Radeberger Group on the block?
In a recent interview with the national media, the chairman of the Dr Oetker Group, August Oetker, best-known for custard power and frozen pizzas, admitted that he would be prepared to sell his beer business if it repeatedly missed its profit target, thus contradicting his top beer man Ulrich Kallmeyer, who has always maintained the group’s allegiance to beer.
The privately-owned Dr Oetker Group with a turnover of more than EUR 7 billion annually, whose interests range from shipping (43.2%), food (25.8%), beer and beverages (18.8%), champagne, wine and spirits (7.2%) and others (5.0% – of turnover) is Germany’s number two brewing group behind InBev. Currently, its beer division by the name of Radeberger Group, which owns brands like Radeberger and Jever, enjoys a market share of 15 percent and a turnover of EUR 1.3 billion. However, since August Oetker declared the beer business one of his holding’s core businesses a few months ago, Kallmeyer was told to increase the beer division’s market share to 20 percent by 2010. In other words, if his beer business executives fail to achieve this target over the next four years, August Oetker might put his breweries up for sale. Although Dr Oetker Group never publishes any profits, it is widely believed that each division has to reap a 12 percent return on invested capital.
There is a long road ahead of Dr Oetker’s beer men. After the take-over of the ailing Brau & Brunnen Group in 2004 for EUR 450 million, the Radeberger Group has taken on dozens of struggling regional brands and now has to do a brutal hatchet job to reduce the 100 odd brand portfolio to a more manageable size. While Kallmeyer insists that no brands would be axed, industry observers believe that the final portfolio will consist of only about 45 local, regional and national brands. Not an easy job. This year the Radeberger Group is to invest EUR 200 million into new products and established brands.
If the Radeberger Group intends to reach its target of 20 percent market share, it will have to grow through acquisitions as Germany’s beer market has been on a slow but steady decline for the past decade. Munich brewers have taken note of August Oetker’s announcement a short while ago that he was interested in entering the Munich beer market. Now this is a real interesting statement to make … because in fact there is nothing left for him to buy. The Munich beer market has already been carved up by both InBev (Löwenbräu, Spaten) and Schörg-huber/Heineken (Paulaner). Of the remaining two Munich breweries, Augustiner is owned by a foundation which has no intention of selling a very profitable beer business and the other, Hofbräu, is owned by the Bavarian state. In case Oetker’s knowledge of Munich geography is a bit wobbly and he actually meant the Erdinger brewery, which is located outside Munich, he still should have borne in mind that Erdinger is in cooperation with Germany’s Bitburger Group and, from what we hear, the cooperation is not about to break up soon. Which beggars the question: is there a Munich fire sale in the offing?
That Dr Oetker Group can afford a large-scale acquisition is without doubt. At the end of 2005, the group’s war chest was filled with EUR 1.1 billion. Moreover, to finance a big deal the group would be prepared to sell off some of its diversified businesses. 407 companies are part of Dr Oetker Group.
