Jacob Leinenkugel Brewing Company
Jacob Leinenkugel Brewing Company
Wholly Owned Subsidiary of Miller Brewing Company
NAIC :31212 Breweries
Jacob Leinenkugel Brewing Company is a prominent regional and specialty beer brewer. Leinenkuge’s core market is the upper Midwest, which used to be the only place consumers could buy the beer. Since linking with Miller Brewing Company in 1988, Leinenkugel’s brands have reached broader markets across the United States. The company’s core product is its Leinenkugel’s Original, a beer first brewed in 1867. This accounts for about 40 percent of the company’s sales. Leinenkugel also produces a variety of seasonal and specialty beers, and these make up the remaining 60 percent of sales. Within the Miller Brewing Company, Leinenkugel operates as part of a division called the American Specialty and Craft Beer Company. This division promotes Leinenkugel and other small breweries owned by Miller, to capture the small but growing specialty beer segment of the U.S. beer market.
The company was founded by Jacob Leinenkugel, an immigrant from Bavaria who descended from a family of brewmas-ters. Leinenkugel picked out the northwoods town of Chippewa Falls, Wisconsin, to start a brewery. In 1866, when Leinenkugel arrived there, the town was a remote place unserviced by railroads. Almost all Chippewa Falls’ 2,500 inhabitants worked in the timber trade, logging in the forests or working the huge sawmill on the Chippewa River. The town had few female inhabitants, and the loggers typically worked 12- to 16-hour shifts. This then seemed like a community ripe for a brewery. Chippewa Falls also had another essential ingredient for a brewery: a good source of pure water in its rivers and the Big Eddy Springs. Jacob Leinenkugel went into business in 1867, brewing inside a 24-by-50-foot building. His beer was packed in wooden barrels and delivered by wagon to Chippewa Falls saloons. By 1890 the brewery was doing so well that Leinenkugel invested in new facilities. He built a new brewery, a three-story malthouse, a barn to house the delivery horses, and several other buildings. When Jacob Leinenkugel died in 1899, the business passed to his son Matt.
Leinenkugel remained a strictly regional beer for a long time. Chippewa Falls was not easily accessible, and beer was a fragile beverage that did not do well when shipped long distances. So the company confined its sales to northern Wisconsin. When Prohibition made beer sales illegal in 1918, the company made do by producing a line of soda water. But it kept its brewing equipment in place, and when Prohibition was repealed in 1933, the company started up again with its original recipes. At that time it made its flagship brand, called simply Leinenkugel’s, as well as a bock beer. When the United States entered World War II, rationing and labor shortages caused other breweries to raise their prices. But Leinenkugel steadfastly kept its prices the same. After the war, the company invested again in new equipment. In 1955 Leinenkugel installed glass-lined fermentation tanks at its brewery, and these were the first of their kind in use in the United States.
Greater Distribution in the 1970s
Since the company’s founding in 1867, Leinenkugel’s beer had been sold only in the northwoods area of Wisconsin known as the Chippewa Valley. Sales had been steady enough to allow the company to expand its facilities, but it was not until 1970 that Leinenkugel began to reach out to bigger markets. The company began selling its beer in Minnesota that year, and in 1972 also reached into the Upper Peninsula of Michigan market. The president of the company was still a family member, Bill Leinenkugel. In a March 29, 1982 article in Advertising Age, Bill Leinenkugel noted that one of the advantages of being a small, regional brand was that he felt no need to change the company’s recipes in order to please a mass market palate. The company did add a light beer in 1972, but otherwise the product remained the same, brewed with the old equipment by a workforce of only about 30 people. Through the 1970s, Leinenkugel expanded only gradually into neighboring markets; by 1982, the beer could still be found in just four states. The company sold Leinenkugel’s in northern Illinois, upper Michigan, Minnesota, and Wisconsin, and only in markets that were within 300 miles of its Chippewa Falls plant. The company spent comparatively little on advertising, though it did have a presence on local radio and television stations. Its spokesman was a prominent Minnesota sports broadcaster, Ray Scott. Leinenkugel also occasionally ran print ads in regional magazines such as the Wisconsin Business Journal. The company sometimes sponsored special events such as a Pure Water Day, too.
