Posted November 2009
Waiting for Godot
Belgian beer market |
ESTRAGON: Do you know the story of Belgium’s beer cafés?
VLADIMIR: Stop it! ESTRAGON: They go quietly. More than 1,500
last year. VLADIMIR: STOP IT! ESTRAGON: Some stay and fight. But
many retreat into the shadows. VLADIMIR: I remain in the dark.
ESTRAGON: This is how it is. In western Europe, beer consumption
is going down. Yet, in Germany they worry themselves sick over
Feinstaub, in Britain they angst over Europe, and in Belgium,
where the writing is on the wall for most village cafés, punters
just shrug their shoulders and drink their beer elsewhere.
VLADIMIR: Nothing can be done. ESTRAGON: Well, there is always
the black economy and tax dodging. VLADIMIR: What do brewers do?
ESTRAGON: They cry into their beer. And wait for Godot, err the
taxman, to clamp down on errant publicans. Or, if they are
clever, they rev up beer exports to the U.S.
“Belgian Beer Paradise”. Great
marketing ploy – if ever there was one. It conjures up images of
brewing as one of the fine arts, of cavalier brewers who
overcome mundane issues of competition to become the custodians
of a noble tradition which lies at the heart of Belgium’s
culture. Belgian Beer Paradise – just let the words drip off
your lips - alludes to a multitude of beers and beer styles,
whether light or strong, blond, amber-coloured, reddish or
brown, fruity, bitter or acid, yet served with love and pride in
beautifully shaped glasses.
“Look no further”, it seemed
to say, “Belgian beer is nectar from heaven, the drink of
paradise par excellence: for everyone and for all occasions. Why
not have one now?”
This is what Belgian brewers
wanted the whole world to believe. But what on earth did they
really think, all those years ago, when they were sitting round
the table at the Brewers’ Mansion that overlooks Brussels’ Grand
Place? Did they slap the adman on the back, saying, “well done”?
Or did they chuckle to themselves, wondering: “what will the
media make of this?”
On the face of it, a Belgian
Beer Paradise sounds like a jolly good idea. It suggests an
idyll where everything is nice and clean and everybody gets on
so very well: Godot, Adam, Eve and even the snake. Who wouldn’t
want a “des res” there?
Trouble is, “paradise” to most
consumers is just a metaphor. No one will take it literally. In
effect, the notion of a Belgian Beer Paradise has been too
ambiguous for its own good all along. Because, whenever there is
talk about a paradise, we tend to turn around to see if there
aren’t any clouds approaching. Sorry to have to rub it in, but
you cannot have a Paradise without the Fall. They come in a
Of course, some readers will
now jump to the conclusion that a Belgian Beer Paradise BF (ie
Before the Fall) should have been frozen in time circa 1982,
when ten Belgian family brewers got together and set up the
Flemish Gourmet Beer Marketing Board in the U.S.
This marketing initiative,
which laid the foundations for the Belgian Beer Paradise, was
incredibly farsighted. Show us any other brewers who at the time
would have dared launch a collective export campaign while
domestic consumption was still on the increase? True, individual
brewing companies like Heineken, Beck’s and Carlsberg were
already out on the prowl in far-flung places. But who had ever
heard of a concerted effort by small brewers before?
The Belgians’ exertions not
only raised the profile – and sales - of their beers across the
Atlantic, it also convinced American homebrewers that there was
a Life after Lite – and that they should break into their piggy
banks and set up craft breweries specialising in Belgian-type
beers. And before the cobwebs of oblivion grow too thick – let’s
remind ourselves that it was the Belgians’ show-stopping number
a quarter of a century ago which persuaded the Rocky Mountains
brewer Coors to introduce Blue Moon into the market – a brand
which is climbing from success to success only today.
Unfortunately, the foray into
the U.S. market by these “strange beers from Belgium”, as they
were called, was cut short five years later when a slump of the
U.S. dollar priced them out of the market. While Duvel and
Chimay decided to persevere, the rest of them beat a retreat,
but with a time lag of several years returned – this time with
To cut a long story short: the
Belgian Beer Paradise disappeared in the mists of history a long
time ago, which, in our era of short-termism, is the same as
saying about two decades ago. Nevertheless, it has not stopped
Belgian brewers from recreating it in the minds of their
consumers, especially when they had their Fall from Grace –
which in less prosaic terms refers to the massive drop in
Belgium’s domestic beer consumption which started in the 1990s.
ESTRAGON: Don't let's do
anything. It's safer. VLADIMIR: Let's wait and see what he says.
ESTRAGON: Who? VLADIMIR: Godot. ESTRAGON: Good idea.
