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Beverage Sector Trends: Germany and Benelux
By: Steven Hanft, CONUSBAT
Posted: July 16, 2010
The beverage markets of Germany and the Benelux nations have seen extensive harmonizing regulatory efforts by the EU Commission in recent years, which has, in many ways, made for easier access for both internal and external markets. Furthermore, the introduction of the euro currency has added a positive dimension towards doing business in these EU nations. A good example of how the euro has made life easier for consumers can be observed in the area known as the Dreiländerpunkt, where Belgium, the Netherlands and Germany share a border. Here, several languages are spoken, including a German-speaking part of Belgium on the border with Germany. Yet the euro allows these diverse consumers to purchase, for instance, a Heineken at a Belgian pub or supermarket. Even with the current debate about certain EU nations not meeting crucial economic conditions, EU consumers don’t have to think about going to a bank to exchange currencies.
Germany and the Benelux Nations: Political, Economic and Demographic Facts
In total, Europe has a population of close to 830 million people; of that, about 490 million live in the EU.
Germany’s population is 82 million (92% German, ~3% Turkish, 5% other), with a GDP per capita of $34,100, making it Europe’s largest economy. Although English is the language of international business, one should not forget that in all of Europe, German is the most widely spoken language. When comparing the number of people living in Germany or the Netherlands (see below) to the United States, it is clear that these European states have a far greater population density. However, Germany’s birth rate, unlike that of the United States, remains stagnant; statistics show that German women on average are bearing approximately 1.37 children (sources: Eurostat 2004/BBC News, March 2006). Since 1989, the reunified Germany has been a jump-off point into Eastern European nations such as Poland, the Czech Republic and Russia. When it comes to beverages, Germany is the second largest producer of hops in the world, fueling its reputation for high-quality beers. Wine production occurs mostly in the Mosel and Rhine valleys.
The Netherlands’ population is 16 million (81% Dutch, ~4% Turkish or Moroccan descent, ~15% others, including individuals from former colonies Indonesia, Surinam and the Caribbean Islands), with a GDP per capita of $39,200. The Netherlands is Europe’s most densely populated nation; due to immigration, cities like Amsterdam and Rotterdam mimic New York City’s reputation for global diversity. Having lived and worked in Europe for about 14 years, I’ve come to some conclusions that, despite the negative legacy of the European colonial period, that legacy has created important economic networks. Industrial activity in the Netherlands predominantly consist of food processing, chemicals, petroleum refining, and electrical and electronic machinery. It has a dynamic agricultural export sector and is well known for its cut flowers (i.e., tulips). Considering the Netherlands' size and population, one can admire the success of this country, which has deep roots as a trading nation, including VOC (Dutch East and West India Co., est. 1602). In essence, the VOC was the first multinational company (stock was sold with 100,000 employees), which led to the multifaceted issues of globalization we face today.
Belgium’s population is 10.8 million (58% Flemish, ~33% Walloon, 11% others, including formerly Belgian Congolese), with a GDP per capita of $36,600. As Brussels is the seat of the EU Parliament, naturally many people employed here come from the other EU 27 member states, making it a very international city. (Read more about the Belgian snack sector here.) The country produces more than 1,000 brands of beer, which will be discussed further in this article. Periodically, Belgium goes through some political pains between its two main opposing populations—Walloons (French-speaking) and Vlaams (Flemish-speaking). Somehow the union remains, the common joke being that each group loves the other’s regional beers and foods.
Luxembourg has a population of 500,000 (92% German, ~3% Turkish, 5% other), with a GDP per capita of $78,000. Due to Luxembourg’s smallness and perceived low population, many tend to view it as irrelevant, which in my opinion is a mistake. Luxembourg has an extremely high per capita GDP, much of which is related to its investment banking sector and its strategic location beside powerhouses Germany and France. Furthermore, it shares its border on the famous Mosel river valley, well known for its wines, which will be further discussed in this article.
Beverage Favorites in Germany and the Benelux Nations
Concerning the beverage markets of these four EU nations, InBev (Belgium), Heineken (The Netherlands), Nestle (Switzerland), Danone (France), Unilever (United Kingdom-Holland) and Kraft Foods (United States) play major roles. For the most part, this article will focus on other lesser-known products and companies.
Nonalcoholic Coffee and Tea
Jacobs Krönung kaffee (Kraft Foods Deutschland; Bremen, Germany; www.jacobs.de), which traces its roots back to 1895, is one of German-speaking Europe’s most recognized coffee brand names. Its products are available in roast and ground, whole beans, soluble crystals, coffee pods and flavored mixes. Acquired in 1978 by Sara Lee Corp., Douwe Egberts’ (D-E; www.de.nl) koffie products include its most recognized roasted brand Aroma Rood. D-E worked in tandem with the Dutch electrical appliance producer, Philips Electronics, in developing the coffee pod Senseo product line. Seeking to emulate British teas, the D-E family selected its Pickwick Tea name from Charles Dickens’s The Pickwick Papers. Flavors include fruit, green, herbal, black, rooibos (indigenous to South Africa) and others. Established after WWII, Tchibo (pronounced chee-bo; Hamburg, Germany; www.tchibo.de) is a privately held company, which sells its kaffee along with clothing, apparel and home furnishings. The company employs 12,000, posted 2008 revenue of €3.2 billion, and runs ~800 kaffee bars—~500 in Germany and another ~300 in Austria, Poland and the Czech Republic.
