Jan Niewodniczanski looks far back into his own past to describe a current problem. "When I did my Abitur here in Bitburg 39 years ago, a crate of beer cost 20 marks," says the co-owner and technical director of the Bitburger brewery group. "And today? We're still around ten euros in some cases.” A roll, on the other hand, didn't even cost ten pfennigs back then, but today it's almost 50 cents.
This comparison is intended to show the great need in which the breweries in Germany find themselves. The message from Niewodniczanski, but also from a number of other brewery bosses in this country, is clear: beer is too cheap in Germany.
Especially since the Corona crisis and the Ukraine war have caused manufacturers' costs to explode, they have become more restless. "The costs are historically high," reports the German Brewers' Association (DBB) and, with reference to a member survey from the end of 2022, lists how much energy, raw materials and packaging materials have become more expensive: hops, for example, by 35 percent, malt by 90 percent percent, glass by 70 percent, crown caps by 120 percent, beer crates by 40 percent, kegs by 90 percent, labels by 30 percent, truck loads by 20 percent.
Added to this would be the high energy costs, which, despite the recent downward trend, are still many times higher than the level we have known for a long time. And that's not all. "We have to expect that the costs will remain at a high level in 2023 and in some cases will continue to rise," predicts DBB CEO Holger Eichele and announces: "The generally high cost pressure will also affect prices in 2023."
In fact, numerous breweries have recently increased the sales prices to retailers and restaurants, sometimes even several times within a few months. Or they have at least announced appropriate steps.
Among those present were the industry giants Krombacher, Radeberger, Veltins and Bitburger, whose price signals are usually followed by the smaller beer producers. "This industry now needs regular price increases in order to survive," says Bitburger Managing Director Niewodniczanski.
However, the ridge that breweries have to walk is a fine one. Because experience shows: After a price increase, the sales volumes of the respective brand usually decrease. The fact that almost every brewery is currently increasing the prices for crates and kegs could dampen the expected effect for the individual manufacturers. After all, there are hardly any alternatives for consumers.
In addition, there is the fundamental concern in the industry that persistently high inflation will lead to a noticeable reluctance to buy. After all, the normal price for a crate of branded pilsner should be 15 to 16 euros in the future.
"Offers and promotions in retail will continue to gain relevance this year," believes Marcus Strobl, the beer market expert at market researcher Nielsen IQ. But the price level is likely to shift there too. "But loss-leader offers for ten euros or less are becoming increasingly rare, otherwise the dealers will add more to every box," he says.
The fact that supermarkets and discounters were happy to rely on such campaigns during the crisis is due to the function of beer for retail. "This is an important source of footfall," explains Strobl, who therefore expects correspondingly tough price negotiations between trade and industry in the coming months.
Especially since the dealers are already dissatisfied with the sales figures. Because while the beer market grew again overall in 2022, the retail trade lost significant volume and market share.
According to the Federal Statistical Office, breweries in Germany sold almost 88 million hectoliters in 2022. That is 2.7 percent more than a year earlier. "The beer market is on the way to recovery," comments Volker Kuhl, Managing Director Marketing and Sales at Veltins.
However, he is still a long way from normality. Because the plus is due to the return of the previously long-closed gastronomy and to celebrations taking place again. When it comes to bottled beer sales, on the other hand, there was a drop of six percent for crates and even almost nine percent for six-packs.
2023 will now be a crucial year for the industry. Because the minus compared to the pre-Corona year 2019 is at least five percent. "This time, however, there is no relief from the gastronomy," says Strobl. “This could mean renewed volume losses. Because in view of the high inflation, consumers are paying more attention to the price.” But it is rising. The Brauer-Bund expects a "painful consolidation phase", as the head of the association Eichele puts it. It can hit medium-sized companies particularly hard.
And indeed, the well-known brands are currently standing out from the general market development. Krombacher, for example, has achieved a sales increase of a good four percent for Pils, Veltins reports more than eight percent more output and the Bitburger brewing group, which in addition to the regular Bitburger brand also includes König Pilsener, Köstritzer and Benediktiner, reports eleven percent growth in volume. Managing Director Niewodniczanski refers to the particularly high proportion of draft beer of around 30 percent in the Bitburger portfolio. "That hit us disproportionately during the Corona period - but now we are also growing disproportionately."
However, the question is for how long. "Beer is not a growth market in Germany," says Michael Huber, General Manager at Veltins. Sales will fall by one to three percent annually due to demographic trends, but also due to changing consumer habits and a constant stream of new beverage offerings. "The market is losing young consumers in particular," says Huber. "The regular users are getting older."
For this reason, breweries have long been entering new business areas away from beer, above all in the area of non-alcoholic beverages. Veltins, for example, relies on Fassbrause and next in this segment is trying the peach iced tea variety. After all, iced tea has experienced a strong upswing in the past two years due to new market participants such as 4Bro or various rappers who have inspired young audiences for this category.
Krombacher, in turn, will be selling Spezi from the spring and is entering into a cooperation with the Augsburg brewery Riegele, which as the licensor holds the trademark rights to Spezi. At the same time, Schweppes, Dr. Pepper and Orangina on the Westphalia brand portfolio.
And Bitburger is also currently directing development capacities into this area. "We are planning innovations," says managing director Niewodniczanski without wanting to give any details. "We are not a lemonade factory, but we also look at other areas." There could also be sales cooperations. Germany's leading mineral water brand Gerolsteiner already belongs to Bitburger Holding.
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