Why Yuengling has partnered with Molson Coors for a big push out West

D.G. Yuengling & Son Brewing Co., the Pottsville-based beer behemoth, has set its sights on becoming a national brand by forging a partnership with industry giant Molson Coors.

Yuengling already is the “largest craft brewer” in the United States with two breweries in Pottsville and another suds factory at a former Stroh’s brewery in Tampa, Fla. The company’s sales are concentrated on the East Coast and the South.

Yuengling’s recipes, including its flagship brand, Traditional Amber Lager, will be produced at Molson Coors breweries under the supervision of Yuengling brew masters.

On Tuesday, Yuengling announced it had entered a long-term arrangement with the Chicago-headquartered Molson Coors. The joint venture bucks the current trend of brewers retrenching to focus on core home markets, said Bart Watson, chief economist at the Brewers Association, a nonprofit trade group.

“Maybe they see opportunity in zigging where others are zagging,” Watson said.

Yuengling, which celebrated its 191th anniversary this year, is sold in 22 states. The Molson Coors partnership will expand Yuengling’s geographic reach into the West Coast.

Molson Coors will benefit from the joint venture in a big way, said Brian Sudano, managing partner at the Beverage Marketing Corp., the industry’s dominant consultant and market analyst.

“It is not a secret that Molson Coors has struggled over the past five years,” Sudano said. “Since 2014, Molson Coors has lost 14% of its market share, going from 26.2% share to 22.5% in 2019. The company is looking for a brand with potential scale that they can grow.”

Formed in 2005 by the merger of the Molson and Coors companies, Molson Coors sells such well-known brands as Molson Canadian, Miller Light and Coors, among many others.

While Yuengling will maintain brewing for the East and South, Sudano said, Molson Coors will have the brand for sale and distribution in America’s two largest beer markets: California and Texas.

“[The deal] also provides Molson Coors with the potential inside track if Yuengling were to decide to sell at some point in the future,” Sudano said.

Yuengling produced 2.65 million barrels last year to hold on to 1.4% of the total U.S. beer market, said Watson of the Brewer’s Association. Sales were down slightly from 2018′s totals, Watson said, in part due to newer hard seltzers grabbing market share from lagers and light lagers, where Yuengling is focused.

The COVID-19 pandemic has had a big impact on sales of craft beers. Nearly 40% of smaller craft brews are sold on draft at tap rooms, bars and restaurants, Watson said, economically devastating to the industry as the virus has led to social distancing and restrictions on public gatherings.

Yuengling will remain independent and family-owned. A six-member board of directors evenly split between Yuengling and Molson Coors family members and executives will govern the operation with Yuengling retaining the chairmanship, the company said.

“This partnership is a great opportunity for us to grow our distribution footprint for the long term, while continuing to support our existing markets and the communities in which we operate,” said Wendy Yuengling, chief administrative officer of D.G. Yuengling & Son Inc.

Yuengling, a staple at regional bars, generated controversy during the 2016 election cycle after owner Dick Yuengling endorsed Donald Trump for president. The stance triggered calls for a boycott. Yuengling said that those calls had little effect on the company’s bottom line.