Mr. Go-it-alone

Forbes, New York, Dec 30, 1996

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Authors: Androshick, Julie

Fifth-generation owner Richard Yuengling of the D.G. Yuengling & Son Brewery in Pottsville, Pennsylvania, took over the business in 1985. He has since doubled the number of products to six, each targeted to a different market. He introduced new labels that play up the firm's classic eagle logo, and highlighted Yuengling's status as the oldest brewery in the US. Over the last 5 years, as the microbrew market took off, barrel shipments at the firm have grown at a compound annual rate of 18.5%. From selling 130,000 barrels in 1989, Yuengling will sell more than 400,000 in 1996, making the firm the twelfth-biggest brewery in the US. In the past 18 months, Yuengling has turned down distribution deals with Miller, Coors, and Anheuser-Busch. Many of his peers have sold out, but Yuengling wants to leave his company to the sixth generation of Yuenglings - his 4 daughters. He wants to take his products nationally, but does not want a partner or to go public. Yuengling has hired a right-hand man and is looking for an additional brewery. 

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"Take on a partner?" scoffs microbrewer Dick Yuengling. "I couldn't even get along with my own father." 

TUCKED INTO THE DREARY coal town of Pottsville, Pa., D.G. Yuengling & Son Brewery went quietly about its business for 167 years, somehow surviving the massacre of small local brewers by AnheuserBusch's Budweiser and Philip Morris' Miller. Fifth-generation owner Richard Yuengling, 53, persevered by positioning his small company early on as a regional maker of specialty beers that boast of flavors far richer than a Bud or Miller Lite. 

When Yuengling took over from his father in 1985, revenues were only $6 million. He has since doubled the number of products to six, each targeted to a different market. Yuengling's dark Pottsville Brewed Porter, brewed with carmel and roasted malt, appeals to the beer connoisseur, while Yuengling Premium Light is targeted at the calorie-conscious crowd.  He introduced new labels that play up the firm's classic eagle logo, and highlighted Yuengling's status as the nation's oldest brewer. 

He also happened to be in the right place at the right time. Over the last five years, as the microbrew market took of, barrel shipments have grown at a compound annual rate of 18.5%. From selling 130,000 barrels in 1989, Yuengling will this year sell more than 400,000, making it the twelfth-biggest brewer in the nation. That should earn the company an estimated $1.2 million, aftertax, for a 3% net margin on revenues of almost $34 million. 

And Dick Yuengling has become a local celebrity. Not long ago, at a sports bar in Reading, Pa., Yuengling was surrounded by a gaggle of giggling nurses from a nearby hospital who asked him to sign their brassieres.  

But more than eager young women lust for Yuengling these days. So do investment bankers and big brewers. "We can't hide anymore," sighs Yuengling with a long drag on his Vantage cigarette. "We are now the hunted." 

In the past 18 months he has turned down distribution-forequity deals with Miller, Coors and AnheuserBusch. Many of his peers have sold out-Latrobe Brewing to Interbrew's Labatt; Redhook Ale Brewery to Anheuser-Busch (a 25% stake); and Jacob Leinenkugel Brewing to Miller. But Yuengling wants to leave his company to the sixth generation of Yuenglings, his four daughters.
Partners? "I couldn't get along with my own father," he says. "So how could I get along with a partner?" 

[IMAGE PHOTOGRAPH] Captioned as: Dick Yuengling, owner of D. G. Yuengling & Son Brewery He won't sell out. He won't go public. Can his independent brewery survive?  

Is Yuengling being foolish? "I hope they're not too big for their britches," says a concerned Robert Weinberg of industry consultant R.S. Weinberg & Associates. "It's a tough business." 

Tough, indeed. Sales growth for specialty brews like Yuengling is slowing. At publicly traded Pete's Brewing Co., which markets Pete's Wicked Ale, net income in the latest quarter fell 46% from the same period in 1995. At Boston Beer Co., maker of Samuel Adams, sales growth has flattened and the stock is off 65% from its November 1995 high. 

Meanwhile, the big boys are moving into making specialty beers. Miller, for instance, has created a division called Plank Road Brewery, whose products are so labeled as to seem to come from a small brewer. 

At the moment Yuengling is essentially a Philadelphia-area product, but the owner wants to take it national, moving region by region. To do this he needs a lot more capital than he has got.  

Since he doesn't want a partner and doesn't want to go public, where's he going to get capital? "Well, if there were a type of agreement we could reach where we would have control, then, yes, but they can't seem to get that into their heads. They want control over you." 

A man with old-fashioned values, Yuengling is wary of debt; his firm is virtually debt-free. He pinches pennies, too. He's always on the prowl for used equipment, and has on occasion gotten irate when he spots mail with a 32-cent stamp destined for a wholesaler. Why couldn't one of his drivers drop the letter off when delivering beer? 

While competitors Pete's Brewing and Boston Beer each spend some $60 a barrel on advertising and promotion, Yuengling makes do with $2 a barrel.

He pretty much depends on wordof-mouth by such seriously devoted fans as Michael Holobetz, a mobilehome salesman, who confesses: "When I travel, I take two cases [of Yuengling] as carry-on luggage." 

(Yuenglingfan.com addition:  And Websites like YuenglingFan.com to spread the message!!)

Yuengling has gone so far as to hire a right-hand man, James Helmke, who worked at Labatt for nine years. The pair is on the prowl for an additional brewery, but naturally they want something cheap. One possibility is the ailing Jones Brewing Co. in Smithton, Pa., which has a 125,000barrel capacity.

Dick Yuengling disregards all the warnings about the danger of going it alone in an industry dominated by behemoths. "Everyone wants to buy you or take you public," he says. "They don't understand this is a small family business. It's not for sale." 

Brave words? Or famous last words? Time will tell. 

[IMAGE PHOTOGRAPH] Captioned as: The sixth-generation Yuenglings, from left to right, Wendy, Jennifer, Debbie and Sheryl Dick Yuengling hopes to keep his brewery in the family.  

[IMAGE PHOTOGRAPH] Captioned as: In an 1873 photo, Dick Yuengling's great-greatgrandfather, D. G. Yuengling (his hands resting on a cane), is surrounded by brewery workers After 167 years, it's time to go national.  

Copyright Forbes Dec 30, 1996