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Posted June 2011

 

Alive and kicking

German beer market | Some brewers are feeling morose about their future. The growing interest in special edition beers however suggests they should not.

Many moons ago, it must have been some time in the mid-1990s, I wrote an article for an American magazine (long since discontinued) with the provocative title “German beer market RIP”. If memory serves me right I argued that with consumption declining by about 2 percent each year, brewers in Germany were in for a long and slow demise since they failed to arouse interest in the beer category by brewing thousands of very fine yet very similar tasting lager beers. I concluded that theirs may be an honourable undertaking - staying true to the tradition of the Reinheitsgebot and all that. But I worried that once flavour was replaced by price as the single most important factor of product differentiation, the writing would be on the wall.

Recalling my juvenile cockiness, I wince at this even today. What made matters worse was that the publisher “Buffalo” Bill Owens, who had a fine eye for graphic embellishment, decided to print my piece against a drawing of a graveyard with toppled over tombstones. Ah well, subtlety was not one of our strong points then. Fortunately, the magazine was not read in Germany and I was saved from having to run the gauntlet of questions and doubts about my beer loyalties in my own country.

Since the article was published, beer consumption in Germany has dropped even further. In actual fact it has declined to 107 litres per capita in 2010 from 147 litres in 1986. Clearly, 107 litres per capita still make Germany a country of beer guzzlers. For how much longer, though? Should Germany go the way of neighbouring Belgium, where beer consumption stands at only 80 litres after two decades of steady decline, brewers in Germany will end up crying into their beer. Inconsolably so. And who would hold it against them? Year after year they have had to stomach the loss of almost 2 million hl of volume (alternatively the increase of painful overcapacities) and EUR 200 million in sales.

I admit I have not given the beer category in Germany much thought in recent years. Like most consumers here I merely sigh with resignation when I see that yet another beer brand is abused by a retailer as a door opener. Last year the so-called national brands sold over 60 percent of their volume on promotion – at a discount of up to 30 percent on the recommended retail price. If you look at things in the harsh light of day, the premium-price category has all but disappeared nationally now that brands with an erstwhile premium tag are being offered for about EUR 10 per crate (10 litres) kind of permanently. I call that pre-meditated murder. And I don’t care who is more of a culprit: the retailers or their accomplices, the brewers.

At Rüdiger Ruoss’ Davos conference in February this year, the French beverage economist Germain Hansmaennel called it sheer madness that Germany’s big brewers were slashing prices on their beers while keeping up high media spending. “If you have any business sense”, he said, “you do one or the other but never both.” Heaven knows what possesses them, but brewers’ advertising budget still adds up to over EUR 400 million annually – making them the biggest spender in the alcohol category (EUR 550 million in 2008) according to figures released by Germany’s alcohol watchdogs.

The rest of the article is reserved for subscribers to Brauwelt International.  Read on

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