German Beer

By: Aayushi Srivastava

Kritika Rai
Mehak Motiwala
Siddharth Kothari
Vinay Buchasia

Table of Contents

Serial No.

Page No.

Title

German Beer: A Brief History

German Beer: Economic Impact And Linkage Effect

German Beer: Industry and Market Structure

German Beer: Uses

German Beer: Government Alcohol Policies
German Beer: Oktoberfest

German Beer: A Declining Beverage?

10

11

German Beer: Presence in India

German Beer: SWOT Analysis
German Beer: Conclusion

Group 6
Synopsis

Someone once very rightly said No great story ever starts with, that time I drank milk.
And with this Group 6 would like to introduce their topic German Beer.
The brewing industry is a global business, consisting of several dominant multinational companies
and thousands of smaller producers ranging from brewpubs to regional breweries.
The highest density of breweries in the world, (most of them microbreweries), exists in the German
Region of Franconia, which has about 200 breweries.
Beer is a major part of German culture. For many years German beer was brewed in adherence to the
Reinheistsgebot or "German Beer Purity Law" which only permitted water, hops, and malt as
beer ingredients.
Its been observed that while German wine is becoming more popular in many parts of Germany, the
national alcoholic drink is still beer, and even though its consumption per person is declining at 106
litres annually, it is still among the highest in the world.
German Beer contributes significantly to the GDP of the country, due to the large-scale production
and consumption of beer.
Moreover Oktoberfest is Germanys premier tourist attraction, with more than six million attendees
and more than seven million litres of beer sold each year. It is a celebration of beer and an important
part of the countrys culture, and adds to the GDP remarkably.
However despite all this the German brewing industry is at a crossroads dude to various factors such
as an aging population, high fertility rate, etc.
On the bright side, fortunately for beer lovers around the world, many of these breweries export their
beer to near and far places, Cheers!

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Group 6
GERMAN BEER

Beverages, like cuisine, are symbols of the culture theyve emerged from. The greatest drinks are
pearls of the human race. The Champagne or the Cognac lead us to France. The Sherry carries the
essence of Spain, and how can the Vodka be anything but Russian?

Likewise, when we partake a Munich Helles or an Oktoberfestbier, we are transported to the land of
the Germans. Germans love beer, ranking 3rd in per capita consumption (behind the Czechs and the
Austrians) at an astonishing 106 litres per year. Beer production and consumption is ingrained into the
German way of life. With 1300 breweries operating within its boundaries, Germany has the highest
density of breweries on the planet. These 1300 breweries mill out 10.6 million kilolitres of beer
annually, the highest in Europe. It is an incredible achievement, giving that they are beaten in beer
production only by much larger countries. (China, USA, Brazil)

German Beer: A Brief History

Beer was first brewed by the Sumerians and the Babylonians, around 5000-8000 years ago. Beer was
first brewed in Europe by the Germanic and Celtic tribes of central and northern Europe, around 3000
years ago. However, in the 400 years that followed, the Germans had firmly established their spot as
the primary brewers in Europe.

Germanic tribes drinking habits were first recorded by Roman historian Publius Cornelius Tacitus in
the year 98 A.D. In his De origine et situ germanorum (About the origin and location of the Germans),
Tacitus asserted that the Germanic people were prolific consumers of beer, who organised drinking
parties at the slightest excuse. He states that it was customary for the tribes to invite guests to their
homes for a meal and drink.

The Romans looked down upon Germanic beverages, with wine being the supreme drink. However,
even the Romans succumbed to the allure of Germanic beer. Multiple Roman tombs (dating back to
the year 200 A.D.) had epitaphs identifying the dead occupants as beer merchants. The Romans
themselves had learnt the art of brewing from the Germanic tribes of central Europe.
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Group 6
By the advent of the sixth century A.D., the Western Roman Empire had crumbled to dust, and the
Germanic way of life flourished along Central Europe, in the Teutoburg forest and along the river
banks. Life for the next two and a half centuries, when not interrupted by raiding Huns or Saracens,
was generally peaceful. While the man of the house was outdoors, farming and rearing domestic
animals, the lady of the house spent her day cooking and brewing. Brewing was as ubiquitous as
cooking in German families of that period. It was customary for a family to share their brew with
neighbours.

In the year 768 A.D., King Charles I (Charlemagne) was proclaimed King of the Franks (the Franks
were an assimilation of Germanic tribes0). With Charlemagnes ascent to the throne, feudalism was
once again imposed in central Europe. Now, all land was owned by the crown, with vassals given
parcels of land to govern. As a result, the serfs could hardly find any grain of their own to brew.
Brewing was legal under Charlemagnes rule, as long as you could find the grain. Due to lack of
private ownership of land, the serfs were no longer able to procure grain, leading to a decline in the
brewing of beer.

