AB InBev has initiated the process of selling the two German non-core brands Hasseröder and Diebels including the respective breweries. The company has sent out first information packages to prospective bidders and has asked for first bids before the summer break. Both brands had combined sales of about 140 million euros and sold nearly 2.5 million hectoliters in 2016. Anyhow, both brands also became a symbol of AB InBev’s incapability to manage local brands.
When the Belgian Interbrew Group, the self-acclaimed World's Local Brewer and predecessor of AB InBev bought Diebels in 2001, it was a strong national brand with a production of 1.52 million hectoliters and clear leader of the speciality Altbier beer segment. Last year there were only 330,000 hectoliters left, the rest of the production capacity had to be filled with contract brewing for other breweries and brands.
The situation with Hasseröder, was different but similar catastrophic for the brewery. When Interbrew bought the brewery in 2002 it was the largest and fastest growing brand in East Germany. Interbrew’s annual report 2002 read: “The deal brought us Hasseröder, a strong core brand with potential to expand, and a good portfolio fit with our existing operations.” From initially 2.4 million hectoliters in 2002 only 2.1 million hectoliters were left last year. In 2016 the brand lost 7.4% of its sales. Hasseröder, once a leading brand in East Germany and supported by a strong national TV-commercial and sponsoring campaign has deteriorated over the years to a low-image beer close to the entry-level price segment with hardly any marketing support. A large proportion of all Hasseröder beer is sold in promotions rather than in regular sales in order to keep volumes up.
Experts believe, that AB InBev could still fetch around 200 million euros for the two breweries, which would be far less than the multiple of about 15 times EBITDA, what Asahi paid last year for SABMiller's well managed European brands Peroni, Grolsch and Pilsner Urquell. When Interbrew bought Gilde Group, the parent company of Hasseröder, it paid a historic EBITDA multiple (Interbrew’s annual report 2002) of 8.6. With a current estimated EBITDA of roughly 50 million euros, it seems questionable to achieve a similar result.
Possible buyers are said to be mainly German breweries, which are faced with declining domestic beer consumption and a fierce competition and might be interested to consolidate the market.
A likely buyer could be market leader Oetker Group, which recently sold its shipping department to Danish conglomerate AP Moeller-Maersk and received proceeds of €3.7 billion (inside.beer, 28.4.2017). People close to Oetker believe that the family owned company will use the majority of the money to strengthen its core business which consists of a €3 billion food division (frozen pizza, baking powder, cake mixes, yogurts, pudding, cake decoration and cornflakes), a €2 billion beer and non-alcoholic beverages division (with brands like Radeberger, Schöfferhofer, Clausthaler, Berliner Pilsener, Selters Mineral Water, Pepsi, Bionade, Ti) and a €0.7 billion sparkling wine, wine and spirits division (with brands like Henkell, Fürst von Metternich, Deinhard, Mionetto, Wodka Gorbatschow, Kuemmerling and Fürst Bismarck).
Another strong player in the German beer market already earlier denied interest in further acquisition of breweries. German business magazine Wirtschaftswoche cited last year Krombacher-owner and CEO Bernhard Schadeberg: "We will not buy a brewery. We will merely complement our current assortment.” He also predicted a withdrawal of international brewing groups from the German market because of the fragmented industry with nearly 1400 breweries, a complicated system of returnable and non-returnable bottles and cans with a deposit, branded beer glasses in pubs and restaurants and much more.
AB InBev’s sale of Hasseröder and Diebels is thought to be only an intermediate step in AB InBev’s withdrawal from the German market. AB InBev still owns a brewery in Munich which needs to be relocated in the coming years.
When Interbrew bought in 2003 the famous Spaten-Löwenbräu brewery in Munich, the former owners kept the land and leased it back to Interbrew, which meanwhile became AB InBev. The contract asked for a tenfold increased rent to yearly €6.5 million after 15 years, which will be in 2018. In 2010 AB InBev refused to buy a site in Langwied in the outskirts of Munich, which was offered by Spaten-Löwenbräu’s former owners. Instead Heineken’s 30% subsidiary Paulaner took the chance, bought the land and built a new brewery (inside.beer, 2.6.2017).
Observers fear, that AB InBev could close the brewery in Munich next year, sell the local Löwenbräu and Spaten brands to Paulaner or another Munich based brewery and keep only the core wheat beer brand Franziskaner, which could also be produced in AB InBev’s only remaining German brewery in Bremen and abroad.
Harm van Esterik, a Dutchman and AB InBev’s Country Director Germany, seems to clean up the German market for his employer. Two weeks after he took office in January, he replaced the two leading sales people Martin Holzhüter (ontrade) and Raphael Rauer (offtrade). In April he restructured the local marketing organization which made AB InBev’s German marketing manager Henner Höper redundand.
Taking this into account the sale of Hasseröder, Diebels and maybe also Spaten and Löwenbräu starts to make sense.