As a teenager stacking barrels after school at his family’s brewery in Pottsville, Pennsylvania, 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 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.

Cases of lager roll off the assembly line at the Yuengling brewery in Pottsvillle. Photographer: Mike Mergen/Bloomberg

“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 fifteenth most-popular beer total in the U.S. in 2011, according to Norwalk, Connecticut-based industry researcher Beverage Information Group. The lager and five other beer varietals helped Yuengling passBoston Beer Co. (SAM), the maker of the Sam Adams brands, as the largest U.S.-owned beer maker by volume sold in 2011.

“Dick is an American original,” said Jim Koch, CEO of Boston Beer, in a phone interview. “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.”

Small Footprint

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 U.S. 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-to-earnings before interest, taxes, depreciation and amortization multiple of Boston Beer, closely held Yuengling is valued at $1.8 billion, according to data compiled by Bloomberg. Enterprise value is defined as market capitalization plus total debt minus cash.

Yuengling declined to comment on the company’s value or profitability. He has never appeared on an international wealth ranking.

‘Doing Well’

“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 who 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 (ABI), which sells more than 200 brands, and MillerCoors LLC, a 70-brand joint venture of London-based SABMiller Plc (SAB) and Denver-based Miller Coors Brewing Co., control almost 80 percent of the U.S. beer market, according to data compiled by Bloomberg. 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 beverage industry analyst with Bloomberg Industries in Princeton, New Jersey.

Beer Consumption

While U.S. beer consumption fell 1.3 percent in 2011 to 2.78 billion cases, the super-premium, craft beer and malt beverage segment grew almost eight 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 U.S. 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.

Alcohol Abolition

The company expanded with the rise in beer-drinking immigrants in the northeastern U.S. Wagons full of beer from local breweries, including Yuengling, would park outside Pennsylvania coal mines to serve the workers before, during and after work.

Prohibition, a period from 1920 to 1933 when the U.S. outlawed the production and sale of alcoholic beverages, pushed the business to the edge of being shuttered, according to “Yuengling: A History of America’s Oldest Brewery,” by Mark A. Noon.

The company weathered the period by opening a creamery, producing legal near-beer with 0.5 percent alcohol, an alcohol- free children’s version and a 2 percent alcohol elixir available only at pharmacies.

Grain Rationing

Dick Yuengling grew up in Pottsville watching Brooklyn Dodgers and New York Yankees baseball games on the first cable television system, installed in the area in 1948. By the time he was 10, he said knew he wanted to take over the family business.

He began working part time at the brewery with his father and grandfather five years later. At the time, Yuengling and other regional breweries were coming under increasing pressure from national brands, which were expanding amid a barrage of TV ads and shifting consumer tastes for lighter-tasting brews.

During World War II, brands such as Budweiser and Coors began using less grain in their beers as the U.S. government rationed commodities for the war effort. Following the conflict, they didn’t restore their recipes because their customers liked the lighter beers. Yuengling, which didn’t alter its recipe much during or after the war, was getting bypassed in the market.

“We were out of business and too dumb to know it,” Yuengling said. “All the breweries in the ‘60s and early ‘70s were going under.’’

Pottsville Pricing

Yuengling pushed his father to cut costs by automating their bottling operations, one of many initiatives that the two butted heads over. Tired of the fighting, Yuengling left the business in 1973 to start a beer and wine distributorship. He returned to the family business 11 years later as his father developed Alzheimer’s disease.

In 1985, he sold the distribution company and purchased the company from his father for an undisclosed sum. Annual production was 137,000 barrels that year.

At Maroons, a Pottsville bar named for the local National Football League franchise locals contend won the national title in 1925, Yuengling paraphernalia lines the walls along with sports memorabilia. Five Yuengling offerings are on tap.

As with other watering holes in the city of 14,000, a Yuengling draft costs $2.50, based on a company policy to keep prices low for its beer in Pottsville. The practice, Yuengling said, is to thank local customers who have remained loyal to the brand and its unchanging flavor as Budweiser, Miller and other brands grew through ubiquitous marketing campaigns.

