Einbecker: Back to the future
Good beer, great story, but shame about the past. With a new team at the top Einbecker Brewery, one of Germany´s oldest breweries, is hoping to reverse its fortunes and imbue its beer brands with that aura of aspiration that made Einbecker Europe´s most popular beer brand 600 years ago.
If you travel the world and see people paying good money for one of Belgium´s high alcohol beers, it saddens you to think that many of these consumers will probably never get a chance to try the original stuff, an Einbecker Ur-Bock. Einbecker Ur-Bock, the beer that made the small town in Lower Saxony world-famous (in the Middle Ages, that is), compares favourable with all of Belgium´s strong beers. It is served in a small bottle and has its own historic glass. Yet, ask any beer drinker in the United Kingdom if he has ever heard of Einbecker or tried one and he will say “no” – unless he has been with the army and been stationed near Einbeck.
The town of Einbeck, to the south of Hannover and Hamburg, comes straight out of Germany´s fairy tale books. Lying amid softly rolling hills and lusciously green fields, Einbeck is a town of narrow cobbled streets and timber framed houses that have survived the vagaries of history. It was here that people brewed the “Ainpöckische Bier” (in contemporary German “Bock Bier) that was first documented in 1378. In the 14th century each citizen of Einbeck had the right to brew beer. However, he was allowed to keep only a certain amount. All excess production was bought up by the council that sold the beer to the farthest corners of Europe. Although the Bavarians do not like to admit it, the ducal court in Munich used to be one of Einbeck´s main customers. In the late 16the century more than 1,300 hl of Einbecker bock beer were sent to Munich on ox drawn carts because the spoilt and choosy courtiers did not like the local brew.
Having been praised by the reformator Martin Luther as “the best drink that he knew”, Einbeck´s 700 odd brewhouses continued to flourish and in the 17th century formed several brewing cooperatives. A couple of centuries and several mergers and renamings later, the Einbecker Brauhaus was founded in 1967 as a public company.
Despite its impressive historical record, Einbecker bock beer has fallen victim to changing consumer tastes. In the off-trade sector, bock beers today represent 0.5 percent of Germany´s beer sales. Including on-premise sales, total market share may be 1 percent. That need not be fatal as the example of the Belgium beer market shows where speciality beers have a market share of about 30 percent of consumption. No, what has kept Einbecker bock beer back and impacted its potential as an export product were corporate mismanagement. That´s the sad and simple fact.
For most of its existence as a public company Einbecker brewery has been under the umbrella of a larger German brewing group. Not only was the brewery regularly cashed out, several generations of managers also stuck to the erroneous decision to brew an Einbecker pils, which made them neglect the Einbecker bock beer. In the 1970 and 1980s pils was the growth segment so everybody wanted to take a slice of the market. Einbecker pils is not a bad beer. Far from it. Yet, it has to compete with lots of national beer brands that have more clout and financial muscle.
In the 1990s when Einbecker was with the Brau + Brunnen group (now part of the Radeberger Group, Germany´s number one brewing group), management made the mistake of expanding Einbecker´s production capacity. Until the fall of the Iron Curtain, Einbeck was located almost right next to it. There were no markets east of Einbeck to be served. Yet, when the wall came down and eastern German citizens were thirsting for a decent beer, Einbecker Brewery was expanded to serve these new markets. Unfortunately for Einbecker Brewery, within a few years, eastern Germany´s breweries had been refurbished and their capacities increased. The effect? Einbecker Brewery suddenly found itself burdened with capacity it could not utilise. Its then management, having no other option, decided to take on own-label production of beer.
The demise of Germany´s Brau + Brunnen brewing group, which in its final year produced more than 6 million hl of beverages, was long and agonising. That´s when some clever investment bankers from Düsseldorf came up with the idea to buy out Einbecker Brewery. The investment company Ender& Partner for an undisclosed sum bought Einbecker Brewery in 1997. However, instead of taking it private, they maintained Einbecker´s status as a public company. Someone must have made some money somewhere along the line because most market observers agreed then that keeping a brewer listed is near suicidal in a beer market that is in long-term decline.
Let´s put it this way: How was Einbecker Brewery going to deliver the growth stories that investors want if overall beer consumption is going down? That´s nearly impossible.
No wonder that there have always been rumours going round that Einbecker Brewery will be sold. Not to a foreign brewer, obviously. Because a brewery that does less than one million hl of beer is too small to provide a foreign brewer with scale quickly. However, the Radeberger Group, which already owns a host of breweries around Germany and prides itself for keeping Germany´s beer diversity alive, has regularly been ticked as a potential buyer.
Ten years on, Einbecker Brewery still awaits its sale. If the investors behind Ender&Partner ever pursued an exit strategy, they had to abandon it eventually and do something with their investment. Einbecker Brewery´s share price development reflects this change in plans. Over the past ten years, the price has dropped to EUR 15 per share from EUR 27 in 1998.
Whether the investors wholeheartedly believe in Einbecker Brewery remains to be seen. In the meantime they have put a new management team in place that has to clean out the metaphorical cobwebs and convince employees and customers alike that there is life yet in the brewery and its brands. With Andreas Berndt, 48, Marketing Director, and Bernhard Gödde, 51, Board Member for Marketing, two marketing experts were brought in last year who have decades of experience in the brewing industry behind them, having worked at Flensburger Brewery, Jever Brewery and later Brau + Brunnen. Besides, Mr Berndt spent years at REWE, one of Germany´s powerful food retailers. What is more, both marketers are of northern German origin. That will help them in their efforts to reform Einbecker´s corporate culture which, in typical northern German fashion, is slow and deliberate.
Both Mr Berndt and Mr Gödde have a lot of persuading and prodding to do to convince their people that the management´s new way of doing things is the right way.
In 2007 Einbecker Brewery had a turnover of EUR 41.8 million, down 3.9 percent on 2006, an EBITDA of EUR 5.7 million, down 13.5 percent on the previous year and an EBIT of EUR 565,000, down 41.4 percent year-on-year. Still, Einbecker Brewery managed to give most its profit away as dividend: EUR 0.25 per share. That´s the same dividend Einbecker Brewery had paid the previous year. Alas, the 2006 dividend payment was only made possible with the help of new debt.
In 2997 Einbecker Brewery sold almost 800,000 hl of beer, 129,000 hl less than in 2006. 209,000 hl of these were distributor-own-brands. Einbecker Brewery has seen the volume of these low-yielding hectolitres go down over the years – minus 40,000 over 2006. Fortunately, Einbecker could compensate some of these losses by selling more of its own brands: +10,000 hl over 2006.
For this year and next, Mr Gödde and Mr Bernd have secured the support of their advisory board to increase Einbecker´s marketing budget. But spending more on selling their beers is not enough. They will have to do some subtle pruning of their bloated brand portfolio. Einbecker Brewery also owns a brewery in Kassel and the brands of a now discontinued brewery in Göttingen, both south of Einbeck.
Their strategy, confirm Mr Berndt and Mr Gödde, is simple: premiumisation of the Einbecker pils in its regional market, a stronger penetration of the national market with the Einbecker bock beer and increased export activities.
Obviously, Mr Berndt and Mr Gödde are aware that their task is far from easy. Hopefully, with Einbecker´s shareprice in the doldrums, they will be given enough time by the investors to achieve the turnaround before they have to start worrying about who will own Einbecker Brewery next.
