THE GIST
D.G. Yuengling & Son, Inc. and Molson Coors Beverage Company announced Tuesday the companies would form a partnership to brew and distribute Yuengling’s beers to 25 new states. The move has implications not just for Yuengling and Molson Coors, but for Molson Coors-aligned distributors in Yuengling’s expanded territory; for other macro Lager brands sold in those states; and potentially for the Brewers Association trade group, which has, since 2014, counted D.G. Yuengling & Son as its largest member.
Yuengling, based in Pottsville, Pennsylvania (and which also maintains another brewery in Tampa, Florida), is America’s oldest and largest “craft” brewery as defined by the Brewers Association (BA). It is currently available in 22 states along the East Coast, from Connecticut to Florida. The new partnership will focus on selling beer primarily in the western half of the U.S.
Yuengling will expand its sales territory beginning in the latter half of 2021, overseen by a six-member board of directors composed of three members of the Yuengling family and three representatives from Molson Coors. The existing D.G. Yuengling & Son, Inc. company will remain family-owned and separate from this partnership. According to a press release, Molson Coors will brew Yuengling’s beers in these new territories, “opening markets the company can’t currently reach.”
WHY IT MATTERS
The partnership expands sales territory for a brewery that has, since its founding in 1829, been associated with its East Coast geography. Yuengling’s prior distribution expansion has moved at a glacial pace; this announcement will more than double its territory with one move. A post on Molson Coors’ Beer & Beyond blog says the expansion will be “measured and methodical.” (Surely, though, it will be faster than the 190 years it took Yuengling to sell in 22 states.)
The deal will force growth for Yuengling, whose sales have slumped over the past three years. Dollar sales of Yuengling Traditional Lager—a national top-20 brand in multi-outlet and convenience stores—fell -6% between 2017 and 2019 in grocery, convenience, liquor, and other chain stores, as tracked by market research company IRI. And despite a small +3% bump this summer as COVID-era shoppers stocked up on flagships, Traditional Lager sales are on pace to fall again in 2020 from the $333 million the brand netted in 2019.
Yuengling has essentially been a one-brand brewery since its founding. (Traditional Lager currently makes up 77-80% of the company’s sales in chain grocery, convenience, liquor, and other stores.) In recent years, it’s tried to diversify its offerings, though only one brand has made any real impact on its bottom line in the past 12 months: Yuengling Flight, the company’s low-calorie, low-carb answer to Michelob Ultra. Debuting this year, the brand has brought in $7.5 million through Sept. 6, the same amount sold in IRI-tracked chain stores as Leinenkugel’s’ seasonal portfolio and 3 Floyds Brewing Co.’s entire portfolio. Things have not been as good for other top brands.
The money accrued by Flight has been needed to offset the downward trajectory of other Yuengling beers. Over the 52-week period ending Sept. 6, Black and Tan (-2%), Golden Pilsner (-3.2%), and Light Lager (-9.9%) are all down at a time when COVID-19 has forced record sales in chain retail channels, where Yuengling has traditionally thrived.
Yuengling has previously opened new sales territories to much fanfare, but it hasn’t sustained the momentum. A much-lauded Massachusetts launch in March 2013, for example, was followed by steep sales declines in that state. Yuengling saw dollar sales of its Traditional Lager fall in Massachusetts’ IRI-tracked private/liquor stores from $9.2 million in 2015 to $4.5 million in 2019.
During the pandemic, as shoppers stocked up at the grocery store on large packs of familiar brands, Yuengling should have been seeing huge sales growth the way other nationally distributed craft breweries did. That it got only a modest bump nationally indicates organic growth may be tapped out, and it’s looking for a boost by entering a wide swath of new sales territory.
So what’s Molson Coors’ interest in the brewery? Volume.
“It’s a good shot in the arm. Yuengling brings volume to the table that not a lot of other brands can bring at this juncture,” says Kimberly Clements, cofounder and managing partner of Pints LLC consultancy. “Is it a super-hot brand or anything like that? No. But it creates opportunity for more shelf space [for Molson Coors].”
The partnership with Yuengling—reportedly in the works for more than a decade—gives Molson Coors-aligned distributors another macro Lager to help compete with rival Bud Light. (That 10-year timeline overlaps with now-settled lawsuits between Molson Coors—at the time MillerCoors—and Pabst Brewing Co. over the former’s contract brewing of brands including Pabst Blue Ribbon, Old Milwaukee, Lone Star, and Schlitz.)
