German brewers face “cut-throat competition” and “price war”

Germany is going to face “cut-throat competition” and a further “price war” in the years to come, according to Michael Huber, Chief Representative of Brauerei C.& A. Veltins. Despite an estimated slight plus of 0.5 percent last year, the overall trend in the German beer market is clearly negative. After the high temperatures, record sunshine rates and the Football Word Cup in 2018 one could have expected beer drinkers to consume at least 4 to 5 percent more beer than the year before, which already saw declining beer sales of 2.5 percent. However, most breweries were left disappointed with last year’s sales.

"It's true that weather-wise it could not have been better for us brewers: These were ideal conditions," says Niels Lorenz, General Manager and Member of Group Management Team at Dr. August Oetker KG, which owns Germany’s largest brewing group Radeberger. "After having boasted superlatives, our industry remained at the end of the year only with a very tender growth in the domestic and in the overall beer market. The enthusiastic announcements turn out to be only much ado about nothing," says Lorenz. "If you do not compare the volumes sold in 2018 with the very weak year before but with the sales in 2016, German brewers have even significantly lost sales."

Lorenz knows what he is talking about. His flagship brand Radeberger, which is Germany’s 10th biggest beer brand, lost over 200.000 hl or 11.1 percent of sales in 2018, according to the newest Inside Brand Chart published by our publishing house Inside Getränke Verlag last week. It was only a cold comfort, that Jever and Ur-Krostitzer, two more brands of Radeberger Group, which appear on rank 13 and 14 of the brand chart, gained 65.000 hl (+5.9%) and +95.000 hl (+9.0%) respectively.

Another sign of the desolate condition of the German beer industry is the fact that AB InBev is already trying for more than one and a half years to sell two of its breweries in Germany without any success. The international brewing group put up for sale the two German non-core brands Hasseröder and Diebels including the respective breweries in June 2017(inside.beer, 21.6.2017). In January 2018, the group had to admit that no international bidder was interested in buying the two breweries, which brew together more than 2 million hl of beer. In the course AB InBev announced the sale to an unknown German financial investor (inside.beer, 16.1.2018). Later the same year, AB InBev said that the investor was not able to meet several deadlines for a payment and declared the sale as failed (inside.beer, 30.08.2018). It comes to no surprise that Hasseröder, which still ranks on place 9 of the Inside Brand Chart 2018, lost last year 143.000 hl (-7.5%)

But there are other breweries, which show that is also possible to perform well in the “hardest beer market of the world”. "Yes, it was an exceptional year," says Michael Huber, chief representative of Veltins Brewery, which is already for years exceeding the market and managed to grow 4.8 percent last year. The privately owned brewery sold in 2018 for the first time in its history more than 3 million hectoliters of beer. But Huber also admits: “You must not assume that this is the basis for the future.”

Georg Schneider, President of the Bavarian Brewers Association knows the reasons for the problems in the German beer market and predicts a further decline in beer consumption in Germany. "Society has become a bit more sober," he told Augsburger Allgemeine, a local newspaper, last year.

"German population is getting older and older. And older people drink less beer than younger people," Schneider says. And he adds: "People have longer travel distances to get to their work. And who drives a car, drinks less beer." And last but not least, there is also a shift in population. "There are also more Muslims living in Germany who do not drink alcohol." In his view, the sum of all these factors explains the slump in beer consumption and the expected negative trend for the future.

 

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