For a company that has weathered a fire, the Civil War, two World Wars, Prohibition, pandemics, recessions and changing consumer trends — all without ever closing any facilities or laying employees off — D.G. Yuengling & Son has seen firsthand the pitfalls that have pushed countless other beer competitors to extinction.
Today, America's oldest brewery is navigating its way through the latest wave of challenges in the coronavirus outbreak and a broader industry slump in beer sales. At the same time, Yuenglingis gearing up next year for the biggest expansion in its 191-year history — a bold move to the western U.S. that will bring its beers to millions more Americans and grow its reach beyond the small Pennsylvania town of 14,000 people it has called home since it was founded.
"Given the history of what our ancestors had made it through, it gives you good perspective that this is just another chapter in our history.It’s just a bump in the road that we will persevere through," said Wendy Yuengling, the company's chief administrative officer and one of four sixth-generation daughters involved with the brewer. "We will tighten our belt, and we’ve done it many times before, but we will come out of it stronger."
In a sector where consolidation has built industry giants such as AB InBev, the world's largest beer company, and Molson Coors, among others, family-owned Yuengling has rebuffed the M&A overtures to remain a rarity in the sector:an independent business that has cultivated a devoted fan base and maintained its relevancy in an increasingly crowded alcohol sector by staying true to the style of beer it is known for, according to analysts.
"There’s very few examples of traditional breweries who have resisted the urge to expand (Miller, Anheuser-Busch, Pabst), so it is unique for a brewery to remain smaller and in the family," Aga Jarzabek, a research analyst at Euromonitor International, said in an email. "It seems that the company recognized its strengths a long time ago and has grown familiar with its East Coast market, delivering reliable brews without the constant need for growing profit margins."
Yuengling has uniquely positioned itself to benefit from the perception among consumers that it is both a large-scale brewer and a more nimble, trendy craft player. Jarzabek said Yuengling's traditional offerings tap into the storied perception of an authentic brew associated with Germany, Oktoberfest and beer halls.At the same time, the ability of Yuengling to develop the aura of a craft player enables it to reap the quality associated with smaller brewing operations and their devotion to the art of making beer.
A cult following
Yuengling, the sixth-largest brewer in the U.S., posted sales of roughly $1.6 billion in 2019, or 1.5% of the U.S. beer market, according to data provided by Euromonitor International. But even with its rich history and broader success, Yuengling has experienced its own share of challenges.
After a surge in demand between 1995 and 2010, when Yuengling's volume increased to 37.2 million cases — helped in part by an expansion into new states and the 1999 purchase of a former Stroh'sBrewery in Florida that enabled it to fulfill consumer demand —output has gradually declined since then.Last year, the company produced 35.4 million cases, according to data provided by the Beverage Marketing Corporation.
Nathan Greene, an analyst at the Beverage Marketing Corporation, said the brewer's challenges have been exacerbated by slowing growth in craft beer sales and struggles increasing volume across the 22 states where its product is already available. The brewer's beers have only been available in the East Coast where its two production facilities are located;the logistics of shipping was too complicated to justify the expansion on its own.
"There is definitely a cult following aspect to it, especially for East Coast transplants and people that might have come across it because there's definitely an every man's and every woman's craft beer aspect to Yuengling."
Nathan Greene
Analyst, Beverage Marketing Corporation
But Yuengling's recent joint venture announcement in September with beverage giant Molson Coors, which will brew and distribute Yuengling's beers to an additional 25 states in the west while enabling the family-owned business to maintain control of its existing operations, will present it a unique opportunity to fast-charge its once stagnant growth. Yuengling plans to eventually expand on its own into New Hampshire, Vermont and Maine.
"It could lead to the company being doubled in scale.That's not a completely unreasonable thing to say over a five- to 10-year period," Greene said of the partnership with Molson Coors. "There is definitely a cult following aspect to it, especially for East Coast transplants and people that might have come across it because there's definitely an every man's and every woman's craft beer aspect to Yuengling.There is pretty long pent-up demand."
In announcing the new joint venture,Gavin Hattersley, president and CEO at Molson Coors, offered up an anecdote that provided insight as to why the beer giant was interested in partnering with Yuengling. Consumers in the western U.S. "have smuggled Yuengling across state lines in the trunk of their car" to get access to the popular East Coast beer, he said in a statement.
