Greg Litwicki, co-owner and sales director at St. Louis ad agency Shaw Co., received a shock to the system six months ago when his largest client, Anheuser-Busch Inc., changed its payment terms and approach toward marketing.

After years of pouring a generous flow of business from its St. Louis headquarters, the brewing giant altered its approach in March. It dropped retainers, whittled down its roster of agencies, and crimped all suppliers’ cash flow by giving itself 120 days instead of its traditional 30 days to pay bills. The changes jolted ad shops and left some scrambling to survive.

“They threw the switch, and we felt it,” Litwicki said. “There were substantial cuts across the board. Nobody was exempt from having to feel the pinch of their budget reduction.”

Fueled by drastic cuts in marketing and ad spending nationwide, ad agencies across the country have been forced to cut back—many now work with about half the staff they had in early 2008—and rethink their business plans and revise their mix of clients.

For many of those who work with Anheuser-Busch, particularly ad shops in the brewery's own backyard, recent changes have been especially jarring.

Many of St. Louis’ ad agencies are small and private, and there is an almost universal fear among them that speaking of recent challenges will damage their relationship with the brewery or jeopardize what work they have left with the King of Beers. Yet the tone of conversations with local ad executives makes it clear this year is not business as usual. Stories of declining revenue, slashed staffs, and a mad dash for new business abound.

Brewery work accounted for about 70 percent of Shaw’s $2.8 million in revenue last year, thanks to marketing for brands such as Bud Light and Shock Top. Over the past several months, however, the agency’s sales to Anheuser-Busch have decreased by about 30 percent, and the brewery now accounts for about 60 percent of Shaw’s revenue.

Litwicki and business partner Steve Brenner were forced to lay off half of their 20-person staff. Shaw projects total revenue will come in at about $2.5 million this year, 11 percent off 2008.

Local agency Cfx Inc. continues to do some Web-based work for the Stella Artois beer brand, but company president Chris Frank said he expects revenue from Anheuser-Busch will be down 50 percent this year. Frank said no client accounts for more than 20 percent of Cfx’s total revenue.

Jeff Stevens, executive creative director at Momentum Worldwide, said his firm also has taken a hit, even though his agency continues to do work for the brewery’s Land Shark Lager, Rolling Rock beer, and its theme parks. The decline has compounded the impact of broader budget cuts other customers are making in response to the economy.

“Every client across the board has come at us with cost pressures and efficiency pressures,” said Stevens, whose other clients include Verizon, Microsoft, and American Express. “These changes are not unique to A-B.”

Jim Palumbo, a managing director at Waylon Advertising, echoed those sentiments. He confirmed his agency continues to do work for Budweiser, Budweiser American Ale, and other Anheuser-Busch brands, but acknowledged marketing budgets are generally down among all clients.

“It’s a tough year all around,” Palumbo said.