Tampa Brewery

Outside Pottsville, where the company employs 175 people, Yuengling’s strategy is to sell their products within 75 cents of the cost of a Budweiser and Miller in bars, and close to them in retail stores. Shadowing national brands on price contrasts with other craft brewers, who aim to sell their products at a premium, according to Boston Beer’s Koch.

That strategy has allowed Yuengling to increase sales volume more than 2,000 percent since he bought the company. In his first decade of ownership, word of mouth was enough to double the business.

By 1999, he was having trouble meeting demand. Yuengling decided to pull his product out ofNew England and other markets to focus on the Pennsylvania while building a second, $50 million brewery in Pottsville.

That year another chance to expand presented itself when the family owners of Stroh Brewery Co., a Detroit-based brewer founded in 1850, decided to shutter most of its business. Yuengling bought Stroh’s 1.6 million barrel capacity plant in Tampa, Florida. Within six months, it allowed him to fill every order.

‘Drinking Better’

Two years later, the second Pottsville brewery opened and Yuengling began broad selling in the south. The added capacity dovetailed with momentum in the craft beer movement –encouraged by consumers who demanded more flavors — that has enabled brands such as Yuengling and Sam Adams to grow in a tepid market.

‘‘It’s simple: people are drinking less and drinking better,” said Koch. “There’s not much more to it than that. We’ve seen the same trend before in wine and in hard liquor.”

Yuengling, who expanded into Ohio in 2011, says he has no immediate plans to further expand capacity or enter new markets.

“Run your brewery at capacity or close to it, that’s how you are successful financially,” he said.

His market share is about 10 to 15 percent in the states he sells in, good enough for a national market share of about 1.2 percent, according to Bloomberg Industry’s Shea.

Jeans, Sneakers

Yuengling doesn’t exhibit the kind of wealth his business affords him, preferring to wear blue jeans, sneakers and Yuengling-logoed shirts around the office. He lives 20 blocks from the brewery, and is known to get up before sunrise to plow snow.

In the evening, he drinks a couple of beers. If Yuengling isn’t for sale, he’ll drink Sam Adams or Sierra Nevada. Associates who order wine or cocktails are viewed with suspicion.

“We’re in the beer business, so that’s what I support,” he said. “I find it kind of strange that beer wholesale owners, I see them with a glass of wine sometimes. What the hell are you doing here? You’re promoting a competitor!”

‘American-Owned’

Yuengling says he has no plans to sell the company in a public offering or to a potential buyer. He hears out investment banker pitches and then sets them aside. The dominant beer makers have stopped asking if he’s interested in selling. Two of Yuengling’s four daughters, Jennifer and Wendy, hold management positions at the company. He hopes a third, who clashed with him much like he butted heads with his father, will want to return to the business too.

“We put ‘American-owned, family operated’ right on the case. And you know what? It means something to some consumers,” he said, a smile emerging as he pulled a drag from his cigarette. “It doesn’t mean something to everybody. But they are anti-corporate America, the younger people today, and maybe rightfully so.”

Source: http://www.bloomberg.com/news/2012-12-17/yuengling-beer-billionaire-beats-sam-adams-in-craft-craze.html

It seems we’re not the only ones that dislike big beer using the term “craft beer” to push brands like Goose Island and Blue Moon.  The Brewers Association has also taken issue with moniker.

The Brewers Association, the not-for-profit trade association dedicated to small and independent American craft brewers, issued the following statement regarding the increase in production and promotion of craft-like beers by large, non-craft breweries:

 

An American craft brewer is defined as small and independent. Their annual production is 6 million barrels of beer or less and no more than 25 percent of the craft brewery is owned or controlled by an alcoholic beverage industry member who is not themselves a craft brewer.

 

The community of small and independent craft brewers has grown as beer enthusiasts embrace new, diverse beers brewed by their neighbors and friends who are invested in their local communities. Beer drinkers are voting with their palates and dollars to support these entrepreneurs and their small and independent businesses.

 

In 2011, small and independent craft brewers saw their industry grow 13 percent by volume; in the first half of 2012, volume grew by an additional 12 percent. Meanwhile, the overall beer industry was down 1.3 percent by volume and domestic non-craft was down 5 million barrels in 2011.

