Breweries in crisis: Corona is causing beer sales to plummet historically

Monday, February 01, 2021

Breweries in crisis
Corona is causing beer sales to decline historically

Whether Kölsch, Pils or wheat – draft beer is hardly in demand in the Corona crisis. The ban on major events is just as bad for organizers as it is for breweries. Smaller businesses in particular are increasingly finding themselves in dire straits.

The corona crisis is severely affecting breweries in Germany. Last year, their beer sales fell to the historically low value of 8.7 billion liters due to the ban on celebrations and the catering trade that was closed for months, as reported by the Federal Statistical Office in Wiesbaden. But the volume decline of 5.5 percent compared to the previous year shows the dramatic situation only very inadequately, complains the brewers' association. Smaller companies in particular have long had to struggle to survive, while a few large breweries have benefited from the increased retail sales of bottled beer.

The big bankruptcy wave has not yet materialized, says Holger Eichele, President of the German Brewers Association. He is usually proud of the diverse brewing traditions in the country. The association has listed more than 1,400 companies nationwide, most of which sell their beer only in the immediate vicinity of their brewery. "They notice every unusual festival." The problem is exacerbated with the ongoing Corona ban for pubs and restaurants, because they no longer buy draft beer. But that is the particularly lucrative business with high added value for the breweries.

In Darmstadt, Hesse, there was a lack of events last year such as the Hainerfest or the music festival in the Schlossgraben, where up to 500,000 young people celebrate the night with lots of beer. According to its own statements, the Darmstadt-based private brewery owned by the Koehler family suffered a loss of 1.1 million euros in 2020 instead of the expected profit of 200,000 euros. "We'll need eight or nine years to catch up. You have to ask yourself how long it can go on like this," says senior partner Wolfgang Koehler.

The big names in the sector were able to better compensate for their gastro losses with increased bottled beer sales via the food retail trade. The specialist portal "Inside" sees comparatively small volume losses in well-known national brands such as Krombacher (-4.8 percent), Oettinger (-1.5 percent) or Veltins (-3.5 percent). Bitburger (-8.0 percent) and Warsteiner (-16.2 percent) were hit harder with their higher gastro proportions. "We can only dream of that," says Christian Kerner from the Cologne Brewery Association.

In the cathedral city, the breweries traditionally sell a very high proportion of their Kölsch directly over the counters of the restaurants, so they are particularly hard hit by the repeated lockdown. The small brewers are trying to counteract this with special offers for bottled beer or home deliveries, but they cannot make up for the lack of major events in the stadium or the Cologne Arena, says Kerner. "None of this compensates for the losses with draft beer, especially since the margin for bottled beer is significantly smaller." And because the carnival season is also canceled this year, things could get even worse in 2021.

"Tax advisors are working at the limit"

Veltins boss Michael Huber expects corona-related operational tasks at the competition over the entire decade. It is true that the federal government has currently made extensive use of tax deferrals and compensatory measures for affiliated restaurants to alleviate the difficult economic situation. But that will not be enough: "For many regional brewers it became apparent how unstable their market position has developed with dwindling liquidity."

The Lemke brewery in Berlin is looking for new sales channels via the Internet and wants to benefit from the capital's cool export image, according to its own classification. "No company can cope with a decline in sales of more than half in the long run," says founder Oli Lemke, who no longer wants to rule out layoffs in the current year. At least there is now a prospect of state aid: "After the latest changes, we can now get the November / December aid for the catering industry. Our tax advisors are working to the limit because everything is extremely complex."

The Brewers' Association demands further help: "Extensive aid measures have been developed for the catering industry – the 1,500 mostly artisanal and medium-sized breweries who are indirectly affected, however, with a few exceptions, are left empty-handed," says Eichele. "From week to week, through no fault of their own, more breweries find themselves in dire straits. If the federal and state governments do not take specific and decisive countermeasures, many breweries are threatened with bankruptcy." The Koehlers in Darmstadt also want to continue. "Fortunately, we are still in very good shape and can also finance our new filling system that we ordered shortly before Corona," reports the senior boss. "But in many companies the banks will decide when to end."