When it comes to drinkable yogurts, the Netherlands is Europe’s leading consumer (approximately 26 kg/person per year). Considering Vitamin D and calcium absorption powered by these products and cheeses such as gouda and leerdammer, it’s no wonder that Dutch people have been measured to be the tallest humans in the world. The European Commission and the Netherlands Competition Authority approved the acquisition by the Danish dairy cooperative Arla Foods (Nijkerk, Netherlands) of Friesland Foods (Amersfort, Netherlands) from Friesland Campina in May 2009.
Developed by an Austrian entrepreneur, Red Bull (www.redbull.com) took many marketing and ingredient ideas from an energy drink in Thailand called Krating Daeng. According to Zenith International (2006), Red Bull consumption by country is:
- Netherlands: 1.9 liters/person
- Belgium: 1.4 liters/person
- Germany: 0.8 liters/person
Naturally, Red Bull advertises its products extensively in conjunction with sporting events (auto racing, skiing, etc.).
Located in one of Germany’s top wine growing regions, the Rheinland-Pfalz, the Doktorenhof (Venningen, Germany; www.doktorenhof.de) drinking vinegars, or weinessig, are promoted as a savory flavor for salads and meals, and a digestif before dinner supporting health and wellness. The Doktorenhof products are offered in assorted flavors such as herbals and fruit infusions. As expected, these are not mass-market products, and previously my firm found success in marketing these products in specialty food markets in New York that rely on international clientele.
Lindeman (Vlezenbeek, Belgium; www.lindemans.be) is known for what are called lambic beers, which are based on wheat and barleys. The name lambic is either a corruption of the name of the municipality Lembeek, or derived from the parable of the brewing kettle with the alambiek of gin distillers. By 1980, fruit flavored beers were successfully developed and marketed, including: framboise (raspberry), cassis (black current), pecheresse (peach) and kriek (cherry). Although now owned by Heineken, to many outside the Benelux nations and region, Brand Bier (Wijlre, Netherlands; www.brand.nl) is one of the lesser known Dutch biers. Much of this has to do with the region where it is brewed—Zuid (South)-Limburg, or the Dutch Alps—which is sometimes jokingly called “not Holland.” The majority of the region’s population is Catholic, which historically dates back to royalty and its previous ties with Spain. Brand literally means fire, and traces production back to 1340. (Another local beer brewery is Gulpen Bier.) In 2004, under the slogan “Green is Gold,” Brand Bierbrouwerij’s (beer brewery) green crates have now been replaced by gold crates—history plays a major role in European beer production. Well known for its pilsner beer, Bitburger Bier (Bitburg, Germany; www.bitburger.com) is located in a rural area of Rheinland-Pfalz (Palatinate). In 2005, Bitburger introduced Bit SUN, which marked the launch of the first new Bit brand. A recent trend in German beers has been the growth of mixes with lime, orange, etc. Also, weizen, or wheat dark beers (high in malted barley), play a major role in both the German and Dutch markets. With over 1,300 breweries in Germany, it is fair to say that no one brand owns >10% of the market. Even with InBev’s acquisition of Anheuser-Busch, this fact remains in direct contrast to the US market. Other facts about the German beer market:
- Pils flavored beer is the most widely consumed (60%)
- Imported beer accounts for approximately 6% of the market
- Retail accounts for 80% of beer sales
- Yearly beer consumption has declined from ~125 liters/person in 2000 to ~116 liters/person in 2006
White and Sparkling Wines
A number of white and sparkling wines are produced on the north bank of the Mosel (Luxembourg; www.vins-cremants.lu), which has a winemaking history dating back to the Romans. Luxembourg is known for making several different kinds of wine including Riesling; pinot gris, noir and blanc; Auxerrois; Rivaner; elbling; Gewürztraminer; and Crémant de Luxembourg (sparkling wine). Authentic Luxembourg wine can be identified by the National Mark.
Although debates swirl about the efficacy of the euro, a benefit of it has been to easier access across borders for various types of beverages. Traditions are long-standing, but in lieu of new immigration trends in the European Union, product development has kept pace with the call for different products that meet challenging new tastes. Fortune 500 companies such as InBev, Heineken, Nestle, Danone, Unilever and Kraft play major roles in these markets, but there is room for small and medium enterprises.