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Posted March 2018

The German Sonderweg – Tripping up Big Beer

Foreign brewers in Germany | It’s a tough life for brewers in Germany. The market is in decline, beer prices are at rock bottom and profits under pressure. The only consolation old-established brewers can draw from such dire circumstances is that the foreign brewers AB-InBev and Carlsberg are suffering too. Little remains of their erstwhile plans to disrupt and consolidate the market. In fact, both seem to be beating a gradual retreat.

In January 2018 AB-InBev sold two breweries, leaving them with only Bremen’s Beck’s and Munich’s Spaten-Löwenbräu. That’s two out of six initially. As to Carlsberg, no one knows when (or if at all) the Danish will open their as yet to be built new Holsten brewery in Hamburg.

In business, size is not everything. But a lack of scale and the costs of operating in lots of smallish market regions may help explain why foreign brewers who entered Germany in the early Noughties with great fanfare have since quietly pulled the plugs on their earlier investments. Compared with beer markets in the Americas, profitability in Germany has stubbornly remained low, especially when considering all the hassles with a highly fragmented competition.

AmBev’s owners, aka the Brazilians, probably watched in horror as their soon-to-be partner in InBev, Belgium’s Interbrew, in 2001 started gobbling up breweries in Germany. In quick succession the Belgians bought Beck’s and the alt beer producer Diebels, followed by Gilde and Hasseröder in 2002 and Munich’s Spaten-Löwenbräu in 2003. All in all, their shopping spree cost the Belgians EUR 3 billion (USD 3.2 billion). And what did they get in return? An assortment of mainly regional brewing companies, except for the export brand Beck’s. Combined these breweries then represented a total of 15 million hl in beer sales and an accumulated German market share of 11 percent. This made Interbrew a serious contender for the market leader, the Radeberger Group, whose share was then 15 percent.

At the time Interbrew’s tactics made perfect sense. There is no German beer market to speak of. When it comes to beer sales, Germany is an assortment of regional markets, each with its dominant traditional styles and entrenched beer brands. To this day, being a national beer brand only means that you are in national distribution. No single brand has yet succeeded at being the uncontested supremo in all of Germany’s seven market regions into which market research firm Nielsen has divided the country of 83 million people. Still, the three most populous regions are the north, the west and the southeast (Bavaria), where over 50 percent of all Germans live and hence most beer is consumed.

Interbrew – the boldest

In this respect Interbrew did really well when they took on Germany one region at a time and managed to persuade the owners of Beck’s, Gilde, and Spaten-Löwenbräu to sell. Lacking a major foothold in the west, they would have knocked on the doors of Warsteiner, Krombacher, Bitburger etc too, which rule that region. But those privately-owned brewers were either in no hurry to exit or their asking price was too high even for the generous Belgians.

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