The leaders of D.G. Yuengling & Sons Inc. and Molson Coors Beverage Company say the smuggling of beer is alive and well.
“Just as is the case with a certain brand out of Golden, Colorado, more than a few people have smuggled Yuengling across state lines in the trunk of their car,” Molson Coors CEO Gavin Hattersley said, drawing a comparison to the demand for Coors beer in the 1970s, which inspired the 1977 beer-smuggling action comedy film Smokey and the Bandit. “But soon, millions of fans won’t have to resort to such tactics.”
Yuengling and Molson Coors today announced a joint venture that will deliver Yuengling products to consumers in the 25 midwest and western states where the Pottsville, Pennsylvania-headquartered brewery does not currently sell them.
The JV is “all about growth,” Hattersley said during a press conference Tuesday following the announcement.
“We’re taking Yuengling to folks that have never had the opportunity to try it, so the base is zero,” he said. “From a top line point of view, it’s very positive, from both Molson Coors’ point of view and a Yuengling point of view.”
Under the companies’ 50/50 JV, Molson Coors will brew Yuengling’s products for the 25 states in which the 190-year-old company doesn’t sell beer. Yuengling products are currently sold in 22 states. Its footprint’s western edge is Arkansas, Louisiana, Tennessee, Kentucky and Indiana. Yuengling is distributed along most of the Atlantic Seaboard, but does not extend past Massachusetts.
Although the JV will oversee expansion into any new western states, Yuengling will manage its eventual entry into Vermont, New Hampshire and Maine.
“Those three New England states would fill out our East Coast footprint, and those will be managed by DGY, our existing company,” Wendy Yuengling told Brewbound. “We don’t have a set timeline for them.”
As for westward expansion, the group declined to share which states will be first to receive Yuengling offerings, or which Molson Coors brewery will be the first to brew them.
“Once we announce what brewery we’re going to brew in, it probably tips our hand as to what market we’re going to,” Hattersley said. “I don’t want to give our competitors a heads up on this one. So, you know, we’ll make that call and we’ll make it public in the next few months.”
West of the Mississippi, Molson Coors operates breweries in Fort Worth, Texas; Golden, Colorado; and Milwaukee, Wisconsin.
The JV is a separate business entity and governed by a board of directors that has three seats for each company. Yuengling chief administrative officer Wendy Yuengling will chair the board. Jennifer Yuengling, vice president of operations, and advisor Mark Pulaski of Allentown, Pennsylvania-based Cornerstone Advisors will also sit on the board for Yuengling. Representing Molson Coors will be Hattersley, Geoff Molson and David Coors.
On the business operations side of the JV, Molson Coors will provide category management and analytics, while Yuengling will handle sales and marketing strategies, brand management and chain relationships.
“It’s a true commercial joint venture,” Hattersley said. “The benefit is as simple as it is significant. This joint venture will follow the same steady pace and discipline that has brought Yuengling success for 190 years.
“It’s not going to go national out of the gate, but there are 25 states open for expansion under this partnership — 25 states with tens of millions of drinkers all with zero Yuengling distribution today,” he continued.
Hattersley and both Yuengling sisters stressed that expansion will be slow and steady. Historically, Yuengling has been cautious and deliberate about adding states. Arkansas, its latest expansion market, was added in January 2018, nearly three years ago.
“We don’t do anything quickly — we’re a very slow and methodical company,” Wendy Yuengling said. “We’ve been kicking this around for a couple of years now and the timing was finally right.”
So don’t expect Yuengling’s 23rd state to be announced anytime soon.
“Our goal is to be able to get everything set up and get the [Molson Coors] breweries ready to make our beers, so that we can open up a new market by this time next year,” Wendy Yuengling said. “So, we’re looking out about 12 months.”
Molson Coors will foot the bill to adjust its facilities to produce Yuengling products.
“We’ll certainly fund that out of our existing capital budgets,” Hattersley said. “It’s not a meaningful amount of money, frankly.”
The world’s second largest beer manufacturer is no stranger to JVs or acquisitions. The company considers such collaborations a “core competency,” Hattersley said.
In April, it expanded its partnership with Quebec, Canada-based cannabis company HEXO to form a new JV, Truss CBD USA, to produce non-alcoholic, CBD-infused beverages.
The JV between Yuengling and Molson Coors is not a path toward the Pennsylvania brewing company eventually selling the company or ceding control, the Yuengling sisters said. They are the sixth generation of the Yuengling family to run the business, which operates three breweries (Pottsville and Port Carbon, Pennsylvania, and Tampa, Florida).
“It’s incredibly important for Jennifer and I and our sisters to make sure that our existing company remains family owned and operated,” Wendy Yuengling said. “That’s something that we’re fiercely committed to.”
In 2019, Yuengling produced 2.6 million barrels of beer, making it the largest craft brewer by volume in the country, according to national trade group the Brewers Association (BA). Yuengling has not always been included in the craft beer fold because its flagship Lager is brewed with corn, but a tweak to the BA’s definition of craft brewers changed its status in 2014.
Because the JV is a separate business entity, Yuengling will remain a craft brewer and will likely still be the country’s largest craft brewery by volume at the end of this year.
“Everything that stays within our 22 state footprint stays within our existing finance and remains fiercely independent and family owned and operated for generations,” Jennifer Yuengling said.
BA chief economist Bart Watson told Brewbound that he expects Yuengling to remain a BA-defined craft brewer within its current footprint, plus the northern New England states.
“That said, the new joint venture is clearly not independent (since Molson Coors owns 50%) so we wouldn’t count any volumes produced under the joint venture in our data set,” Watson wrote in an email.
However, even if Yuengling’s status with the BA changed because of the JV, the Yuengling sisters say they’ve never worried about definitions.
“Historically, we’ve never really been caught up in definitions, because it seems like it’s always changing,” Wendy Yuengling said. “We’ve always considered ourselves a family brewery and a regional brewer and that’s the most important thing to us.”