Bitburger buys into craft beer distributor Brausturm

Germany | Take it as an indication that selling craft beer continues to be a tall order. The specialist craft beer distributor Brausturm (“Brew Storm”) from Hamburg has sold a 30 percent stake to brewer Bitburger for EUR 1.15 million (USD 1.26 million) in what observers have called a rescue mission.

The transaction was reported on 10 September 2019 – only days after the Munich craft brewer Crew Republic had announced that it had sold a 20 percent stake to AB-InBev.

Although Germany’s number of breweries has risen by 200 since 2014 to reach over 1,530 in 2018, it is still impossible to say how many qualify as craft brewers. For example: shall we include the more than 800 breweries which have an annual output of less than 1,000 hl beer? Or shall we generously count all of those that produce less than 10,000 hl annually? It would not make much of a difference in terms of market share. It would still be under 2 percent.

However, craft beer’s market share would drop to 0.3 percent if we only were to consider breweries, which were founded this decade and produce beers that have been inspired by international craft beer styles.    

The classification espoused by the US Brewers Association, which centres on ownership (independent) and size (less than 7 million hl in output), does not work in Germany. Because it would mean that nearly all domestic brewers would count as craft brewers – with the exception of Carlsberg and AB-InBev’s local units obviously.

The distributor Brausturm was founded in 2014 by Maximilian Marner and Ronald Siemsglüss in Hamburg. It also operates the Hamburg craft beer shop Beyond Beer, which was set up in 2015. By its own account, Brausturm has about 900 customers in the wholesale, retail and catering sectors. Its range includes more than 1,000 beers, from price entry level pils to high-end craft beers, as well as spirits. In 2018, the firm generated sales of about EUR 2.9 million (USD 3.2 million) and shipped an estimated 10,000 hl beer.

Interestingly, the transaction values Brausturm at 6 times EBITDA. A valuation based on EBITDA is usually applied to breweries, which have sizeable depreciations and amortisations. But none of these usually affect distributors. Documents show that in 2019 Brausturm expects to earn an EBIT of EUR 66,000 (USD 72,000), which is to rise nearly fourfold by 2021. Observers think this is a fairly optimistic assumption.  

All this points to a rescue mission. After all, the Bitburger Group is Germany’s third-ranking brewer (including breweries Köstritz, Lich and Wernesgrün), behind Radeberger Group and AB-InBev. It sells over 6 million hl beer annually. Not to forget, it has a craft beer unit called Craftwerk and a national sales team. Really, what can Brausturm do for Bitburger that it cannot do itself?