchises, 300 college sports teams, and most professional basketball, hockey, and soccer teams. Roger Fridholm, 46, president of struggling Stroh Brewery, complains that Anheuser-Busch has a restrictive contract with ESPN, the all-sports cable TV station, that has kept his company from advertising there. ''It's sort of a barrier to purchase,'' says Fridholm. ''If we want to buy time, ESPN has to offer it at a comparable price to Anheuser-Busch first.'' Competitors may think that this is Busch league -- but it's legal. In late 1985 the U.S. Justice Department ruled that Anheuser-Busch and Miller were not breaking the law by cutting exclusive deals to advertise on network sports programs. Marketing billions of bottles of beer each year demands a high sense of showmanship, which Busch admits he lacks. Executive Vice President Roarty supplies it. An easygoing Irishman, he is short and stocky, a kidder, and a gabber -- an absolute contrast to Busch. He hangs out with Tom Lasorda, manager of the Los Angeles Dodgers, and likes to schmooze with baseball stars Keith Hernandez and Steve Garvey. Roarty's office is cluttered with all sorts of sports memorabilia -- satin boxing jackets, a stuffed Clydesdale horse that wears a blanket from the Irish Derby, a Michelob wastebasket in the shape of a golf bag. Wholesalers and advertising people adore Roarty. ''Michael is much more humorous than I am,'' says Busch. ''He's a better speaker. I'm more direct, have a shorter fuse.'' Roarty is demanding, says the chairman, ''but he's probably more tactful.'' With Busch as the taskmaster, Roarty furnishes the glitz. Every three years he hosts the Anheuser-Busch wholesalers convention, a Las Vegas-style extravaganza of monumental scale. Stars such as Paul Newman, Bernadette Peters, and Gene Kelly, plus Anheuser-Busch spokesmen like Ed McMahon, Lou Rawls, and John Forsythe, appear on stage before about 5,000. With near- perfect comic timing, Roarty might trade quips with Bob Hope, whom he resembles. Roarty, who joined Anheuser-Busch 34 years ago while still in college, got the idea for the show in the mid-1970s, when Miller was vowing to steal Anheuser-Busch's lead. He recalls, ''I wanted to impress upon our wholesalers that we were bigger than life itself.'' The marketing machine that has become the legend of the beer business did not look so fierce when Busch took over from his father in 1975, at age 37. Until then Anheuser-Busch sold beer the old-fashioned way, with one variety of national advertising that targeted the general beer-drinking audience. ''Anheuser-Busch was a $700-million company that was run like a corner grocery store,'' says industry consultant Robert Weinberg, who joined the company in 1966 as its first corporate planner. Anheuser-Busch didn't revolutionize the beer business -- Philip Morris did when it acquired Miller in 1971, pouring millions into the High Life brand, applying sophisticated market research and gobbling up most of the commercial | time on TV sports programs. Philip Morris relentlessly pursued the typical beer drinker, the male blue-collar worker, by dumping High Life's image as ''the champagne of bottled beer'' and pitching it as a reward to enjoy after a hard day's work -- at Miller Time. Busch's father, who was chief executive, and others at Anheuser-Busch opposed jacking up marketing spending to compete. His son persisted and won. So began the modern Anheuser-Busch. Still, the younger Busch had a lot working against him when he took control. Some questioned his background. The eldest son among August Busch Jr.'s 11 children, he had never been a serious or particularly disciplined student. He went to the University of Arizona and left after two years. At 21 he joined his family's company, which his great-grandfather had founded in 1864, and cleaned beer tanks in the St. Louis brewery. (Busch's eldest son, August Busch IV, 23, started the same way; he's now a brewery foreman.) Busch eventually worked in just about every division of Anheuser-Busch. In 1976, soon after he became chief executive, a 90-day strike crippled the company for the big summer beer-selling season. As Anheuser-Busch's market share deteriorated, Miller boss John Murphy announced his company was on its way to No. 1. ''A Sense of Urgency'' became the official rallying cry at Anheuser-Busch. The company printed the acronym ASU on hats and T-shirts, even engraved it like a university seal on company stationery. Busch vowed that his company would dominate every aspect of beer marketing, and with Roarty and Long he created ''total marketing,'' the basis of today's efforts, pouring money into all sorts of advertising, creating eye-catching in-store displays, and sponsoring sports events and music concerts. Miller, which Philip Morris grew sevenfold in the 1970s, has gone flat in the 1980s. Its Lite beer is No. 2 to Budweiser in U.S. sales, but Miller's total volume is about half that of Anheuser-Busch. The company admits it was outdone. Says Alan Easton, Miller's vice president of corporate affairs: ''If Miller brought modern marketing to the brewing industry, Anheuser-Busch was the best student of it and did more with it than anyone else.'' Even competitors agree that Chairman Busch's obsession with quality has been a main reason Anheuser-Busch has stayed ahead. He claims his company invests more capital to produce a bottle of beer than any competitor, and notes that it makes Budweiser and Michelob beers by supplementing the traditional barley malt with rice instead of