 

Witnessing both the tremendous success and growth of craft brewers and the fact that many beer lovers are turning away from mass-produced light lagers, the large brewers have been seeking entry into the craft beer marketplace. Many started producing their own craft-imitating beers, while some purchased (or are attempting to purchase) large or full stakes in small and independent breweries.

 

While this is certainly a nod to the innovation and ingenuity of today’s small and independent brewers, it’s important to remember that if a large brewer has a controlling share of a smaller producing brewery, the brewer is, by definition, not craft.

 

However, many non-standard, non-light “crafty” beers found in the marketplace today are not labeled as products of large breweries. So when someone is drinking a Blue Moon Belgian Wheat Beer, they often believe that it’s from a craft brewer, since there is no clear indication that it’s made by SABMiller. The same goes for Shock Top, a brand that is 100 percent owned by Anheuser-Bush InBev, and several others that are owned by a multinational brewing and beverage company.

 

The large, multinational brewers appear to be deliberately attempting to blur the lines between their crafty, craft-like beers and true craft beers from today’s small and independent brewers. We call for transparency in brand ownership and for information to be clearly presented in a way that allows beer drinkers to make an informed choice about who brewed the beer they are drinking.

 

And for those passionate beer lovers out there, we ask that you take the time to familiarize yourself with who is brewing the beer you are drinking. Is it a product of a small and independent brewer? Or is it from a crafty large brewer, seeking to capitalize on the mounting success of small and independent craft brewers?

Source: http://www.brewersassociation.org/pages/media/press-releases/show?title=craft-vs-crafty-a-statement-from-the-brewers-association

Anheuser-Busch getting bigger?  It seems that’s what they want to do.

Editor’s note: Steve Hindy is co-founder, president and chairman of The Brooklyn Brewery. Brooklyn Brewery started in 1988 and is among America’s top 15 craft breweries.

 

The proposed purchase of Mexico’s Modelo beer brands by the world’s largest brewing conglomerate, Anheuser-Busch-InBev, is causing deep concern among America’s craft brewers.

 

Anheuser-Busch already controls about 47% of the U.S. beer market. Adding Modelo’s Corona beer and other brands would give it another 6%. MillerCoors, the other big player in the United States,controls about 30%.

 

If the Modelo deal goes through, a duopoly would control more than 80% of the U.S. beer market.

 

The concentration of market share in two global companies means they have tremendous influence over distributors and retailers. This gives an advantage to big brewer beer brands over small brands created by America’s independent craft brewers. Ultimately, with limited choices, the beer consumer loses.

 

The Department of Justice is determining whether the sale would violate antitrust laws.

 

As I understand it, Anheuser-Busch claims it would have no say in the marketing or sale of Modelo brands in the United States. Those functions would be left to Crown Imports, the Chicago-based marketing and sales company that is owned by Constellation Brands, the world’s largest wine company.

 

In 10 years, Anheuser-Busch would have the right to buy Crown.

 

It’s hard to understand how a brewery could own another brewery and not have some control over sales and marketing. Doesn’t the owner control the price of beer sold to the importer/marketer? Doesn’t the owner contribute to the sales and marketing programs and costs of the importer/marketer? Doesn’t the owner have some say over the hiring of personnel for the brewery it owns?

 

And isn’t the owner responsible to its shareholders to ensure the brewery is maximizing shareholder value?

 

America’s small brewers have been on a roll in the past decade, claiming more than 6% of the U.S. beer market since the craft brewing revolution began in the early ’80s. That 6% is divided by 2,400 small companies.

 

The duopoly already has tremendous influence over beer distribution in America.

 

In most markets, brewers have two choices, a so-called Blue and Silver distributor, who sells MillerCoors brands, or a Red distributor, who sells Anheuser-Busch brands. (The color codes describe the primary colors of the brewers’ labels.)

 

Through so-called “equity contracts,” the large brewers prescribe how much money distributors spend to sell and market their brands. In some cases, they have the right to approve or disapprove the manager of the distribution company. In some cases, they have the right to approve the succession plan of the distributor. In some cases, they have the right to approve the sale of a distributor.

 

Craft brewers constantly struggle to get the attention of these distributors.

