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US. Dick Yuengling Rewrites Family History

When Richard "Dick" Yuengling Jr. first took a job at his family's brewery as a teenager, his grandfather's secretary discreetly gave him this advice: "You ought to go out and do something else, because we're barely making payroll."

That was more than 50 years ago, long before he purchased America's oldest brewery from his father to become the fifth-generation owner of D.G. Yuengling and Son.

After 26 years at the helm, Dick Yuengling is doing a lot better than making payroll.

Yuengling is one of the fastest-growing and most coveted brands in the beer industry. And in one generation, Dick Yuengling has rewritten the family storyline from one of surviving to one of thriving.

Through four generations, it hadn't changed much from its origins in 1829 when founder David Yuengling, a German immigrant, made beer for thirsty coal miners in Pottsville. When Dick Yuengling took over in 1985, the company put out 137,000 barrels of beer each year from its historic Pottsville brewery. The beer was sold mostly in Pennsylvania with a little trickling in to neighboring states of New York, New Jersey and Delaware.

"That wasn't what I thought America's oldest brewery should be," said Yuengling, 68.

Today, Yuengling sells more than 15 times that amount, or nearly 2.2 million barrels annually. Even though it is only available in 13 states, its sales rival what Samuel Adams-maker Boston Beer, a $500 million annual business, does in 50 states. And Yuengling, which does not disclose revenue figures, does it with 250 employees compared with Boston Beer's 780.

Yuengling beers are sold in bars, supermarkets and convenience stores and through distributors from New York to Florida along the Eastern Seaboard plus West Virginia, Tennessee and Alabama. The company plans to enter Ohio later this year, and is fielding interest from Louisiana and Texas. Beer drinkers in New England are clamoring on the social networking site Facebook to bring Yuengling farther north.

Yuengling sales now account for 1 percent of the country's beer business, and its market-share is between 2 percent and 4 percent in states where it is sold. That's tiny compared with mega-brands such as Budweiser and Miller. But Yuengling keeps growing while larger beers' sales keep shrinking.

Dick Yuengling, who walks through his breweries in dungarees, occasionally stopping to puff a Marlboro, is quick to shift credit elsewhere, including the company's first sales director, David Casinelli, whom Yuengling hired in 1990.

"It's very rewarding to see what we've accomplished, but it's not all me," Yuengling said. "It's the people I work with ... I just spent the money on breweries and expansion to meet the demand [Casinelli] created."

America's oldest brewery

The family business began in 1829, when David Yuengling opened Eagle Brewery in downtown Pottsville. It burned down two years later, and a new one was built on Mahantongo Street, where Yuengling is still made and where wooden beer barrels are on display as relics.

In 1873, the brewery's name was changed to D.G. Yuengling and Son after David's son Frederick became a partner. Yuengling (pronounced Ying-ling) means "young man" in German. The tricky name -- some beer drinkers mistakenly think it is Chinese -- would later present marketing problems for the company.

The business survived 14 years of Prohibition by selling the legal low-alcohol substitute "near beer" and making ice cream. When Prohibition ended in 1933, Yuengling celebrated by brewing a batch of "Winner Beer" and sending a truckload to PresidentFranklin D. Roosevelt.

Following World War II into the 1980s, the beer industry drastically changed. National brewers grew bigger, building modern facilities with greater capacity and launching big-dollar advertising campaigns.

That pushed many smaller breweries the size of Yuengling to close or sell their operations.

Dick Yuengling took over a business that was an endangered species. The brewery had to grow to thwart the threat of being gobbled.

Old product, new life

Two years into his run as owner, Dick Yuengling made a pivotal move by reintroducing Yuengling Traditional Amber Lager, which had been out of production for decades.

"It was a marketing ploy, that's all," Yuengling said. "Our name is hard to pronounce. People in Pennsylvania know how to pronounce it. But bartenders in Maryland and Virginia, they didn't know how to pronounce it. We said, 'Just call it lager,' and it worked."

Lager became the engine that propelled the company's rapid growth and now accounts for 75 percent of all Yuengling sales. Whether you're bellied up to the bar at a biker joint or dining at a white tablecloth restaurant, bartenders and servers throughout Pennsylvania know that a customer ordering a lager wants a frothy glass of amber-hued Yuengling.

