Oxstones Investment Club™POTTSVILLE, Pa.—D.G. Yuengling & Son Inc. has become the seventh-largest U.S. beer supplier and is growing rapidly.
You wouldn’t know it by looking at the owner’s car.
Dick Yuengling. sole owner, says the Memphis deal could double output.
Dick Yuengling Jr., 67 years old, drives to work in a 2002 Ford Taurus that he bought used. On a recent morning, the gray sedan sat coated with dust, papers strewn across the front and back seats.
“He won’t get it washed because he won’t spend money on a car wash,” says David Casinelli, Yuengling’s chief operating officer.
Mr. Yuengling’s frugal ways and his deliberate approach to growth are part of the formula that has enabled the 181-year-old regional brewer to survive industry consolidation and become a sought-after brand among distributors, retailers and consumers.
Now, the fifth-generation brewing scion and sole owner is poised to make his riskiest move yet to expand the nation’s oldest beer maker. Yuengling (pronounced ying-ling) announced last week that it signed a letter of intent to buy a former Coors brewery in Memphis, Tenn. The facility would be the Pennsylvania brewer’s largest and could more than double the company’s overall capacity and allow it to expand distribution into multiple states beyond its 13-state footprint in the Eastern U.S.
Bar owners in such states as Ohio and Kentucky would like to be able to offer Yuengling Traditional Lager, but it’s unclear how Yuengling beers will fare with consumers in new markets. Some of Yuengling’s success stems from its cachet as a hard-to-get brew.
The gift shop of the historic Yuengling brewery in Pottsville, Pa., is a stop along the daily tours of the factory.
Nick Faulkner, 31, thought Yuengling was an import the first time he drank it, in Florida. (Many people mistakenly think it’s Chinese.) Now the Jacksonville firefighter and Ohio native owns a website called BringYuenglingToOhio.com. “It’s just about the only beer I’ll drink,” he says, and he wants his pals in Ohio to be able to buy it.
Mr. Yuengling says the purchase price for the Memphis facility is in “the $20 million range” and that the brewer will need to make additional investments in machinery.
“If this deal goes through, we are going to grow very slowly and methodically,” the chief executive says. “We are around for 181 years and we’re in no hurry.”
Indeed, Mr. Yuengling and his company seem to have one foot in the past and one in the present. Mr. Yuengling doesn’t use email and got his first cell phone last year. The company has about 250 employees, compared with about 700 at Samuel Adams maker Boston Beer Co., which is about the same size in terms of sales volume, though it distributes in 50 states.
The white-haired Mr. Yuengling wears jeans to work, smokes Marlboros and rinses out Styrofoam coffee cups so he can re-use them. (Mr. Yuengling says he keeps a nicer car at home than the one he drives for work.)
Mr. Yuengling is cautious with money, he says, because he remembers hard times in the late 1950s and early 1960s when a veteran employee at the brewer—then run by his grandfather—warned the younger man that the company was barely making payroll and urged him to pursue another career.
Yuengling was founded in 1829 by German immigrant David Gottlieb Yuengling. (Yuengling is German for “young man.”) The company long served thirsty coal miners in this hilly region northwest of Philadelphia. Dick Yuengling bought the brewer from his father in 1985 and later hired Mr. Casinelli to revamp sales and marketing.
Mr. Yuengling spends most of his work days, which begin before dawn, dealing with bottling, packaging and logistics. Mr. Casinelli handles day-to-day business affairs. “Dick is very entrepreneurial, but he’s a lousy day-to-day manager,” Mr. Casinelli says.
“I’m a production guy,” says Mr. Yuengling. “That’s what I grew up doing.”
Well-known in New Jersey and Delaware as well as its home state, Yuengling moved into the Southeast a decade ago after buying a brewery in Tampa, Fla. After a slow start, the brand now is growing quickly in the region.
In all, the company posted a 12% rise in sales volume, to two million barrels, last year—the only double-digit growth rate among the 10 largest U.S. beer suppliers, according to newsletter Beer Marketer’s Insights. (Mr. Yuengling won’t disclose dollar sales or profits.)
The brewer is flourishing while the industry, hurt by high unemployment among its core customers, is down in volume by about 2% this year. One reason for Yuengling’s relative success is that many drinkers view it as being in the same camp as microbrews and other specialty domestic beers, though its main brands are priced similarly to Bud Light and Miller Lite.
The brewer is getting more aggressive in its advertising. New print and television ads show its amber-hued Yuengling Light Lager—darker than the major light beers—alongside its foes and says “other lights pale in comparison.”
Yuengling could encounter difficulty attracting drinkers as it advances westward, where many haven’t heard of the brand. Competition from small-batch “craft” brewers also is likely to be stiffer in some states than it was in some of the markets in the Southeast that it entered in recent years.
Surging demand for Yuengling’s brews has created internal challenges, says Mr. Casinelli. For instance, he says, he finds it hard sometimes to persuade Mr. Yuengling to invest in personnel.
Yuengling’s brewery operations in Pottsville, Pa.
Mr. Casinelli says he and other managers sometimes pursue projects in secret, for fear that Mr. Yuengling will shoot them down before they get off the ground. Workers, for example, began testing an India pale ale at the Tampa brewery without telling the owner. (The product hasn’t been introduced yet.)
Mr. Yuengling says he doesn’t mind the practice, because Mr. Casinelli eventually brings new concepts to him for discussion.
Mr. Yuengling says he would like to leave the company in good shape for the next generation, and hopes that one or more of his daughters—two of the four work at the brewer—will buy it from him. He has no plans to retire. “I don’t know what I’d do if I didn’t do this,” he says. “I’d go crazy.”
Write to David Kesmodel at david.kesmodel@wsj.com
Tags: beer, consumer retail, private equity