One barrier to greater distribution of Leinenkugel’s was that the beer was made with no chemicals, unlike most national brand beers. This gave it a short shelf life, and so it was difficult for the company to imagine it could penetrate into wider markets. But the beer was becoming known outside its limited Midwestern market. In 1978 Newsweek magazine lauded Leinenkugel’s, labeling it “The Pride of the Northwoods,” and in 1982 Advertising Age featured the brand in an article about regional breweries. President Bill Leinenkugel thought that the company might grow by finding more creative ways to reach people within its geographic market area. The company opened a hospitality center in 1980, with a small museum and gift shop, and began offering tours of the brewery. Northern Wisconsin attracted a lot of tourists in the summer, and the hospitality center was devised to bring them to Chippewa Falls and introduce them to the taste of Leinenkugel’s. Besides tourists, the company also thought it could reach out more to college students. A number of small colleges dotted the upper Midwest, and by 1982, Leinenkugel was planning ways to appeal to these young drinkers. The company also planned to start selling its beer in Iowa in the early 1980s. But that was as far as the company’s expansion plans went.
Under Miller After 1988
By 1987, Leinenkugel was a profitable company, comfortable in its geographic niche. The brewery produced 60,000 barrels of beer that year, and sales in its four-state market had been growing impressively. The company had made few changes in the late 1980s. It introduced Leinenkugel’s Limited (Northwoods Lager) in 1986, a new product based on an original Leinenkugel family recipe. Its Original brand, the core product, won a gold medal in 1987 at the Great American Beer Festival, more evidence of the beer’s great appeal. Still a small, family-controlled company, Leinenkugel seemed to be making the most of its regional market without straining for greater growth. But in some ways the company was trapped. While it was doing well in its region, the company did not have the resources in terms of marketing and distribution to get its beer beyond the Midwest. The company wanted to branch out in a different way, too. Specialty brewing—small-scale production of “hand-crafted” special recipe beers—was a market category that was just starting to boom in the late 1980s, and Leinenkugel wanted to get in on it. But the company did not have the cash to finance a switch to a new product. In the meantime, Miller Brewing Company, one of the American beer giants, was experiencing stagnant sales. It was also locked into its core product, and was having difficulty breaking into new areas. Miller first approached Leinenkugel about a sale in 1987. According to Leinenkugel family legend, the father of current company president Jake Leinenkugel thought Miller wanted Leinenkugel to buy it. But it came to pass the other way around. Leinenkugel became a wholly owned subsidiary of Miller Brewing Company on April 1, 1988.
The sale was a shock for many Leinenkugel fans and employees, who feared the giant beer company would adulterate the Leinenkugel recipe and perhaps close down the historic brewery. Despite company president Jake Leinenkugel’s assurances that Miller had no intent to mess with a successful product, the brand lost an estimated ten percent of its core customers in the year following the sale. After that, however, sales took off as Miller’s marketing expertise and deep pockets allowed the smaller company to branch out. Although sales were still primarily in the four states Leinenkugel had traditionally sold in, Miller managed to get the brand distributed in Michigan, Indiana, Ohio, Nebraska, and Colorado by 1994. Sales in the upper Midwest market grew by double digits, and soon after the sale to Miller, Leinenkugel began producing new beers.
“It’s what you put into a beer and what you do to it that makes the beer great,” Jacob Leinenkugel said. That’s the way we’ve been brewing our beer for 131 years, and that’s the way we’ll continue to brew Leinenkugel’s today, and in the future.
Its first venture into the small batch specialty beer category was its Northwoods Lager, introduced in 1986, before the sale to Miller. Leinenkugel’s next attempt was Leinenkugel’s Red Lager, first brewed in 1993. This was a direct attempt to counter the popularity of a Coors brand, Killian’s Irish Red. The company also started brewing seasonal beers, such as an Autumn Gold specialty and a dark Winter Lager. Success with specialty brews was important to Leinenkugel. Though only two percent of the U.S. beer market was held by specialty brews in the early 1990s, this category was growing faster than anything else. Growth in the specialty beer niche grew 40 percent in 1995 alone, while sales of mass market beer were flat. Leinenkugel’s first attempts to get in on the “Chand-crafted” market were not as successful as they might have been, and in 1995 Miller formed a new division to better focus its specialty brands. It formed a unit called the American Specialty and Craft Beer Company (Absco.), and placed Leinenkugel under this division, along with the Celis Brewery in Austin, Texas, and another affiliate called The Shipyard Brewing Company, of Portland, Maine. The purpose of Absco. was to let the small brewers do what they knew best—that is, make their particular beers. Though they had the support of Miller’s research and development teams, particularly important in making a new product consistent, as well as Miller’s vast financial backing, marketing and distribution was handled by managers who really understood the smaller beer market. Aptly put in a May 1996 article in Beverage Industry, Leinenkugel and the other small brewers under Absco. had the opportunity to “link up to Miller’s resources without being ‘Millerized.’”