It turned out to be the right product at the right time. Initially, it offered robust flavor compared with Budweiser, Miller and other brands in its price range right as the craft beer movement started to gain traction. The cachet of being from America's oldest brewery, which resonates with customers upset that Anheuser Busch is now owned by a company in Belgium, has helped boost its sales more recently. And Yuengling has always been modestly priced, which enabled growth through the Great Recession. In the Lehigh Valley, you can buy a case of Yuengling lager for about $15 and a 12-pack for about $10.

"Consumers perceive a difference between Yuengling and the mainstream brands they compete against," said Eric Shepard, editor of Beer Marketer's Insights in Suffern, N.Y. "They have been able to exploit a touch of craft, a touch of the little guy, a touch of flavor. You put all that together and a reasonable price, and the consumers have responded. It hasn't been any one thing."

The biggest challenge has been keeping pace with demand.

Growing for the next generation

In 1992, Yuengling expanded its downtown Pottsville brewery, and the company sold all of the additional beer by the time the project was finished. Yuengling knew he had to expand elsewhere, but was reluctant to spend the money unless someone would continue the family legacy.

Yuengling's oldest daughter, Jennifer Yuengling, recalled a conversation with her father in 1995 when she was finishing her master's degree in psychology at Lehigh University. Her father wanted her to join the business. At the time she was thinking of pursuing a career in sports psychology, but she agreed.

"This is our family history and there's no other family in the world that can claim what we have," said Jennifer Yuengling, 40, who manages the company's plants.

Her sister, Wendy Yuengling Baker, 35, also works for the company in administration. She credits her father with instilling a strong work ethic in his family.

"He works a lot and he's hands-on," Wendy Yuengling Baker said. "He cares about the employees and people in town, and that always goes into the decisions he makes."

In the mid-1990s, demand for Yuengling exceeded capacity and the company had to pull back from some markets.

With the next generation on board, Dick Yuengling invested heavily in expansion. In 1998, he announced plans to build a modern brewery in an industrial park on Mill Creek Road, in a village just outside of Pottsville. A year later, he purchased a brewery in Tampa, Fla., from Stroh's. Production at the Mill Creek brewery began in 2001. And another expansion is being finished at the brewery that will bring its annual capacity up to 1.5 million barrels.

Beer making past and present

Touring the two Pottsville-area breweries underscores the vast changes in the industry. The historic plant is built into a hillside in downtown Pottsville, wedged between homes and businesses. Different shades of brick reveal where the plant has expanded through the years. Stairways and halls cut through the disjointed brewery. A machine shop is loaded with tools needed to keep the old equipment running. On the lower levels, tunnels carved deep into underlying bedrock were once used to store beer before it was shipped.

It's a charming place to visit, like a museum of industrial history. More than 30,000 people from around the world come to see Yuengling's historic plant every year, making it one of Schuylkill County's top tourist destinations. But it's hardly a model of efficiency. Narrow streets, hillsides and the multiple levels in the plant present production and shipping challenges. Output is constrained to about 200,000 barrels of beer each year.

The Mill Creek brewery stands in sharp contrast. Built on 16 flat acres in an industrial park off state Route 61, the highly automated plant is a snapshot of efficiency. Empty kegs run along a series of conveyors to be steam-cleaned and filled by machines. Robotic arms stack the heavy barrels on pallets for shipment. Green glass bottles meander along a similar path to be filled, labeled, capped and packaged. Beeping forklifts scurry the sprawling floor. Outside, rail cars deliver corn and barley from the Midwest and Canada that form the mash used to make beer.

Dick Yuengling beams with pride walking through both plants. At Mill Creek, his eye for production is on full display. In an endless stream of bottles moving along a production line, he snags one with excessive head off the conveyor and sets it aside.

In downtown Pottsville, his customer service skills shine through. He takes a camera from a young couple touring the brewery and offers to take their picture together. "You better give me that camera so you both can be in the picture," he said. When he spots a crowd sitting on a bench outside the gift shop, he makes sure a tour guide shows them around even though the last one scheduled for the day had already started.

Yuengling's growth strategy has been slow and steady. The company works to build the brand in each new state and then add an adjacent one. A critical factor is finding a good network of wholesalers in each new market to help build the brand.

Breweries have to form partnerships with wholesalers who bring their beer to retailers. Those wholesalers are also peddling larger, competing brands, so establishing sales goals and growth targets up-front is important. Yuengling wants to know its new wholesalers will do more than just put its products on shelves. The company wants partners who will help establish the brand in new markets and nurture its growth, Dick Yuengling said. Once licensing agreements are signed with new wholesalers, getting out of them is difficult if sales don't meet expectations, Yuengling said. So the company is deliberately cautious.