with the cheaper corn that most rival brewers use. ''They have a great sense of making a good product, which a lot of brewers have forgotten,'' says America's hottest adman, Hal Riney. He has been creating beer advertising since the 1960s and is now making commercials for Anheuser-Busch. Once-powerful Schlitz, Riney notes, switched to a cheaper brewing process in the early 1970s and ultimately destroyed its brand image. Pabst Brewing spoiled its image by drastically cutting prices to attract customers. Miller acknowledges that the decline of its own High Life brand resulted largely from ignoring product quality in its ads. Says Miller's Easton: ''People were walking into bars saying, 'It's Miller Time. Let's have a Bud.' '' Secure at the pinnacle of its industry, Anheuser-Busch is making sure no one gets too close. Coors has been expanding eastward but has damaged Anheuser- Busch least. ''They're awesome,'' says Robert Rechholtz, 50, Coors's executive vice president of sales and marketing. Last March, a month before Coors moved into the huge New York and New Jersey market, Anheuser-Busch wholesalers received a 300-page ''Coors Defense Plan'' and money for buying into promotional opportunities that might interest Coors -- Hispanic parades, for example. Coors couldn't cut a good deal with a major beer wholesaler, so it is distributing through a Canada Dry soft drink bottler. In retaliation, Anheuser-Busch's wholesalers are promoting especially hard in the area the soft drink people know best, the supermarkets. Anheuser-Busch does have a few problems. The most serious is Michelob. The young, white-collar drinkers who account for most of its volume have been moving to imports, such as Mexico's Corona. They were turned off by recent ad campaigns (''Where you're going, it's Michelob,'' ''Who says you can't have it all?''). Now new commercials, music videos featuring rock stars Phil Collins and Roger Daltry, appear to be boosting Michelob sales for the first time in six years. An old rule in the beer business says that once a brand declines, it's pretty much dead, so Wall Street is watching cautiously. ANOTHER disappointment is L.A., a low-alcohol brew that Anheuser-Busch launched with fanfare and $25 million of advertising in 1984. The company sold only about 130,000 barrels of L.A. last year, but Busch plans to stick with the product because it helps his company's image. Clayton Wilhite, head of | D'Arcy Masius Benton & Bowles in St. Louis, the ad agency that creates the Budweiser and L.A. commercials, says the advertising bombed because it focused on the beer's intellectual appeal -- that it could keep the drinker in control. A new low-budget campaign featuring the slogan ''L.A. keeps you cool'' likens the product's taste to regular beer's. Anheuser-Busch's major marketing mistakes have come outside the beer business. Baybry's, a champagne cooler introduced in late 1985, seemed destined to fail -- and did. It sold for $5.50 a four-pack, about twice as much as most wine coolers, which generally appeal to young adults with lower- than-average incomes. The company introduced a low-calorie wine cooler called Dewey Stevens last June and targeted the ads too specifically at women. The product got lost in the cooler crowd. Then a flavored sparkling water called Zeltzer Seltzer got off to a rocky start. Privately held American Natural Beverage, which makes Soho Natural Soda, sued Anheuser-Busch, claiming that the two beverages' labels look alike. The companies recently settled, American Natural dropping its charges and Anheuser-Busch agreeing to alter the label. Anheuser-Busch is not putting a lot of money behind nonbeer beverages. It has entered the new markets largely because competitors have, and it doesn't want its wholesalers to distribute those products. Busch, who took over direct responsibility for nonbeer beverages last December, says, ''We need to maintain wholesaler share of mind.'' Even if the nonbeer beverage products go nowhere, they will scarcely slow down the company. Profits at Campbell-Taggart, the second-largest U.S. baker, dived after Anheuser-Busch acquired it in 1982, but they're finally rising. Eagle Snacks, Anheuser-Busch's five-year-old line of high-priced snacks and nuts, hasn't turned a profit yet, but sales exceeded $100 million last year. ''That's a real sleeper,'' says Emanuel Goldman, Montgomery Securities' highly respected beverage analyst. And there's always beer. Wall Street agrees with Busch that the scandal and management changes are not likely to weaken the marketing machine seriously. Is a 50% share -- 12 points above the 1986 level -- possible in the mid-1990s? Busch curtly refuses to talk about that. He is pressed. Finally he responds, ''Is it arithmetically feasible?'' Pause. ''Yes.'' And he flashes a rare smile.

CHART: TEXT NOT AVAILABLE CREDIT: ILLUSTRATION BY ANDERS WENNGREN SOURCE: BEVERAGE MARKETING | CAPTION: Chugger's Champ Unlike any major competitor, Anheuser-Busch has slurped market share steadily since 1976. DESCRIPTION: Market share of Anheuser-Busch, Miller and Stroh, 1975, 1980 and 1986. Color illustration of man drinking from mug.

CHART: INVESTOR'S SNAPSHOT ANHEUSER-BUSCH

SALES (latest four quarters) $7.8 BILLION CHANGE FROM YEAR EARLIER UP 10%

NET PROFIT $538.1 MILLION CHANGE UP 17%

RETURN ON COMMON STOCKHOLDERS' EQUITY 23% FIVE-YEAR AVERAGE 19%

STOCK PRICE RANGE (last 12 months) $36.50-$23.25

RECENT SHARE PRICE $31

PRICE/EARNINGS MULTIPLE 18

TOTAL RETURN TO INVESTORS (12 months to 5/22) 31%