REPUBLICANherald.com

8/06/2008
Oldest brewery now 2nd-largest
BY STEPHANIE LASOTA

D.G. Yuengling & Son Inc., Pottsville, is headed for the title of second-largest domestically owned brewery in the nation.

Anheuser-Busch has been the No. 1 U.S.-owned brewery since the 1960s, according to Peter V.K. Reid, publisher of Modern Brewery Age magazine in Weston, Conn.

The Belgian-Brazilian brewer InBev is to acquire Anheuser-Busch, the maker of Budweiser, for $52 billion to create the world’s largest beer producer.

The deal, announced July 13 and expected to be completed by year’s end, would end the St. Louis, Mo.-based company’s roughly 150 years of independence as an American brewer and move D.G. Yuengling & Son Inc. — America’s oldest brewery — to the No. 2 domestically owned brewery.

Boston Beer Co. out of Boston — maker of Samuel Adams — would be the No. 1 domestically owned brewery after the deal’s done.

The transaction is subject to the approval of InBev and Anheuser-Busch shareholders and other customary regulatory approvals, according to a press release from the company.

“Anheuser-Busch is an iconic company. They’ve been around for 150 years. A member of the Busch family had always run it even though they didn’t own a majority of the stock,” said Dick Yuengling Jr., president and owner of Yuengling.

“I think it will place Yuengling on a good place in terms of how they represent themselves in the market,” Reid said Tuesday. “They’ve always been the oldest brewery in the U.S. ... and not only are they that, but they’re still family owned.”

Boston Brewing Co. is publicly owned, Reid said.

According to Modern Brewery Age statistics, Boston Beer Co. produced 1,876,000 31-gallon barrels of beer in 2007 in 50 states. D.G. Yuengling & Son produced about 1,700,000 in 11 states.

“In the market that we’re in, we have a much greater market share than that company,” Yuengling said. “But as far as overall statistics go, Budweiser, Miller and Coors still dominate the American brewing industry.”

Miller Brewing Co. was acquired by South African Breweries in May 2002, while Coors Brewing Co. is a division of Molson Coors Brewing Co. The Colorado brewer merged with the Canadian Molson in February 2005.

City Brewing Co. — a domestically owned brewer in LaCrosse, Wis. — produced 2,098,000 31-gallon barrels in 2007; however, Reid said the business may include other contracted beverages in their numbers, like Mike’s Hard Lemonade and Smirnoff Ice. That detail makes Yuengling No. 2 instead of No. 3.

But like other breweries across the nation, the Pottsville company has to contend with the rising cost of grain, a vital ingredient in beer.

“We haven’t cut anything, no, we still make beer the way we used to but we’re in the process of raising prices just like the cereal companies have raised prices and so has every brewery in the U.S.,” Yuengling said. “It’s going through the roof, it’s horrible ... You have the government out there trying to use gas out of corn and all these breweries use corn or barley or wheat ... The saleability of corn because of the sale of ethanol is becoming easier, so farmers are switching.”

The barley, processed to become malt for the beer, is derived mostly from the Midwest. Demand for biofuels are causing a shortage for brewers, Yuengling said.

“Our grain prices have gone up and right now we’re absorbing it ... That’s a fast ticket to extinction when you absorb that,” he said.

Production fell 15 percent in 2006 to 180 million bushels, down from 211.9 million in 2005, mainly due to droughts in Australia and the Midwest and more farmers choosing to grow different crops like corn and soybeans, according to information from the Idaho Barley Commission.

Yuengling said barley price increases may translate to the consumer in a $1.25 increase per case or a $7 to $8 increase per keg or half-barrel.

“In 50 years, I’ve never seen price increases like that, but you can’t absorb it and you compound that with delivery costs, there’s no way you can absorb it,” he said.

Grain prices, which are listed at price per bushel, have been rising at least once a month, he said.

“We try to sell our product at domestic premium prices ... The price structure becomes difficult when grain prices explode,” he said.

The company goes through one railroad car of grain a week — about 170,000 to 210,000 pounds, Yuengling said.

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