Germany: Beer price increase cancelled

German Breweries have passed another opportunity to increase the beer price, which is already one of the cheapest in Europe, in order to fight rising production and distribution costs.  Krombacher, market leader of branded beer in Germany withdrew on Tuesday an already announced price rise due to unforeseen risks in the market. "We have weighed risks and opportunities and decided to postpone the price increase," told a company spokesman German press agency dpa. However, the company did not name a date, when to make up for it and market observers believe that the beer price rise is completely cancelled.

At the end of May Krombacher said it would raise the price of its bottled beer by €6.60 per hectoliter by October 1, 2017. Many other German breweries were expected to follow the example but were reluctant with announcements. In the end, Krombacher feared to be the only major German brewer to increase prices and to lose market share in one of the most competitive beer markets in the world.

In a country, which has created discount stores like Aldi and Lidl, food retailers have been historically very strong. None of the major beer brands could achieve such a strong position in the past to dominate the market and to act as a flagship for others. On the contrary, so called TV beers, which are national beer brands advertised on television have fallen in price below regional and mostly much smaller beer brands and are mainly sold in sales promotions at discount prices. Augustiner from Munich, which is one of the most successful beer brands in Germany, had in the past successfully avoided to sell its beers through major retail stores and could boast of never having paid lsting fees.

Beer has proven to be one of the most successful items sold in retail promotions and German consumers can select every week among several national beer brands sold at discount prices. Therefore brand loyalty is only limited and consumers switch between a handful of national beer brands with a similar perception of value. This makes it hard for a single brewery to raise unilaterally the price for beer in bottles and cans.

Even a beer brand like Krombacher, which has evolved in the last decades as one of the few winners in the German beer market due to a successful lead by its managing partner Bernhard Schadeberg, does not seem to be strong enough to stand the two-sided fight with food retailers on the one side and the rest of the pack on the other side.

 

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