Facebook is represented with several pages created by Yuengling fans pleading for the company to bring its products into their state. The day the joint venture was announced, Molson Coors' phones "were ringing off the hook from distributors, from retailers, from folks inside the industry, from consumers," said Adam Collins, chief communications officer for Molson Coors.
He said it's rare to find an asset such as Yuengling that has a solid reputation for brewing a quality product, the opportunity to enter a significant, previously untapped market and a way for Molson Coors to expand its premium offerings. "There are not many stories like that," Collins said. "We think it's a tremendous growth opportunity for both businesses."
In markets on the East Coast where the two companies both have a major presence, Collins added that Molson Coors will continue to "compete vigorously with them."
Sticking to what works
Unlike other craft brewers that have thrived on developing cleverly named products loaded with novel and trendy ingredients to attract consumers, Yuengling has taken a vastly different tactic by sticking largely to its core beers.
Its Yuengling Traditional Lager, created in 1987, has become its flagship beer — generating about 80% of its volume, Greene estimated. Other sales come from offerings including itsLight Lager, Black & Tan and Golden Pilsner.
In recent years under the close watch of its four sixth-generation daughters, Yuengling has stepped up innovation and introduced new brews to expand its consumer base, includinga low-carb offeringcalled Flight and the creation of a Chocolate Porter with Hershey.
"The way we've approached it over the last couple of years is looking for opportunities to go big," Wendy Yuenglingsaid.
Yuengling is very selective when it swings for the fences. A product must be able to generate volume and efficiency to make it economical for a business of its size, complement its existing portfolio and be in line with what consumers would expect to see from the nearly two-century-old company.Wendy Yuengling"wouldn't rule anything out" like a hard seltzer in the future, but said for now, Yuengling "takes pride in being a traditional beer company."
“I feel like there is a discipline to our approach. We might not be as quick and innovative as others, but there is a very strong discipline and methodology to how we do things,” she added. “When we try to bring something out, it’s always for the long term. When we make decisions it’s always based on what's good for future generations, not the next two to three years.”
Greene said Yuengling's commitment to shy away from trendy names and flavors, coupled with its long-time family ownership, instills a sense of timelessness and independence that plays well among consumers.
"There is definitely an established consumer that is dedicated [to Yuengling] rather than with your traditional craft consumer that kind of jumps from product to product, beer to beer, brewer to brewer," Greene said. "The Yuengling consumer has been a Yuengling consumer before they were a craft beer and will stay a Yuengling consumer even if craft beer continues to lose interest.”
In the current pandemic environment, Yuengling faces many of the same challenges as other brewers across the country. Sales of beer to restaurants, stadiums, bars and other venues have siphoned off a reliable revenue stream that has left brewers largely dependent on retail operations.
Yuengling's exposure to on-premise is low at 30%, but the brewer hasn't been immune to the difficulties plaguing beer manufacturers, Wendy and her sister Jen Yuengling said. To offset the lost business, Yuengling has shifted from producing kegs to more packaged products such as 12- and 24-count bottles and cans that were especially popular when consumers were pantry loading. It also rolled out 16-ounce cans of its low-carb Flight beer as people stocked up and consumed more at home.
“Loss of [on-premise] sales will be a major hit, but considering how consistent Yuengling sales have been through the years, they have a good chance of bouncing back,"Jarzabek said.
Each of the daughters startedworking in the family business doing jobs such as offering tours and working in the gift shop before leaving for college and to pursue other opportunities. By 2004, all of them had returned to the business and they are now making major decisions with their dad that will lay the foundation for the future of their brewery.
"We've weathered a lot of storms and are just happy to be here today," Jen Yuenglingsaid.
The daughters are constantly reminded of the legacy of the Yuengling business they will one day have the opportunity to purchase from their dad — much like prior generations did from those who ran the business before them.Yuengling still makes Dark Brewed Porter and Lord Chesterfield Ale, which are based on their great, great, great grandfather's original recipes. The old home where he once lived in Pottsville, Pennsylvania,is now used as the office for the brewery, and pictures of prior generations adorn the walls.
“We all fight very hard to protect the way, the specialness of being America’s oldest brewery and the way things have been done in the past,” Wendy Yuenglingsaid. "I think that is why we work so hard each day to keep it in the family and keep it a tight, close-knit family business because we realize we have something very special."