Obviously, Belgian brewers did
not heed Vladimir’s advice. All they had to do was to look at
the numbers. And they made depressing reading. According to data
issued by the Belgian Brewers’ Association, beer consumption has
dropped from 12 million hl in 1990 to 8.7 million hl in 2008.
For a country of only 10.6 million people, seeing 3.3 million hl
disappear was a serious blow to brewers especially as this
translates into 27 percent of their erstwhile volume.
As in other western European
markets, the decline in consumption has been gradual, although
in Belgium, it was more severe in the 1990s compared to the
years 1998 to 2008, when it dropped 12 percent.
With average consumption
slightly in excess of 80 litres, Belgians drink far less than
their neighbours. Which is remarkable, given that Belgium
traditionally used to be a beer country. However, if you
acknowledge that Belgians in the course of a year knock back
quite a few bottles of their strong high-fermented beers, they
do not compare unfavourably with others.
In general, Belgium’s beer
market figures need to be treated with great suspicion as their
hold over reality is fairly tenuous. Take a look at beer
imports. They stood at 880,000 hl in 2008 (2000: 801,200 hl),
with more beer coming into Belgium from Mexico (149,784 hl) than
from Denmark (111,507 hl).
¡Hola! Does this mean that
Corona Extra is the Belgians’ favourite import beer? Far from
it, Carlsberg is still the leading import and has been for a
long time, although its sales are going down in sync with the
market. Why imports from Mexico rank before Denmark’s can easily
be explained: Mexico’s Grupo Modelo, the brewer of Corona Extra,
uses Belgium as its port of call for Europe.
When it comes to Belgium’s beer
exports, market observers will issue another warning. Without
some insider’s knowledge figures will not add up. In 2008, beer
exports stood at 55 percent of total production, making Belgium
one of the top European beer exporters – in a league with the
Netherlands (Heineken) and Ireland (Guinness).
Now, matters become more
complicated. For example, Belgium’s beer exports to Germany have
risen to 1.5 million hl in 2008 from 518,700 hl in 2000. Are
Germans falling over themselves to get a bottle of a Belgian
beer speciality as these figures might suggest? Not really. Most
of the beer volume exported to Germany from Belgium is produced
by one brewery – Martens – which specialises in private label
beers for German retailers.
Another example. Let’s look at beer
exports to France. They were 3.3 million hl in 2007 and 2.9
million in 2008. Non-insiders will perhaps scratch their heads
and wonder what has happened here. Nothing spectacular.
Belgium’s major brewer AB-InBev has probably just re-shuffled
production among its western European breweries to increase
Ah, those were the days when working
out a country’s beer consumption was a matter of simple algebra.
You took production volumes, added imports, subtracted exports
and the result stood up to reason – and reality.
Now, it takes in-depth studies and
reports like this one.
Still, readers need not
despair. If there is one figure that is beyond dispute and can
be taken at face value, it’s Belgium’s beer exports to the U.S.
They have risen to 967,000 hl in 2008 from 62,500 hl in 2000.
That’s a remarkable feat – and the result of a collective effort
by the country’s 100-plus breweries.
ESTRAGON: He should be here.VLADIMIR: He
didn't say for sure he'd come.
ESTRAGON: And if he doesn't
come? VLADIMIR: We'll come back tomorrow.
ESTRAGON: And then the day after tomorrow.
What’s become of the Belgian
Beer Paradise AF (ie After the Fall)? Has it disappeared
altogether with Interbrew’s quasi-meteoric rise to world
leadership? Are Belgium’s brewers now eating their bread “in the
sweat of their face” like all of us lesser mortals who know the
Scriptures? Or are they faring better than their colleagues in
Britain and Germany who are stretching their necks to survive as
they see margins and volumes vanish?
The good news first: market
leader AB-InBev has not increased its firm grasp over Belgian
beer consumption. Its market share is 57 percent, followed by
Alken Maes (Heineken) with 11 percent, Haacht (Primus) with 4
percent, Palm (Palm) with 4 percent and Duvel Moortgat (Duvel)
with 3 percent. All the other brewers share 11 percent, while
private labels represent 10 percent.
Of Belgium’s top 10 beer
brands – Jupiler, Stella Artois, Maes, Leffe, Primus,
Hoegaarden, Cristal, Palm, Duvel and Carlsberg – InBev owns
four. Perhaps contrary to our readers’ expectations, AB-InBev’s
leading brand in Belgium is a pils called Jupiler. It dominates
the market by a wide margin and outsells the number two brand –
Stella Artois – by 6:1.
Fortunately, AB-InBev has
always stuck to the rule of increasing prices as the market
declined to maintain profitability. Otherwise it might have been
tempted to use its scale and pricing power to eradicate some of
its competition. As said, Belgium’s brewers have been fortunate
that AB-InBev has played by the rules in this respect, although
they have regularly protested loudly when AB-InBev raised prices
– only to follow AB-InBev’s lead eventually.