 

In the mid-1990s, the CEO of Anheuser-Busch, August Busch III, declared that he wanted “100% share of mind” from his wholesalers. Some Red distributors ejected non-Anheuser-Busch brands from their warehouses. Distributors who gave his 100% were given more favorable terms for their purchase of beer. August III is gone, but the new owners of Anheuser-Busch have called for distributors to get “aligned” with the brands they control.

 

Large brewers also have control over some retail sales of beer. Many chain supermarkets and stores appoint “category captains” to determine which beers are sold in refrigerated aisles and which beers go on the warm shelves. If the category captain is a Blue and Silver distributor, MillerCoors will play a key role in choosing which brands get sold where. If it is a Red distributor, Anheuser-Busch makes the calls.

 

This results in a tug-of-war between large brewers trying to get maximum placement of their brands and small brewers trying to get a spot. Obviously, a company that controls 53% of the U.S. beer market is going to have a better shot at shelf space than my company.

 

Both members of the duopoly have wholly owned brands like Shock Top and Goose Island that are presented as craft brands. They own large shares of some other breweries like Red Hook and Kona. There is concern that these brands would get greater attention from wholesalers than independent craft brands, like mine. This can greatly limit the beer consumer’s choices.

 

In sports venues like arenas and stadiums, the large brewers monopolize space. They typically have advertising contracts with the venues, and this results in their having a dominant share of the beer taps and other beer placements. If you want a Brooklyn Lager at Yankee Stadium or CitiField or the new Barclay’s Center in Brooklyn, you’d better be prepared to spend some time searching. Brooklyn Brewery is in those venues, but in a very limited way.

 

Those are my concerns, and the concerns of other craft brewers. Obviously, I am not an attorney. I know little about antitrust law. I recently read a couple of books about the oil industry and learned that antitrust rulings in that industry have drawn a line for defining a company with too much market share.

 

Given this, I am baffled by the state of the U.S. brewing industry. How did we ever get to a situation where two companies control 80%? And how can we allow them to control more?

Source: http://www.cnn.com/

The Top 25 Beers of 2012
photo: winemag.com

Wine Enthusiast Magazine has put together its top 25 beer list for 2012, and while all lists of this nature are subjective, there are definitely a few good ones in the mix.

A quick breakdown of what was included in the judging:

Beer Review Breakdown by Country:
Belgium – 6
England – 5
Germany – 5
New Zealand – 1
Norway – 1
Portugal – 2
Scotland – 1
Spain – 1
United States – 95

U.S. Review Breakdown by State:
Alaska – 2
California – 22
Colorado – 11
Delaware – 2
Massachusetts – 11
Maryland – 2
Maine – 2
Michigan – 4
Missouri – 2
New Hampshire – 2
New York – 10
Oregon – 10
Pennsylvania – 2
Texas – 2
Utah – 8
Virginia – 2
Wisconsin – 1

