Who will buy AB-InBev Germany?

Germany | A year ago, in October 2021, Bloomberg reported that AB-InBev was seeking a buyer for its German unit, as the world’s number one brewer sought to “prune less profitable businesses and trim debt”. The asking price: USD 1.2 billion.

Sadly, Bloomberg did not specify which breweries and brands would be included in the sale. Presently, four brewery locations are part of AB-InBev Germany: Bremen (home of Beck’s), Issum (the Alt beer brewery Diebels), Wernigerode (Hasseröder pils) and Munich (Spaten, Franziskaner and Löwenbräu). The Munich brewery is not owned but leased from the previous owner.

All in all, they produced 6.35 million hl beer in 2021, up 1 percent over 2020 according to Inside, a German trade publication. The uptick in sales was partly due to the much-maligned practice of “channel stuffing”, which added an estimated 130,000 hl beer in December 2021.

Not even the usually well-informed Inside, whose editors keep their ears close to the ground, has picked up any rumours if a buyer has since come forward. And as time passes, it will become even less likely.

Second time lucky?

This is the second time that AB-InBev has put its business on the block. In 2017, it appointed Deutsche Bank to find a buyer for two of its breweries, Diebels and Hasseröder, believing they could fetch EUR 200 million (then USD 220 million). After nearly a year’s worth of negotiations with a somewhat shady German investor – and AB-InBev substantially lowering the price –, the sale was blown off.

Apparently, the potential buyer could not secure financing. Which is no surprise: Who would buy into the declining German beer market, where beer prices have not really risen for 30 years, and take on a group of breweries which have been underinvested in for years?

That was the situation in 2018 and little has changed since, except that overcapacities in the brewing industry have risen dramatically so that Germany’s leading brewery group, Radeberger, was forced to shutter its Frankfurt brewery, axing 150 jobs.

What is more, over the years AB-InBev has quietly moved the family silver out of Germany. The international brand Beck’s is not exclusively brewed in Germany but at plenty of AB-InBev’s breweries around the world. In August, AB-InBev announced it has localised the production of the Munich beer brands Spaten and Franziskaner in Russia. That means several hundred thousand hl in lucrative beer production have vanished from Germany.

Therefore, German brewers will think twice before they make AB-InBev an offer. Because ultimately, they will only get domestic licences to German brands (surely, AB-InBev would want to keep the more profitable international licences of these brands), which all experience the pull of gravity, plus four tired breweries.

Observers say that these breweries do not conform to today’s sustainability standards and would also be costly to run due to their age. Besides, one of these breweries (Munich) has seen its annual rent shoot up by 1,000 (!) percent to EUR 6 million (USD 5.9 million) in 2018. The contract runs until 2034.

Thanks to some massive cost cutting, AB-InBev Germany is certainly profitable, just not as profitable as other AB-InBev units. Still, German brewers would be very reluctant to pay the asking price.

According to the grapevine, the assets could be worth EUR 500 million (USD 490 million) at most. Or less, if a domestic brewer decides to buy the licences for the brands but feels compelled to shutters the surplus breweries. AB-InBev employs some 2,700 people in Germany. Redundancy payments could be huge and the public outcry deafening.

All these considerations make a sale of AB-InBev’s German assets to a domestic rival implausible. Most likely, AB-InBev will need to fight on – just like everybody else in the German brewing industry.