Shortly after AB InBev decided to put two of its four remaining breweries in Germany up for sale (inside.beer, 21.6.2017) and the decision to sell their administrative building, called the Beck’s Haus in Bremen, the German arm of the world’s largest brewery undertook the next step, which caused a lot of confusion in the market: AB InBev Germany announced a price increase by about 6% for their bottled beer effective November 1.
Tino Saalbach and Helgi Tómasson Jonsson, since the beginning of this year new sales directors off- and on-trade at AB InBev Germany, said in a statement directed to their “dear business partners” that they will increase the price for one crate of beer (10 liters) for the brands Beck’s, Hasseröder, Diebels, Haake-Beck, Löwenbräu and Spaten by €0.59 up to €0.69 depending on the brand.
The move comes to a surprise because Krombacher, market leader of branded beer in Germany, just canceled an announced beer price rise three weeks ago due to unforeseen risks in the market (inside.beer, 20.7.2017).
Cost cutting with pruned marketing expenditures has forced AB InBev in the last years to sell most of the own beers in promotion. Therefore market observers believe that a rigid implementation of the price increase will lead to significant volume losses in the retail trade. In order to reinforce the move, the company already told their customers as a precaution in their statement: “We would like to draw your attention to the fact that any compensation and suspension of effectiveness beyond the date of the increase are excluded.”
Since the brands for the two breweries for sale (Hasseröder and Diebels) are also on the list, proceeds from the company sale might be much lower than the anticipated €200 million.
The reason for the incomprehensible action might be explained by the severe cost savings measures imposed by AB InBev’s head office in Leuven/Belgium. It looks like a price increase is the only way to pour in the short term additional revenue into AB InBev’s coffers. The negative long term effect on the German market obviously does not care AB InBev CEO Carlos Brito, who seems to be determined to bring the German market in line with other beer markets around the world, something which seems to be impossible and made other international players to withdraw from Germany, one of the most competitive beer markets earlier.