Pennsylvania-brewed Yuengling wrests U.S. crown from Sam Adams
As a teenager stacking barrels after school at his family's brewery in Pottsville, Pa., Richard L. “Dick” Yuengling, Jr. was encouraged by plant workers to avoid a career in the family business. America's taste for national brands such as Budweiser, Coors and Miller, they said, was going to put them all out of a job.
Undeterred, Yuengling bought D.G Yuengling & Son Inc. from his father in 1985, and he built it into the maker of the country's best-selling craft beer brand. As the company's value soared in the past decade amid a surge in demand for craft brews, Yuengling became a billionaire.
“We stay nuts and bolts — we make beer,” Yuengling, 69, said in an interview last month on the floor of his brewery in Pottsville, an old coal town 75 miles northeast of Philadelphia. “People pick up our products today because they are tasteful and they have character.”
D.G Yuengling & Son sold more than 2.5 million barrels of beer last year, a 15 percent increase from 2010, according to the company. Its flagship offering, Yuengling Traditional Lager, a medium-body brew, was the best-selling super-premium beer and the 15th most-popular beer total in the United States in 2011, according to industry researcher Beverage Information Group. The lager and five other beer varieties helped Yuengling pass Boston Beer Co., the maker of the Sam Adams brands, as the largest American-owned beer maker by volume sold in 2011.
“Dick is an American original,” said Jim Koch, CEO of Boston Beer. “For years, people thought they were smarter than Dick and told him to do things differently. He never did, and for 27 years he has proved them wrong.”
Yuengling said the company has little debt and keeps its marketing and distribution costs lower than most of its peers by having a smaller geographic footprint — its beers are only available in 14 states — and selling more draft beer, which has bigger profit margins and constitutes 30 percent of its business, three times the industry average, according to Yuengling.
Based on the company's stated 2012 production of 2.9 million barrels and the enterprise value of Boston Beer, closely held Yuengling is valued at $1.8 billion, according to data compiled by Bloomberg.
“I know we're doing well,” Yuengling said, smoking a Marlboro Light while sitting in his brewery's tasting room. “We're okay financially. We can go to wherever we want to go to open new states, there's a lot of distributors want our brand. It's a good addition to anyone's portfolio because it's profitable to them.”
Together, Belgium-based Anheuser-Busch InBev NV, which sells more than 200 brands, and MillerCoors LLC, a 70-brand joint venture of London-based SABMiller Plc and Denver-based Miller Coors Brewing Co., control almost 80 percent of the U.S. beer market, according to Bloomberg data. Imported beer accounts for about another 14 percent of the business. Yuengling and other craft breweries make up the rest.
“The industry isn't growing so much, so the gains that the Sam Adams and Yuengling brands are making are coming out of someone else's pocket,” said Kenneth Shea, a analyst with Bloomberg Industries in Princeton, N.J.
While beer consumption fell 1.3 percent in 2011 to 2.78 billion cases, the super-premium, craft beer and malt beverage segment grew almost 8 percent, according to Beverage Information Group. Wine grew 3.1 percent and spirits grew 3.4 percent in the same period.
To counter the rise of brands such as Sam Adams and Yuengling, beer makers are buying or creating their own craft beers. In 1995, MillerCoors released Blue Moon, a medium-bodied fruity beer often served with an orange slice. Sales of Blue Moon increased 21 percent in 2011 to narrow Yuengling's sales lead to about 935,000 barrels.
Yuengling's roots in the United States date to 1829, when his German immigrant great-great-grandfather, David G. Yuengling, built a brewery in Pottsville to serve the region's expanding German beer-drinking population. His first year of production yielded 600 barrels.
In 1831, the facility burned down, and a new one was built closer to a spring that now lies in the center of town. That brewery still stands, producing as much as 600,000 barrels annually and giving Yuengling the enviable marketing claim as America's oldest brewery.