Home' Brewers Guardian Digital Magazine : September 2013 Contents S
o far, 2013 has not been a lucky year for German
brewers. A cold winter followed by a wet spring saw
H1 sales – 2.4 per cent lower at 48.2 million hecto-
litres – lurch downwards at the sharpest rate for two
decades. A long hot summer lifted some of the gloom, but
Oktoberfest 2013 finds Biernation Deutschland with problems
of dwindling demand and overcapacity that were first noted
when a big wall still divided Berlin.
Beer sales have slumped by ten per cent in the last decade,
while consumption per head is down almost one-third since
the ‘70s. Chris Cools, head of AB InBev Deutschland, recently
admitted that a further steep fall of up to 20 million hectolitres
is likely over the next 10-15 years.
As ever, the German industry’s malaise stems from its failure
to restructure in face of long-term overcapacity. In 2012, output
of 98 mhl left a capacity overhang of some 50 mhl. Analysts
and leading players all agree that the brewing landscape needs
to change dramatically, with fewer, bigger brewers able to force
through higher prices and shed unprofitable output.
Instead, the industry drifts from one Oktoberfest to another
with no sign of the domestic shake-up or outside interven-
tion that might reverse its fortunes. “Consolidation in the beer
industry will gain momentum – but at a slower pace than
previously expected,” argues Mario Mirkovic, co-author of a recent
study of consolidation trends in the food and drink sector by lead-
ing business consultancy RoelfsPartner. Even this modest predic-
tion may set the bar too high - the 1,300-plus breweries operat-
ing last year in Germany is an increase on mid-’90s numbers.
And leading producers still prioritise market share over profit-
ability. Last October, Bitburger - Germany’s third biggest brewer
abandoned price increases across its entire range in face of
retailer resistance. Nuremberg market analyst GfK estimates 70
per cent of beer output is permanently sold at discounted prices,
a move that devalues beer as a product and encourages a “race
to the bottom”. Prices for pilsner, still the dominant segment
with a fifty-five per cent market share, have been unchanged
for years – Bitburger last raised its prices in 2008. High quality
output and strict purity laws undermine brand loyalty. Millions
of drinkers simply opt for the latest special offers.
The success of budget or ‘supermarket beers’ from Oettinger
also holds down prices across the industry. Oettinger’s main
brand is the German market leader with six million hectolitres
sold in 2012. Only Oetker-holding Radeberger and AB InBev
Deutschland outsell the Bavarian family firm. Brewers are also
a casualty of Germany’s fierce supermarket wars. Last year,
leading retail chains Kaufland and Globus abruptly delisted
Krombacher brands from their stores following supply disputes.
Instead, the industry is looking to new products to boost
profitability. In the ‘90s and beyond, brewers pinned their
hopes on countless ‘biermix’ brands (essentially, beer with
added carbonates or syrups) to capture young consumers. As
that trend slowly unwinds, craft beers are the latest category
under the spotlight as German brewers look across the Atlantic
for inspiration. Last autumn, Verband der Privatbrauereien
(Association of Private Breweries) organised a ‘beer experience
tour’ to microbreweries in New York, Boston, Philadelphia and
Portland. Three enterprising Americans have already taken the
opposite route, launching their craft beer-specialist Vagabund
Brauerei in Berlin last year.
At up to 20 euros for a 1.5 litre bottle, craft beers offer one
route away from the ruinous price competition across main-
stream output. Such innovative and unconventional brews are
also a good match for Germany’s young urban consumers,
especially as the economy returns to growth.
Leading brewers are already active in this segment.
Bitburger unit Craftwerk Brewing launched its first three
brands (Tangerine Dream, Hop Head IPA 7 and Holy Cowl)
this summer, while a dozen craft beers from BraufactuM,
owned by market leader Radeberger, are available nationwide.
The sparkling beer Infinium, a joint venture of Bavarian brewer
Weihenstephan and Samuel Adams, was another pioneering
craft brand. In time, optimists hope to time to repeat the suc-
cess of US craft output – which already accounts for over ten
per cent of a $100 billion market.
Promises of better outcomes
Fassbrause, a ‘keg soda’ or apple beer made from fruit,
spices and malt extract, is another promising new seg-
ment. Privatbrauerei Gaffel in Cologne added a non-alcoholic
Fassbrause to its traditional Koelsch range in spring 2010.
Within six months the new product accounted for 15 per cent
of Gaffel’s output and remains the dominant brand today.
Biermix specialist Veltins soon entered the fray with a low
calorie fassbrause, achieving more than 60,000 hectolitres
the structural difficulties that have bedevilled Germany’s brewers
for years – an inability to consolidate combined with widespread
discount pricing – continue to exact a toll on its fortunes. there are
innovative green shoots, however, with the emergence of fassbrause
and craft beers. Simon Jones reports
an industry in difficulty
Veltins V+ range: remains Germany’s number-one biermix despite a drop in sales
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