Christianity, by the end of the first millennium A.D., had spread across Europe. With the spread of
Christianity came abbeys and monasteries. In the year 1040 A.D., the Weihenstephan Abbey (built 8th
century A.D.) received official brewing privileges and the right to sell its beer for profit. Today, the
brewery at Weihenstephan is the oldest continuously operating brewery in the world. Abbeys, and
eventually nunneries too, became centres of brewing. Friars and nuns, producing more bread and brew
than needed, often shared their food and drink with passers-by. As a result, many friars and nuns
became specialized in the brewing of beer, and monastery beer gained a reputation for high quality.
The 10th and 11th centuries A.D. witnessed the heights of monastic brewing in Germany, with 500
monastery breweries producing beer of unsurpassed quality and quantity for a nation of 10 million
inhabitants.

By the 12th century A.D., however, the power and clout of the monastery breweries began to decline.
Feudal lords began to take over the breweries, and they often built their own court brew houses.
However, the transfer of expertise proved to be more arduous than the transfer of brewing rights. As a
result, the quality of beer fell, and so did consumption.

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Group 6
Emperor Frederick I, alarmed by the steady fall in quality, was the author of the 1st known beer
regulation in Germany (year 1156 A.D.). The Emperor decreed that a brewer who makes bad beer or
pours an unjust measure shall be punished; his beer shall be destroyed or distributed at no charge
among the poor. Upon violation of this law, the bewer lost his brewing license.

In the year 1516 A.D., the famous all-Bavarian beer purity law, Reinheitsgebot, was introduced by
Duke Albert IV, where the brewers in the city of Munich were forced to take an oath to use only
barley, hops and water for their beers. Furthermore, the Duke introduced price controls, with beer
costing more in summer than in the winter. Initially issued in Bavaria only, the Reinheitsgebot
eventually spread to all of Germany. It gave the government tools to regulate the ingredients,
processes and quality of beer sold to the public. The Reinheitsgebot is the oldest (still existing) food
quality law in Germany.

Until the 16th century A.D., German beer was mostly classified as ale, which thrived at temperatures
ranging from 15-20C. However, using the trial and error method, breweries were able to produce
beer classified as lager. The lager was considered purer and the better tasting of the two, and in the
year 1553 A.D., summer brewing was outlawed in Bavaria. Until 1553, beer in Germany was mostly
ale. However, due to the outlawing of summer brewing, lager eventually took over as the leader in the
beer market.

Over the centuries, beginning in the 18th century, scientific research, better infrastructure and
temperature monitoring has vastly improved the quality and quantity of beer produced. The expertise
and specialization gained over two millennia, coupled with stringent quality laws, has helped preserve
the quality of German beer. Given the high density and variety of breweries, it comes as no surprise
that Germany is a leading beer producer in the world. Its weather conditions also favour the lager,
which is widely accepted as the better tasting variant of beer.

Weihenstephan Brewery
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Group 6
German Beer: Economic Impact and Linkage Effect

Beer is Germanys most consumed alcoholic beverage, with the average German consuming 106 litres
of the beverage each year. Germany also has the largest number of breweries in Europe, and the
highest density of breweries in the world.

The economic impact of the brewing industry in Germany can be expressed as follows:

Germany is the leading producer and consumer of beer in Europe. (10.6 million kilolitres and
9.6 million kilolitres respectively)

The number of employees directly employed in German breweries is 33400 Full Time
Employees. (FTEs)

The brewing sector also generates important indirect effects on the supply sectors; an
estimated 49000 jobs in these sectors can be attributed to the brewing sector, with the
services sectors and agriculture benefitting the most.

In addition to these direct and indirect effects, the hospitality sector and retail also benefit
from beer sales. 429000 jobs in the hospitality sector can be attributed to beer sales, and
38000 people in retail owe their jobs to the brewing sector.

Total turnover in hospitality sector due to beer sales is estimated at 19.1 billion euros.

Total turnover in retail sector due to beer sales is estimated at 10.7 billion euros.

The government also benefits from beer sales. Excise revenues amount to 787 million euros,
total VAT revenues from German beer consumption amount to an estimated 4.1 billion
euros, and personal direct taxes paid by people whose jobs are attributable to beer amount to
an estimated 2.6 billion euros. Total tax revenues for the German government are therefore
estimated at 7.5 billion euros.