Marketing of Leinenkugel’s brands under Absco. stressed the northwoods Wisconsin background of the beer. To make sure that all the people handling the brand really understood this, the Leinenkugel brothers Dick, vice-president of sales, and John, a brand assistant, started what they called “Camp Leinenkugel” in the mid-1990s. They invited sales representatives from parent company Miller to Chippewa Falls to see the Leinenkugel brewery in action, and to brush up on the selling and merchandising of Leinenkugel’s brands. Sales of all Leinenkugel’s brands rose precipitately in the early 1990s, from 85,000 barrels in 1988 to almost 270,000 barrels in 1996. The old Leinenkugel’s brewery worked double shifts, and some of the Leinenkugel’s Original brand was made at Miller’s plant in Milwaukee. Also in September 1995 Miller bought a Milwaukee brewery formerly owned by Blatz, and used this facility to develop new specialty beers for Leinenkugel. By 1996, Leinenkugel had quite a line of specialty beers. It made Auburn Ale, the company’s first ever ale, a Creamy Draft, another English-style ale, and a Bavarian-style wheat beer called Leinenkugel’s Hefeweizen. Then it had a year-round complement of seasonal beers, from its Big Butt Doppelbock, available only from January through April, to its Berry Weiss, a fruit flavored summer beer. For fall there was the Autumn Gold, and winter had been covered since 1993 by Leinenkugel’s Winter Lager. Because it had a beer for every season, Leinenkugel was able to command retail shelf space for its craft products year-round.
Since the sale to Miller, Leinenkugel’s production capacity nearly tripled, and the brand began appearing in markets as far from the Wisconsin northwoods as California and Florida. The company managed to do this without sacrificing its historic brewery or modifying the recipe for its Leinenkugel’s Original brand. By the late 1990s, Leinenkugel’s was in places it would hardly have imagined ten years earlier. In 1998, Leinenkugel opened a brew pub in the unlikely location of the new baseball stadium in Phoenix, Arizona. Though beer brewers had traditionally been barred by law from also owning or operating bars, there were exceptions for brew pubs, where beer was made and sold on the same premises. Although the law’s loopholes were apparently intended to keep small brewers in business, there seemed to be nothing prohibiting Miller from opening Miller’s Leinenkugel Brewing in the Phoenix Bank One Ballpark. It was far removed from the Chippewa Valley, but the foray into retail venues was happening at other big breweries, as well as smaller ones such as Samuel Adams. It was this kind of creative marketing and latching onto new niches that Leinenkugel had been unable to finesse when it was a stand-alone private company. So the match-up with Miller seemed a successful one. Leinenkugel was still run by fifth-generation descendants of Jacob Leinenkugel, with three brothers in top positions, including president. The recipe for the Original brand beer had not been changed. Yet the company was very different in the late 1990s than it had been ten years earlier. Sales were growing, and it had penetrated into many regions beyond the Midwest. Leinenkugel was bigger, more flexible, producing more volume, and more varieties of beer. The combination of the mainstream Miller and the small regional brewer seemed to be working to the advantage of both companies.
Causey, James E., “Leinenkugel Brewing Co. Taps into Craft Beer Market,” Knight-Ridder/Tribune Business News, September 6, 1996, p. 909B0292.
Holleran, Joan, “Leinenkugel Brews Up New History,” Beverage Industry, May 1996, p. 28; “Macro Goes Micro,” Beverage Industry, May 1996, p. 24.
Kermouch, Gerry, “Leinie’s Heir Brewing Miller Sales,” Brandweek, September 13, 1993, p. 20.
“Miller Keeps the Mystique, Adds Employees at Leinie’s,” Corporate Report-Minnesota, June 1994, p. 72.
“A Miller Unit Buys Brewery,” New York Times, September 21, 1995, p. D19.
Ortega, Bob, “How Big Brewers Are Sidling into Retail,” Wall Street Journal, May 18, 1998, p. B1, B11.
Tait, Nancy, “Specialty Markets Give Small Operators a Taste of Success,” Advertising Age, March 29, 1982, p. M46.