America's Oldest Brewery

D.G. Yuengling & Son is Norman Rockwell's kind of brewery, a slice of Americana where plaid flannel is business casual and workers spend hour after hour on the rickety assembly line, filling bottles, packing boxes, crafting what they still call "the local beer." It may not be an American creation, but beer has certainly been embraced by the masses, and the Yuengling family has been quenching thirsts here longer than anyone.

A six-generation family business founded in 1829, Yuengling is the oldest brewery in the United States. The red-brick complex in Pottsville, Pa., built just two years after the original factory burned down, is an aging labyrinth. The paint is chipping, the pipes are rusting, and the plant's chambers are linked by a series of steep metal staircases. Below the hulking structure is a maze of earthen caves and tunnels, where the beer was stored in the 1800s because the temperature remains about 50 degrees year-round. It's a place where the rank and file once began every workday at the crack of dawn with a heaping stein. The halls echo with history, and the federal government agrees -- Yuengling was declared a national historic site in 1976.

But for all its charm, the old brew house at Fifth and Mahantongo, in the heart of this former coal-mining town about 100 miles northwest of Philadelphia, has emerged as an unlikely player in today's beer industry. A remnant of a time when hundreds of tiny local breweries dotted the American landscape, Yuengling now somehow finds itself the nation's fifth-largest brewer, churning out 1.3 million barrels last year and bringing in more than $100 million in annual revenue. All this as it celebrates its 175th anniversary, a milestone very few family businesses ever reach. Virtually unknown and unpronounceable in much of the country, Yuengling (it's YING-ling) has developed almost Kleenex-like brand identity in certain East Coast hot spots. Walk into a watering hole in Philadelphia, ask the barkeep for a lager, and expect a pint of Yuengling to slide your way. "I'm sure a lot of the other lagers out there, it's gotta tick them off," says John Ferry, the longtime owner of Moriarty's, a Philly ale house. "I don't think the best strategists from Wharton could tell you how to do this."

It certainly didn't happen by design. From its very first keg, Yuengling has mitigated risk wherever possible and avoided out-of-control growth at all costs. In fact, for the better part of its two centuries, the brewery avoided growth of any kind, a strategy that allowed it to outlast almost all of its peers. Since taking over the company two decades ago, however, fifth-generation owner Dick Yuengling Jr. has pushed the brand from its stronghold in the Keystone State into nine others along the East Coast. Sales are up 225% since 1996. And in an industry where consumption is flat, America's oldest brewery boosted output 11% last year, 18% the year before. By crafting smooth inexpensive brews and saturating one local market at a time, Yuengling has doubled its national market share in the past five years, making it responsible for .6% of all the beer sold in the U.S. If that doesn't sound like a lot, here's a little beer math: There are 12 ounces in each bottle, 24 bottles in each case, and the equivalent of 13.777 cases in each barrel of beer, the industry's standard unit of measure. Yuengling shipped 1.3 million barrels last year. That's 429,842,400 bottles of beer on the wall. And keep in mind that the beer is sold in just one-fifth of the country.

Of course, with growth comes risk. It may never threaten Anheuser-Busch, Miller, or Coors, but on the heels of a costly expansion spree that has more than tripled capacity, Yuengling finds itself at an interesting crossroads: Can a company that has been making beer since the presidency of Andrew Jackson compete with the big boys in the age of Britney Spears? Can a product that's thrived on scarcity and mystique maintain its cultlike following when it's widely available? Does it make sense for a company that's survived for 175 years by avoiding growth to suddenly embrace it? And how far should it go? With demand that shows few signs of letting up, the Yuengling family must answer a question that many fast-growing companies face, be they five or 175: Just how big is big enough?

The roots of yuengling's current successes can be traced to a dilemma it faced in 1996. Quite simply, the company couldn't make enough beer to satisfy its commitments. "People say, 'What a great problem to have," says David Casinelli, the company's executive vice president. "But it was still a problem. There was a sense of urgency."

The company had reached out to markets in New England, New York, and western Pennsylvania -- and then had to beat a hasty retreat when it couldn't keep up with demand. Built to produce maybe 250,000 barrels a year, the old brewery was pushing 500,000. To say the pullback offended customers and distributors would be putting it mildly. "People were on the verge of a riot," concedes Yuengling. Concluding that the shortages weren't going away and that the company was positioned to pursue a growth strategy, Yuengling decided to assess his options. To meet the demand he knew was going begging, he figured he could continue to pour money into the existing plant, he could outsource some of his production, he could buy an existing plant, or he could build a brand-new facility.

During a key strategy session in 1996, Casinelli, Yuengling's right-hand man, began sketching a portrait of where the potential moves might lead. Each idea was spelled out on a chalkboard. The concern with continuing to upgrade the existing plant was that it would merely be a Band-Aid solution. Outsourcing, which Yuengling had tried for a couple of years as a stopgap, could lead to the perception of inconsistent taste -- a potential death knell. As for buying a brewery, there simply weren't many on the market, and those that fit the company's needs were likely to require substantial upgrades.

At the bottom of the chalkboard list were two words: "Do nothing." "Some of us involved in the planning said to Dick, 'You know, this is a valid option," Casinelli recalls. "We were operating very profitably, we had low overhead, we were very efficient. Dick could've made a lot of money without a lot of risk involved." But the fifth-generation torchbearer, a maverick from the day he began lugging empty kegs as a kid, was ready to break with tradition. "That idea," Casinelli says, "was taken off the board pretty quickly."