That measured growth hit a snag last year. Yuengling was poised to buy a brewery in Memphis, Tenn., that would have more than doubled Yuengling's capacity and provided a platform for growth into the Midwest and Texas. But the brewery required extensive repairs from tornado damage and Yuengling backed away from the move, fearing the company was taking on more than it needed.

"Common sense told me this isn't a good idea," Yuengling said. "I want to get to a point where we have to do it. There's nothing worse than having a 1 million-barrel plant and selling only 100,000 barrels out of it."

For now, Yuengling is biding his time. He has not expressed interest in any other breweries for sale, and building from scratch is expensive. So the company has to keep a careful watch on the inventory of its customers so it knows whether to put beer in kegs, cans or bottles, especially in the busy summer season. Sales to shore towns in New Jersey, Delaware, Maryland and North Carolina are up significantly, and last year Yuengling was running out of beer.

"The only risk that he takes is does Yuengling stay hot or does interest fall off?" said Shepard, of Beer Marketer's Insights. "Does he lose an opportunity? Everyone is hot to get Yuengling right now if he really wanted to aggressively expand. The only risk he takes is will that interest fade ...? They're looking awfully smart right now in how they've grown slowly and deliberately, and there doesn't seem to be any reason to change."

In Pottsville and beyond

In economically depressed Schuylkill County, where the unemployment rate is stubbornly high at 8.8 percent, Yuengling is a destination company. Production employees earn more than $20 an hour plus regular overtime, far more than the state average of $14 an hour for production workers. Plus, Yuengling employees don't pay for their medical benefits, a rare private-sector perk.

And while most companies have been trimming payrolls or putting off hiring since the Great Recession hit, Yuengling has been hiring to accommodate growth. It recently hired about six new workers related to its brewery expansion, Yuengling said.

Forklift operator Jim Cavaluchi of Port Carbon, who has worked at Yuengling for 13 years, said he is proud to play a role in the company's growth.

"This is one of the best places in the county to work," Cavaluchi said. "If you give Dick Yuengling 110 percent, he's more than glad to help you out."

The downtown brewery is an international tourist destination. Maps outside the brewery's gift shop are pricked with colored tacks showing where visitors come from. They are most heavily clustered in the mid-Atlantic region. But the tacks have spread as far as China and Africa.

Jeremy Whitehead, who lives near Atlanta, toured the brewery recently with a group of motorcyclists, the Georgia Rollers Riding Club. He's been drinking Yuengling for the past few years and wanted to see where it is made.

"They're really becoming popular down in Georgia," he said. "All the grocery stores have it."

Pottsville businesses enjoy spinoff from all of those tourists. Yuengling flags are emblazoned in nearly every bar, restaurant and pizza place in town. Nearby Maroons Sports Bar offers $1 Yuengling drafts on Saturdays, the brewery's busiest tour day.

"Everyone grew up on Yuengling and we grew up smelling it brewing," said Kathy Holley, a waitress at Maroons. "It's good to have here. They employ a lot of people."

Outside Pottsville, the historic brewery has become a point of reference.

"Whenever we're at a conference out of town, we say 'We're from Pottsville ... ya know, where Yuengling is made,'" said Frank Zukas, president of the Schuylkill Economic Development Corp. "It always rings a bell with people."

'We've survived'

Dick Yuengling shows no signs of tiring. He jokes that his family is trying to push him into retirement, but he has no plans for that.

"He's devoted his life to this brewery," Jennifer Yuengling said. "He doesn't have any hobbies. He doesn't really do anything else. He loves this brewery."

Standing behind the bar in the downtown brewery's 75-year-old Rathskeller, or hospitality room, Dick Yuengling basks in history. He points to photos on the wall of Yuengling employees who were honored with parties in the room before leaving to fight in World War II. He brags about the hard-working, resourceful workers who helped keep the old brewery alive and how it's tough to find that kind of versatility in today's workforce.

"We didn't buy conveyor belts," he said. "We built them."

And he laments about the decline of American manufacturing, which once offered so much opportunity. Making something is what makes Dick Yuengling happy, and not giving up is what makes him proud.

"It's rewarding to see people come in and take the tour, and they're happy to see we've survived," Yuengling said. "All you see are advertisements for Bud or Miller or Coors. It used to be that all the little towns had breweries, and now they're gone. People appreciate having an option when buying beer."

The Morning Call

28 Jun. 2011

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