The Top 25 List

1. The Bruery Saison Rue Belgian-Style Ale (Saison/Farmhouse Ale; The Bruery, CA)
2. Traquair House Ale (Scotch Ale; Traquair House Brewery, Scotland)
3. Sam Adams Utopias 10th Anniversary (American Strong Ale; The Boston Beer Co., MA).
4. Left Hand Polestar Pilsner (German-style Pilsener; Left Hand Brewing Co., CO).
5. Deschutes Hop Trip Pale Ale (American Pale Ale; Deschutes Brewery, OR)
6. Uinta Dubhe Imperial Black IPA (American-style Black Ale; Uinta Brewing Co., UT)
7. Dogfish Head Noble Rot (Fruit Beer/ Saison Hybrid; Dogfish Head Craft Brewery, DE)
8. Weihenstephaner Vitus Weizenbock (Weizenbock; Brauerei Weihenstephan, Germany)
9. Founders Bolt Cutter Barley Wine Ale (American Barleywine; Founders Brewing Co., MI)
10. Odell The Meddler Oud Bruin Ale (AmericanWild Ale; Odell Brewing Co., CO)
11. Stone Ruintation Tenth Anniversary IPA (American Double/Imperial IPA; Stone Brewing Co., CA)
12. Ayinger Celebrator Doppelbock (Doppelbock; Brauerei Aying, Germany)
13. Avery Annual Barrel Series Uncle Jacob’sStout (American Double/ImperialStout; Avery Brewing Co, CO)
14. Port City Optimal Wit (Witbier; Port City Brewing Company, VA)
15. Lindemans Cuvée René Grand Cru Gueuze Lambic Beer (Gueuze; BrouwerijLindemans, Belgium)
16. New Glarus Two Women Lager (German-style Pilsener; New Glarus BrewingCompany, WI)
17. Smuttynose Big Beer Series S’muttonator Double Bock Beer (Dopplebock; SmuttynoseBrewing Co., NH)
18. St. Feuillien Saison Belgian Farmhouse Ale (Saison/Farmhouse Ale; St-Feuillien Brewery, Belgium)
19. Jolly Pumpkin La Roja Artisan Amber Ale (American Wild Ale; Jolly Pumpkin ArtisanAles, LLC, MI)
20. 21st Amendment Insurrection Series Monk’s Blood (Belgian-style Dark Ale; 21st Amendment Brewery, CA)
21. Karl Strauss 23rd Anniversary Old Ale (Old Ale; Karl Strauss Brewing Co., CA)
22. Boulevard Smokestack Series Tank 7 Farmhouse Ale (Saison/Farmhouse Ale; Boulevard Brewing Company, MO)
23. Captain Lawrence Cuvée de Castleton Batch #5 (American Wild Ale; Captain Lawrence Brewing Co., NY)
24. Brewery Bockor Omer Traditional Blond Ale (Belgian-style Blonde Ale; Brewery Bockor, Belgium)
25. DuClaw Retribution (American Double/ Imperial Stout; DuClaw Brewing Company, MD)

Download the full listing here in PDF format:
http://www.winemag.com/PDFs/2012%20Top%2025%20Beers.pdf

Source: http://www.winemag.com/

Here in the United States we are going through a renaissance in beer.  The craft beer craze is sweeping the nation, but that doesn’t necessarily hold true for the rest of the world.  In South Korea, for example, the country is limited (for the most part) to one of two brewing companies.

The problem for South Korean boozers is that their national market is a cramped duopoly. Hite-Jinro and Oriental Brewery (OB) have nearly 100% of it. Their beers are hard to tell apart; their prices, even harder. At five out of five shops visited by The Economist, their main brands all cost precisely 1,850 won ($1.70) per 330ml can.

 

Until 2011, regulations required all brewers to have enough capacity to brew well over 1m litres at a time. This in effect kept all but Hite and OB from bringing foamy goodness to the masses. Smaller producers were allowed to sell their beer only on their own premises.

This is just the type of thing that we’re trying to prevent here at Indy Beers.  But even in the face of this duopoly, there is hope.

However, only a handful of small brewers have risen to the challenge. One of them, Craftworks Brewing Company, is owned by a Canadian, Dan Vroon. Mr Vroon’s pub in Seoul is packed every night. But several hurdles still make it hard for him to sell his pilsners, stouts and pale ales more widely, he says.

Of Course, this hope comes at a cost.

Brewers are taxed heavily if they deliver their own beer. Craftworks’ unpasteurized brews must be kept chilled from the vat to the tap, which creates a problem. Cold distribution is a tiny, pricey niche. This is because the big boys don’t use it: their beers have their tasty, bureaucrat-bothering bacteria removed at the brewery. They can thus be delivered warm and then chilled in the pub.

 

Punitive tariffs prevent brewing experimentation. The Korean taxman treats malt, hops and yeast as beer ingredients, which are subject to low import duties. Anything else you might put in the brew is deemed an agricultural import, and thus a threat to the nation’s farmers. “Speciality grains like oats aren’t on the approved list, so we must pay more than 500% if we want to use them,” says Park Chul, another frustrated brewer.

 

Those who do not qualify for a wholesale licence have it even worse. Though they sell only through their own pubs, government inspectors place meters on their vats. These can become contaminated, causing costly stoppages. “It’s enough to drive you to drink,” sighs Mr Vroon.

So next time you’re out at the pub having a great craft beer from an independent brewer, remember, not everyone in the world who has access to beer gets good beer.

Source: http://www.economist.com/