Is InBev secretly forging a “Munich Solution”?

Those who are not familiar with Munich’s Who’s Who of beer, there are currently four breweries in Munich: Spaten-Löwenbräu (owned by InBev), Paulaner (controlled by Schörghuber/Heineken), Augustiner (controlled by a charity) and Hofbräu (owned by the State). Hypothetically, of the four, only Spaten-Löwenbräu and Paulaner could be put up for sale.

It has since transpired that Interbrew only bought the brands – Spaten, Löwenbräu, Franziskaner – when they acquired Spaten-Löwenbräu brewery in 2004 but not the real estate. The inner city brewery site is a prime piece of real estate that Dr Kayser-Eichberg hopes to develop sometime soon.

Therefore, Dr Kayser-Eichberg, being a man-about-town, was assigned the difficult task of finding InBev a plot of land within Munich’s city limits on which they could build a brewery. The location within Munich’s boundaries is essential if InBev wants to sell its Munich beers at the Oktoberfest.

Dr Kayser-Eichberg has already secured himself a commercial property suitable for a brewery and it is now up to InBev to make up their mind whether they want to proceed with building a brewery or if they want to stay on the old site – where they’d have to face a major rent increase.

Funnily enough, Munich’s pundits think that InBev will waive both options.

In fact, it looks like InBev is already beating a quiet retreat. To InBev, Spaten and Löwenbräu are just local brands – or C-brands by all accounts. Only the Franziskaner wheat beer is distributed nationally. Interestingly, InBev has gradually dropped all reference to Franziskaner’s Munich heritage over the years. Meaning: they have de-localised the brand so that it can be brewed anywhere.

Theoretically, InBev could keep the Franziskaner brand (1.1 million hl) and move its production to another brewery in Germany – or sell it to the highest bidder. With wheat beers rising in popularity, the brand would be an ideal complement to Radeberger’s portfolio. Moreover, Radeberger, which is Germany’s major brewing group, has a brewery in Nuremberg, Bavaria. If Franziskaner were brewed there, Radeberger could cash in on Franziskaner’s Bavarian heritage – a significant contributor to the allure of a wheat beer brand.

Which would leave InBev with the Spaten and Löwenbräu brands. They represent an estimated volume of 500,000 hl beer – and declining. We ask you: does that warrant all the expense of a new brewery?

This is where Dr Kayser-Eichberg’s nomination as trustee of Schörghuber Group comes into play.

Ignoring for the moment that the appointment runs counter to business etiquette as we know it, it points to a scenario in which Paulaner or Dr Kayser-Eichberg himself could buy the Spaten and Löwenbräu brands.

Such a concentration of Munich beer brands in the hands of just one could lead to all kinds of political complications – not least with the City of Munich as the organiser of the Oktoberfest. If Paulaner brewery were to buy Löwenbräu and Spaten this would mean that Paulaner would enjoy a quasi-monopoly at the Oktoberfest.

The only way for the Munich City Council to prevent such a monopoly would be to re-write the statutes of the Oktoberfest (which say that only beer brewed in Munich can be sold there) – a political move that would border on a revolution.

Again, this is where Dr Kayser-Eichberg could come in handy as trustee of Schörghuber Group. He would be ideally suited to smooth things out with Munich’s powers-that-be.

Another scenario is that Dr Kayser-Eichberg, at the behest of Schörghuber Group, buys back the Löwenbräu and Spaten brands at a symbolic price in order to let them die their death. In a declining and highly competitive beer market such as Munich’s, the killing of brands ought to be considered a viable anti-cannibalisation measure.

As said, the appointment of Dr Kayser-Eichberg leads to all kinds of interesting speculations.