While the brewery sectors total contribution in absolute terms is huge, it consists of only 0.005% of
the governments tax revenue. The brewery sector employs 550000 Germans out of Germanys
approximately 45 million workforce. The productivity per employee in terms of value-added in the
German brewing sector is also relatively high when compared to other sectors.

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Group 6
German Beer: Industry and Market Structure

Germany accounts for 26% of all of Europes beer production. Germany also has the highest export
volume of all European countries. Of a total production volume of 10.6 million kilolitres, 1.37 million
kilolitres are exported. Another 3.1 million kilolitres of foreign beer is imported, and German locals
consume 9.6 kilolitres of home grown beer. More than 75% of all German beer exports go to other
European countries.

With such a large amount of beer consumption amount of beer (9.6 million kilolitres), Germans lead
Europe in beer consumption, with UK and Spain a distant 2nd and 3rd respectively. 70% of the beer
consumed by Germans is classified under lager, with ale having only a 30% market share.

Around 25% of total German beer is sold by the hospitality sector, with the price of one litre of beer
around 8 euros. The remaining 75% is sold by the retail sector.

Due to an extremely high density of breweries serving the German population, competing in the
brewing sector is extremely cut-throat. Nearly 50% of the 1300 breweries are in Bavaria, therefore the
size of the breweries is relatively small.

Factors influencing the impact of the brewing sector on the German economy are:

Majority of breweries are relatively small.

Some strong international brands (e.g. Heineken), leading to sizable exports.

Strong competition for market.

Due to the highly competitive market, prices remain reasonable and the quality of German
beer is maintained.

Premium brands losing ground to lower priced brands.

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Group 6
German Beer: Uses

Germans majorly use beer for drinking, but Germans put beer to a variety of other uses. These uses
are the following:

German households use beer while baking loaves of bread.

Germans use beer to cultivate soil. The yeast filled soil encourages the healthier growth of
plants.

Beer is also used to polish wooden furniture. Using a dampened cloth to wipe a piece of
wooden furniture gives a nice sheen to the wood.

Germans also use beer to remove stains from cloth. Rinsing with water afterward helps
eliminate the smell.

Beer is also using to polish jewellery.

Germans also use beer to cure stomach aches. Beer has known medicinal values, and helps in
the removal of kidney stones.

Beer is also used to play games that require beer. (e.g. beer pong) Germany also organises
local leagues for beer pong.

German Beer: Government Alcohol Policies

Germany has some of the least restrictive laws regarding the use and sale of alcohol. The foremost
function of these laws is youth protection.

Minors (14-16): Minors are allowed to consume non-distilled alcoholic beverages, such as
beer and wine, as long as they are in the company of a custodian.

Minors (16-18): Minors are allowed to consume non-distilled alcoholic beverages, such as
beer and wine without being in the company of a guardian.

Adults (18+): Adults can consume any kind of alcoholic beverage.

Vendors found selling distilled liquor to minors are prosecuted.

Closing hours for bars and discotheques are determined by the Municipal Corporation.

Germany does not require licenses for the production or sale of alcoholic beverages.
However, all vendors must follow the regulation of the Youth Protection Act.

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Group 6
German Beer: Oktoberfest

Oktoberfest (locally called Wiesn), one of the largest funfairs in the world, is held annually in Munich,
Bavaria, Germany. It is a 17-18 day festival, commencing in late September and ending on the first
weekend of October. More than 6 million people attend the fest each year. The Oktoberfest has
inspired numerous spin-offs around the world. Almost 7 million litres of Oktoberfestbier is served
during the festival.

Only 6 breweries are permitted to sell beer at the Oktoberfest, and all of the need to adhere to the
Reinheitsgebot while producing the beer. The festival was first organised by the citizens of Munich to
celebrate the wedding of Crown-Prince Ludwig (later King Ludwig I) to Therese of SaxeHildburghausen.

After the First World War, organising the Oktoberfest became increasingly difficult due to persistent
inflation. Since 1950, the Oktoberfest has been held each year. By 1960, the Oktoberfest had turned
into a major worldwide attraction, bringing in tourists from all over the globe. In 1980, a bomb blast
rocked the Oktoberfest, killing 13 and injuring over 200 people.

Major attractions at the Oktoberfest include amusement rides, gaming stalls, delicacies such as roast
chicken, roast pork, grilled ham hock, grilled fish, sausages, pretzel, dumplings, cheese noodles,
potato pancakes and local Bavarian delicacies such as Obatzda and Weisswurst.

