Subsidies, discount beer and the folly of it all – Comment

Apparently, unbeknownst to the likes of you and me, the big white elephant of the German brewing industry is hiding in deepest Brandenburg – that’s what modern-day Prussia is called. Pampered by taxpayer’s money and managed by a group of clever private equity investors from Berlin, the brewery has been churning out cheap beer for the German and Polish markets for years. In 2009 its 150 employees produced an estimated 2.1 million hl beer.

The Bavarians’ anger may be genuine and perhaps even justified, but if you look closely you begin to wonder: what’s new?

The brewery has produced cheap beer for years even before its current owners took it over. It was founded in 1988 when Eastern Germany was about to collapse and later acquired by Germany’s brewing group Brau + Brunnen to produce beer in cans, aka cheap beer.

When Brau + Brunnen was sold to its rival Radeberger Group, no one wanted it. Let’s face it, there was and still is plenty of unused brewing capacity knocking about all over Germany.

But the federal Brandenburg government was in a fix: the state has got plenty of countryside yet little industry and even fewer jobs. In Frankfurt (Oder), a city of 60,000 people which is 3 km away from the Polish border, the brewery is the major employer.

So the government was more than willing to help out with EUR 5.3 million of taxpayers’ money when in 2003 private equity investors TCB stepped in and widened production to include plastic bottles.

That was a shrewd move. Plastic bottles have since become the discount retailers’ container of choice as Germany’s container deposit system penalises cans.

TCB’s business model seems to have been crowned with success. Not only did they buy a brewery in France from Scottish & Newcastle/Kronenbourg in 2006, they have also embarked on a EUR 18 million expansion scheme at their brewery in Frankfurt (Oder). Again they have applied for a state subsidy which is currently being processed.

In response to the Bavarian brewers’ onslaught, a tight-lipped spokesperson for the Brandenburg ministry of economic affairs pointed out that the subsidy had been rightfully granted under a scheme which supports businesses in economically weaker regions. Breweries in Bavaria are entitled to the same sort of subsidy, the spokesperson added. Moreover, the scheme does not discriminate against certain industries.

Besides, Brandenburg has witnessed a drop in brewing capacity. Last year two breweries were shut down: one in Dessow and one in Pritzwalk.

Guess who owned these breweries? Step forward: Oettinger brewery, Germany’s leading producer of discount beer and headquartered in …. Bavaria!

So much for squelching Prussian-Bavarian rivalry.