The Story of Yuengling (continued)
< back to newsFrom Beer Business Daily — April 11, 2011
Yuengling. There's nary another success story like it. Back in the early 1960s, there were about 1,500 breweries across America. Kinda like now. But as A-B expanded via rail thanks to the miracle of pasteurization, and then Philip Morris bought Miller Brewing Co. and launched the light beer revolution, and the Coors family expanded their territory of their cult beer with celebrities and sports figures as distributors, well, America turned to light lagers heavily advertised. And regional breweries were shuttered weekly.
America's oldest brewery, Yuengling, very nearly went that route. Dick Yuengling, fifth generation owner, told of the time when his father came very close to selling the brewery in 1964 to somebody who was going to "take a wrecking ball to the plant and sell off the copper," he said at the Beer Industry Summit. "I was dead-set against it, and eventually my dad came around." Dick says that those days weren't very fun. They were selling about 70k barrels, with much of that in cheap beer, and his father told him to go to college and get out of the beer business. "I came back and told him, 'we have to make this work.' I just felt we had excellent beers. I thought, as America's oldest brewery, we could survive. We outlasted most of the other co-region breweries. That went on into the 1970s."
It was at that point that Dick was pushing his father into spending money to upgrade the brewery. "I wanted to spend but my dad didn't have the money." At that point Dick left the brewery for 11 years and became a Pabst and Rolling Rock distributor nearby. But eventually, "I bought the brewery in 1975 we were doing 137k barrels," says Dick. "When I bought it, I decided I'm not here to make a $4 case of beer. We acquired a good wholesaler in Philadelphia whose sales manager was David's [Casinelli's] father. He did a great job and built it in Philly. Shortly afterwards David came on board with us and built a great sales force, and that's where we are today."
Today they are selling nearly 2.2 million barrels, most of it at premium or above prices, in only 13 states and DC. How? "We had and have a very methodical plan where we move forward in adjacent states. That's how we grew…. We don't have the sales and marketing dollars the big brewers do. We do it word of mouth," says Dick. "We depend on our wholesaler network…. The reason they won our brands today is because it's a very sellable brand with good margins. We don't require extra people for the wholesaler, except maybe a brand manager, and we can bring the volume to justify that…. We are a craft brewer, though nobody labels us as that. But we make a porter, lager, and black and tan," he adds.
David Casinelli adds: "We're just the hokey guys with the powder blue tuxes at the prom…. How do we grow? Well, I don't think it's a magic bullet. It's been very methodical and it's taken many years…. Back in 1999 we had a big decision in Tampa. Dick made the decision very quickly, and it was huge. He's a risk taker, and he put the money down to expand. Many people at the time believed that was Yuengling stepping out of its footprint, and many thought we'd fail... It's been a partnership with our distributors…. Some of the guys in this room are risk takers and gave us a shot when we weren't that popular…. We're happy but we're never satisfied…. Clearly there's a lot of opportunity with distribution, shelf space, tap handles, and chain marketing." (see below).
When Yuengling expands into a new state, they review their results. "Every time we do it, after the honeymoon period is over, we go back to the brewery and debug it. We constantly push ourselves…. What we look for is very specific planning and creativity and out of box thinking," says Dave. Adds Wendy Yuengling: When choosing a new distributor, "It's somebody who is going to embrace our entire portfolio. They are very important to the heritage of our company….. I think the family part is important to consumers, the history, and the quality of the product itself."
After all, they've sunk a lot of dough into production and assets. "I've sunk a lot of investment into this, the plant in Tampa, and converting to Sankey kegs." Dick said the conversion to modern kegs cost them almost as much as building a brewery. "If wholesalers get bottles in the account in addition to draft, that's a win…. Look, there's good distributors and bad distributors. But it's hard to go into an account where they have draft, and there aren't bottles. If you're selling five kegs a week in that account, you ought to be able to sell a couple of cases of bottles. Not everybody likes draft…. Our family is committed to investing in the growth of our company. And that shows a confidence in the wholesaler network."
When asked by consultant Bump Williams if he considers himself an industry leader, Dick demurs: "No, I don't view myself as an industry leader. I think these craft brewers that came out of nowhere and guys like Jim Koch are the real leaders…. We've been around for long time, so I'm no leader."
Interestingly, Yuengling Lager wasn't always the flagship brand. "Our lager brand didn't start to take off until the mid-1990s. The Black and Tan brand opened the door for us for Lager…. It goes to show you how things change," says Dave.
Bump Williams wrote to his retailer and wholesaler clients last week: "The question on everyone's mind (Retailers, Wholesalers, Brewers, Financial Institutions, Foreign Investors, Importers….) is 'when is Yuengling going to come into my marketplace?' The answer is - I have NO clue. The Memphis deal is dead and to most companies, that would be devastating, but not to the DGY Company. They simply found a solution to this problem and invested a lot of money into improving efficiencies at their 3 existing breweries and added a lot of extra capacity/fermentation tanks as well. That's the great news, but the even better news for me is that when we look at their existing footprint of 13 states and DC, they have so much opportunity to gain ground simply by closing some distribution gaps with Lager, getting the Light Lager on to the shelves and in the bars/taverns, and expanding their presence with their Porter, LCA and Black & Tan that if they simply stayed where they're at today - they could gain another 500,000 c/e's just like that!"
Bump conducted a survey with consumers and found that there is pent up demand in buying 24 packs, the light lager (3x/week vs. 1x/week), and they're sourcing volume from other brands/segments within beer. The secret sauce? "Yuengling is a craft beer sold at a premium price. The only threat to DGY's continued success is OOS's [out-of-stocks] at retail and lack of distribution within the on and off premise channels. I don't understand that at all. It's the fastest growing Premium Beer in America and yet the OOS's are sky high (not enough shelf space/display space) and consumers simply can't find the product where they do their shopping (distribution voids need to be filled)."
Out-of-stocks are the bane of our existence. It even happens with the largest beer brand on certain packages, Bud Light, as well as Coors Light, Miller Lite, Corona, and Heineken. But it's not for a lack of deliveries: Many distributors tell BBD that they are delivering to supermarkets and chain on-premise several times a week, and some put a merchandiser into the store every day. The bottom line: retailers need to add more cooler space to beer. It's obvious to everybody that beer drives traffic at retail more than nearly every other category. And cold beer sells.