Anheuser-Busch InBev executives have long said Yuengling’s entrance into new markets causes a subsequent dent in Bud Light sales (one of the few independent brands capable of this direct competition). Molson Coors calls its partnership with Yuengling “the latest in a string of moves aimed to solidify and fortify its core of American Lagers,” likely referencing new marketing campaigns for Coors Light and Miller Lite. Crucially, Molson Coors is bringing Yuengling into the fold less than two months after it scrapped Michelob Ultra competitor Saint Archer Gold—even as it adds Yuengling Flight.
“Sometimes it’s easier to acquire a brand than build from the ground up,” says Donn Bichsel Jr., founder of consulting firm 3 Tier Beverages. “Molson Coors has had so much change over the years that’s rippled through their entire organization, it’s been difficult for them to stay the course on anything.”
Clements sees Yuengling’s legacy as part of its brand appeal, and part of what made the six-generation, family-owned company an attractive partner for Molson Coors.
“What do Americans like? Easy-drinking Lagers and an American success story,” she says.
(While many see an American success story in the Yuengling brewery’s six-generation family ownership—which now includes increasing leadership from Dick Yuengling’s four daughters, Jen, Debbie, Wendy, and Sheryl—others see a corporate history of environmental exploitation, union busting, and support for Donald Trump.)
Yuengling is a nice pick up for Molson Coors-aligned distributors, Clements says, as they’ll be glad to have another significant, volume-moving American Lager in their hands. As those distributors are careful to price Yuengling competitively, they’ll potentially grow sales as well as shelf space while owning the rights to a long-standing American brand.
Bichsel says Yuengling is the rare brand that’s priced like a domestic premium beer but carries craft cachet among a wide subset of drinkers.
“There are a lot of consumers who think of Yuengling as craft despite the domestic price point that it plays at,” he says. “It’s the perfect crossover brand. […] Yuengling is cooler than Miller, it’s cooler than Bud. […] It’s got more cred than some of other [similarly priced] options.”
What Yuengling’s arrival will mean for distributors in major unconsolidated markets like Houston—where separate wholesalers sell Miller products and Coors products—remains to be seen. Molson Coors will assign Yuengling rights to only one wholesaler in those territories, via a process spelled out in contract agreements between distributors and Molson Coors.
The Yuengling-Molson Coors partnership raises one other significant unknown, this time for the BA. Yuengling is the trade group’s largest member by a wide margin, producing 2.6 million barrels of beer in 2019. (The second-largest BA-defined craft brewery, Boston Beer Co., produced 1.75 million BBLs in 2019.) Some have asked whether the BA will continue to consider Yuengling “craft” under its definition, which requires that member breweries not be more than 25% owned by a beverage alcohol industry member that is not itself a craft brewer.
Because the existing D.G. Yuengling & Son, Inc. company—the portion not entering into partnership with Molson Coors—retains its family ownership, it’s likely the BA would continue to consider that business a craft brewery. It’s a wholly separate question whether the Yuengling company actually cares about its BA craft designation. It enjoys a craft halo by virtue of its long-standing family ownership, though it was not folded into the BA’s membership until the trade group changed its definition of craft in 2014.
But fundamentally, the alignment between America’s oldest, largest craft brewery and Molson Coors further muddies the “craft” waters. The BA’s top-five largest craft breweries in 2019 were:
Yuengling: Now in partnership—at least one half of the company—with Molson Coors.
Boston Beer Co.: Derives its growth from Truly (hard seltzer brand) and Twisted Tea (alcoholic tea) rather than Sam Adams beers.
Sierra Nevada: Still a family-owned brewery, though increasingly branching into non-beer products. Sierra Nevada also doesn’t use the BA’s “Independent Craft Brewer” seal.
New Belgium Brewing Co.: As of late last year, wholly owned by Lion Little World Beverages, a division of multinational Kirin Holdings.
Duvel Moortgat: The Belgium-based collective owner of Firestone Walker Brewing Co., Brewery Ommegang, and Boulevard Brewing.
Increasing attention to non-beer products as well as strategic partnerships with multinational companies indicate the choppy waters breweries must navigate to continue to eke out growth. Add a pandemic and its subsequent economic devastation to the mix, and we’re likely to see more of these kinds of major handshakes—though none quite as significant in terms of volume as the one between Yuengling and Molson Coors.
Words by Kate Bernot