The music level is limited to 85 decibels during afternoons, to ensure that the fest does not exude an
over the top party aura. Smoking in tents (put up for the fest) is prohibited, and the sale of tobacco is
abandoned by common consensus. In 2010, the Oktoberfest celebrated its 200th birthday. Special
horse races (banned since 1960) were held on the occasion, and specially brewed beer was sold during
the fest.

The Oktoberfest remains one of the largest festivals of its kind, with total revenues exceeding a billion
euros, and more than 6 million people visiting the city during the fest.

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Group 6
German Beer: A Declining Beverage?

Foreigners visiting Germany in the 19th century often claimed that the Germans consumption of beer
equalled their consumption of water. Beer was their national drink. The volume of beer consumed
by the Germans was awe inspiring. Fast forward a century and a half. Beer consumption in Germany
has been on the slide since the past three decades, sliding from a per capita annual consumption 145
litres (West Germany) in the late 1970s to a relatively lower 106 litres in 2013.

Germans today are consuming lesser and lesser beer than their fathers did three decades earlier.
However, even at a 106 litres per person, the beer consumed isnt a miniscule amount. If you visit
Germany, even today, youd lose count of the number of people youd see laden with beer steins.
Beer consumption all across the Western world is declining, with North America and Europe
reporting a steady decline in beer consumption. Beer producers all over Europe are compensating for
this loss by turning towards Asia, where beer consumption is steadily on the rise.

In Germany, the brewery sector is highly fragmented. With no brewery that could compete on the
international market against much larger competitors, German brewers will find it tougher to cushion
the blow on declining beer consumption. More and more youngsters are switching over to wine, and
drinking beer during the day is frowned upon. German brewers are attempting to spread awareness
about their drinking culture, in an attempt to attract foreign customers.

The German beer market is shrinking, and the many breweries will undoubtedly perish in the future.
However, if Germany is to maintain its status as the beer nation, its breweries must go global.

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Group 6
German Beer: Presence in India

A majority of the beer market in India is occupied by breweries like United Breweries (Kingfisher),
Carlsberg, SABMiller and Mohan Meakin. With an annual per capita consumption of 1.6 litres, India
isnt a major beer consuming nation, and had escaped the radar of German Breweries. However, in
recent times, German breweries such as Heineken and Kaltenberg have entered the Indian market.
With beer consumption in India on the rise, a higher number of German breweries intend to enter the
market.

German Beer: SWOT Analysis

STRENGTHS

WEAKNESSES

OPPORTUNITIES

THREATS

Presence of a strong
tradition and culture of
enjoying beer in the
country.

Cash asset problems

for family breweries.

Increasing demand in
Asia.

A slump in per capita

consumption for the
last 35 years.

High quality due to the

cut-throat competition
in the market.

Some of the companies

use their real - estate
holdings to finance
brewery production
costs.

Ongoing technological
innovations in products
and processes.

Young Germans
turning to spirits and
non - alcoholic fruit
drinks, beer sales fell
2 percent in a year.

Innovative brewing
procedures despite
long history.

Entrance of global
competitors in German
beer industry has left
domestic producers
short in cash.
Small operations
prevent breweries from
competing on global
market.

Better facilities for

communication and
information transfers.

Traditional family
breweries under
pressure due to rising
costs of production.

Diversification in
terms of brands and
production.

Better mobility and

ongoing innovation in
transportation systems.

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Group 6
German Beer: Conclusion

Germany is the mecca of modern beer production, and its drinking culture is legendary. Beer drinking
is ingrained into the very culture of Germany. With its unique production techniques and purity law,
German beer has a history second only to tea (among beverages). The fragmented German beer
market is one of the most competitive markets on the planet. With the beer being highly popular, its
contribution to the German economy is significant. German alcohol laws are some of the least
restrictive, enabling the beer industry to thrive. The Oktoberfest, one of the largest attraction of its
kind, makes a significant contribution to the local economy, with over 6 million visitors each year.
However, due to a steady decline in the consumption of beer in recent times, many of the smaller
breweries will be affected, and quite a few will have to shut down. Hopefully, as German beer has
endured for the past 2000 years, so it shall endure for the next 2000 years and more.

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Group 6
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http://www.muenchen.de/veranstaltungen/oktoberfest.html
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he+beer_-3-__-3-__-3-_/839/
http://www.germanbeerinstitute.com/Oktoberfestbier.html
http://www.newyorker.com/business/currency/german-beers-existential-crisis
http://www.brewersofeurope.org/docs/publications/Country%20chapters%20Economic%20impact%2
0of%20beer.pdf
http://www.eurocare.org/resources/country_profiles/germany
http://news.bbc.co.uk/2/hi/uk_news/7093143.stm
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http://www.wisebread.com/21-great-uses-for-beer

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