"We don't have a board of directors. We don't have managerial meetings. There's one guy who controls the operation."
"Dick does recognize this," Casinelli says, "but I'm not sure if he's embraced it yet."
It is important for a company like Yuengling, says UCLA management professor Eric Flamholtz, who advised Starbucks on its rise from coffeehouse to coffee conglomerate, to maintain its unique culture -- but not in lieu of meeting the demands that come with rapid growth: formal long-term planning and a management team to carry out those plans. The "tipping point," says Flamholtz, usually comes at either the $100 million-revenue or 500-employee mark, and failure to address the infrastructure needs can sink a company. "I liked being a teenager," Flamholtz says. "But you can't be one forever."
Depending on which expert you ask, roughly 70% of family businesses never reach a second generation. Perhaps 10% make it to a third. With its sixth-generation management on board, Yuengling is bucking some pretty big odds. There are few people in the industry who would question Yuengling's ability to survive, but as the current expansion continues, the challenges also mount.
The struggle to gain acceptance in Florida has served as a cautionary tale of sorts, and the brewery plans to keep overall growth in the 5% to 12% range. Despite calls from distributors begging for the right to sell the beer, Ohio and West Virginia are among the states the brewery has shied away from entering. "There's not a day that goes by when we're not enticed by other markets," Casinelli says. "But I'm not going to put our brands in a market if we don't have the manpower."
With more than 3 million barrels of capacity now at his disposal, Dick Jr. could double his current output and still have room to grow. He sees the extra capacity as flexibility, allowing the brewery to continue growing at its own pace along the East Coast -- but only along the East Coast. Yuengling says he has no intention of ever buying or building another brewery in his lifetime.
Last year, the company posted gains in every state where its beer is for sale except one. The lone exception? Pennsylvania, of all places, where two-thirds of its beer is still sold. Yuengling retains a strong 10% share in its home state, but the brewery is taking the slip seriously. Casinelli says that the brand is "above the radar screen now" and its ever-rising popularity and prominence on the East Coast could, oddly enough, hurt at home. "We can't take for granted that our brand won't become passZ among our core drinkers," Casinelli says. "We've always enjoyed a lot of brand loyalty, but to take your products on more of a national level, you have to market them a little differently."
Dick Yuengling, for one, has little doubt that his brewery can continue to grow and still maintain the Yuengling mystique. "Hey, we fought through Prohibition," he says, "so we'll fight through anything."
Sidebar: A tale of two breweries
Jim Koch still has a few signs lying around his office that proclaim Boston Beer Co. the oldest brewery in America. These days, however, Dick Yuengling lays claim to those bragging rights -- and has no intention of relinquishing them.
Yuengling was founded in 1829 and is legally considered the oldest continually operating brewery in the nation. Boston Beer Co. started brewing a year earlier, in 1828, but took a brief hiatus in the 1970s before Koch purchased it in 1984. But the two men at the helms of these storied brew houses -- the only independent breweries that shipped more than a million barrels last year -- have a lot more in common than that.
Yuengling took over for his father, Richard Sr., in 1985 and has transformed the once tiny Pottsville, Pa., brewery into an expanding, multistate operation. Koch (pronounced Cook) purchased then-dormant Boston Beer a year earlier, in 1984, and over the past two decades has made Samuel Adams a household name. Both men come from long brewing pedigrees. Yuengling is a fifth-generation owner; Koch is the first in his family to run Boston Beer, but five generations of Kochs before him have been brewers. In addition, both Yuengling's and Boston Beer's staple brews are flavorful lagers. While Yuengling shipped 1.3 million barrels last year, Boston Beer shipped 1.2 million.
With similar styles and similar pasts, Yuengling and Koch have forged a friendship over the years, and the two share a mutual admiration not often found between competing CEOs. Despite the bond and the similarities, the breweries find themselves on different paths as they approach their third centuries. Yuengling has more than doubled in size over the past decade and surpassed Boston Beer's production for the first time last year, making it the nation's fifth-largest brewery. In contrast, publicly traded Boston Beer, considered a pioneer for launching the nation's first mainstream craft beer in the 1980s, has declined slightly, facing younger drinkers who now see Sam as somewhat stodgy. Most significantly, Boston Beer chose to go national, supported by a prominent advertising campaign, while Yuengling has stuck primarily with its market-by-market, word-of-mouth strategy. "I would rather be deep than thin," Harry Schuhmacher, publisher of Beer Business Daily, an online industry report, says of Yuengling's approach. "If you have a higher share in a smaller part of the country, that means you've got pretty good brand loyalty."
Rod Kurtz is a staff reporter.