The dual strategy of raising
prices at home and driving up exports has so far prevented a
large-scale consolidation of the Belgian beer market. But with
the economic crisis catching hold and the market environment
changing, casualty numbers may rise – by which I do not just
mean bankruptcies. We might see a few fire sales too in the
Reorganisations have been
announced as InBev Belgium changes to a Benelux organisation
(most likely reducing the head count further), as Heineken steps
up its takeover of Alken Maes (which it got when Heineken
acquired Scottish & Newcastle early in 2008 together with
Carlsberg) and struggles with the relaunch of its pils brand
Maes, as brewer Palm seeks more contract work and the others
hope and pray that distribution channels remain open so that
they can still reach their customers.
In this fairly grim scenario
one brewer stands out: it’s Duvel Moortgat, a listed but
privately-controlled independent company, which has changed from
a single-brand brewer, famous for its 8.5 percent ABV strong ale
Duvel, to a multi-brand company with an abbey beer (Maredsous),
a Belgian-type wheat beer (Vedett Extra White) and fruit beers
(Liefmans) rounding out its portfolio.
Duvel is a 500,000 hl brewer
and has managed to up its domestic sales even as the overall
market has shrunk, helped perhaps by the fact that its Duvel
brand, sold in bottles, is available in almost every Belgian
café. The straightforward explanation for Duvel’s popularity
could be that Duvel does not pose any competition for the
limited number of beer pumps per café.
If only life were as simple as
While AB-InBev, Alken-Maes,
Haacht, Duvel and Palm have carefully sought to keep the notion
of the Belgian Beer Paradise alive by offering a huge variety of
beers and styles, the picture takes on a somewhat different hue
when you look more closely at how certain beer styles have fared
over the years. Here consumers have to take their share of blame
if the Belgian Beer Paradise, the professedly peaceful
live-and-let-live coexistence of beer styles, is disappearing
slowly before our eyes. There can be no doubt about it: pilsner
beers have increased their share to around 70 percent of the
market. And who is responsible for that? The consumers.
However, at the same time,
high-alcohol blond beers (Duvel), abbey beers (Affligem, Leffe,
Grimbergen, Maredsous, Tongerlo) and Trappist beers (Orval,
Chimay, Westvleteren, Rochefort, Westmalle and Achel) have also
gained in prominence, ‘cannibalising’ the sweet brown and amber
coloured beers, such as Palm.
The white/wheat beers
(Hoegaarden) are still popular, say market researchers at
Canadean, but they are dependent upon new line extensions, like
rosé and lemon, to keep this segment vibrant. The Gueuze, Kriek
and fruit beers, for which Belgium is rightfully famous, are
brewed in many flavours and in numerous small breweries. Over
the past couple of years, many new fruit flavours have been
added. Unfortunately, flavour proliferation has not led to an
increase in consumption but to market saturation. Sadly but
true, these beers seem to have passed their peak and volumes
have started to fall.
ESTRAGON: I'm asking you if
we're tied. VLADIMIR: Tied? ESTRAGON:
Ti-ed. VLADIMIR: How do you
mean tied? ESTRAGON: Down. VLADIMIR: But to whom? By whom?
ESTRAGON: To your man. VLADIMIR: To Godot?
If there is a trend that has
put the Belgian Beer Paradise into serious jeopardy it’s the
decline in out-of-home consumption. As late as last decade,
Belgians used to drink their beer mostly in pubs. It was part of
their life-style. Even today, women of a certain age would not
think twice about having a blonde for aperitif – that is before
noon – when they go out “doing lunch”.
Beer with lunch used to be the
norm. And having a beer or two, or three at a café before going
home for dinner was what men did. After all, speciality beers
come in 0.33 litre bottles and pils is drunk out of 0.25 litre
glasses. Having “one for the road” would have been considered a
negligible amount of alcohol by most Belgians.
In Belgium, beer is still
fairly cheap. Tourists probably will not agree, since they drink
their beer in places like Bruges’ Grote Markt, where they charge
you anything from EUR 1.60 to EUR 3.50 for a glass of pils (0.25
litres). In a village pub, expect to pay EUR 1.40 for a Jupiler
(0.25 litres), EUR 1.90 for a bottle of a fruit beer, EUR 2.30
for a Duvel and EUR 2.50 for a Trappist beer (November 2009).
Like the community-type pubs
in England, Belgian village cafés are Mom-and-Dad-affairs. The
woman would run the place during the day while her man tends to
his day-job. In the evenings he would take over. They wouldn’t
sell much food, if any, but, with a loyal clientele, they would
get through 100 litres of beer in four afternoon hours: that
includes the lunchtime crowd and the people returning from work.
How have these types of cafés survived? Well, by not paying
Market research company
Canadean has called Belgium “over-crowded with cafés”. I mean:
what do you call “over-crowded”? 100 inhabitants per café, as
the ratio used to be, or 200 inhabitants per café, which is
today’s figure? Brewers say there are still some 45,000 outlets
selling beer of which 15,000 are classified as cafés.
Although the on-trade’s share
of consumption has been in free fall, it continues to be the
dominant channel, selling far more than the 50 percent of all
beer which is officially attributed to it. How did brewers
arrive at this conclusion? Easy. It’s called cross-channel
sales. Many café-owners stock up on bottled beers in
supermarkets, where they often get a better deal than from their
distributors or brewers.
What has sustained the Belgian
Beer Paradise for many years was the brewers’ tight grip on tied
cafés and the Belgian taxman turning a blind eye to his
countrymen’s tax-dodging. Many suspect that a succession of
Belgian governments preferred not to know what goes on in the
on-trade. Estimates vary as to how much activity in Belgium’s
on-trade ought to be termed “black economy”, but it’s said to be
between 20 percent and 40 percent of the on-trade’s turnover.
On a positive note, the
authority’s leniency makes sure the sector absorbs a lot of
people who would be unemployed otherwise. As they say in
Belgium: “If you cannot find a job you open a café.” The side
effect is that the average life cycle of a café is two years.
Despite this, cafés operating,
ahem, “informally” are typically more profitable than rivals in
the formal economy, which is another benefit of not paying tax.
There is also little incentive for them to grow because bigger
outlets tend to attract the attention of the taxman. But they
are hard to compete with and thus prevent consolidation in the
All this may help to explain
why Belgium’s on-trade sector is still so fragmented. Yet,
things may be changing, though not necessarily for the better.
ESTRAGON: Oh yes, let's go
far away from here. VLADIMIR: We can't. ESTRAGON: Why not?
VLADIMIR: We have to come back tomorrow.
ESTRAGON: What for?
VLADIMIR: To wait for Godot.
In 2008, beer consumption
declined by a record 4 percent. For 2009, Belgian brewers expect
beer consumption to drop another 4.4 percent in the on-trade and
to rise 1.3 percent in the off-trade (supermarkets). That’s
tough, especially since brewers had hoped that a wage increase
of 4.5 percent in January 2009 would prevent another massive
decline in consumption.
It was not to be. Therefore,
market observers expect more violations against good practices
by the country’s big brewers than in the past two years when
they began to offer huge discounts to supermarkets and cafés in
an effort to push pils volumes. Needless to say that
distributors and smaller brewers were not amused. Distributors
especially have begun to complain against these practices since
the big brewers are already poaching in their domain by doing
direct distribution. To most distributors, AB-InBev is both a
client and a competitor, which is awkward at the best of times.
But distributors now quite willingly admit that without carrying
a full range of beverage products they would not be able to
survive if they depended on AB-InBev’s products alone.
Most brewers openly state that
the pils market in Belgium has become a killer market. Of the
EUR 1.66 charged for a 0.25 litre glass of pils the brewer gets
EUR 0.29 (of which he has to pay 5 cents in excise), the
distributor EUR 0.14, the publican EUR 0.88 and the government
EUR 0.35 (VAT).
As if this were not enough,
small brewers worry that price wars fought in the pils segment
could spill over into the abbey beer segment. They fear that
AB-InBev and Heineken might try to compensate for their losses
in the pils segment by promoting their abbey beers.
Shrinking profits, fiercer
competition, and price wars: could it be that Belgian brewers
are finally experiencing the full impact of their fall from
Looks like it. And the
country’s publicans are in for a hard landing too.
As of January 2012, café
owners will feel the full brunt of the ban on smoking. To date,
small cafés have been exempted from becoming a smoke-free
environment if they sell little or no food. Although this law
had been shoddily crafted and awaited revision, everybody
expected the status-quo to be maintained albeit in sounder legal
fashion. But no. In November 2009, the loophole for small café
owners was closed by a cross-party initiative in the Belgian
Parliament, which resulted in a total ban.
Moreover, the much-anticipated
VAT cut (from 21 percent to 12 percent) for the on-trade, which
should have boosted consumer spending, was limited to
Whichever way you look at it,
there is no denying that Belgium’s publicans have been slapped
in the face by their politicians, which might be just another
way of telling them off for tax-dodging.
Expect the shake-out of the
on-trade sector to gather momentum.
For a running commentary on
future events, I recommend Beckett’s play “Waiting for Godot”.
Most quotes in this report are his. Some dialogues are mine. For
decades, theatre-goers have wondered who Beckett’s protagonists
Estragon and Vladimir represent. I say: they could be anybody
and everybody. Surely, Belgian brewers with their acute sense of
the absurd will agree.
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