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The rise of the German brewery start-up Bergmann has been so rapid that co-founder Herbert Prigge jokes he is tired of discussing growth rates and production figures. "Every number I tell you will soon be wrong, anyway," he smiles when we meet at the company's shiny new building south of Dortmund's city center.
Prigge, a business consultant who began to brew beer with his friend Thomas Raphael a decade ago, is not exaggerating. By late this summer, Bergmann's sales were 80 percent higher than at the same stage of 2017. By the time they moved in March, their new brewery was already too small. The unpretentious beer hall, where some special varieties sell for up to €14 a liter, is bustling every night. Brewery tours are already nearly sold out until the end of the year.
As regional retailers badger Bergmann to increase supply further, Raphael, who still works as a self-employed microbiologist, admits: "We are getting overwhelmed by demand. Our biggest challenge is to avoid growing too fast."
It's a problem Germany's more established beer makers would love to have. The country is the world's fifth-largest beer market, with a total consumption more than twice as high as in the UK. This week will see more than six million people start to flock to Munich's legendary Oktoberfest, where they will spend close to €500m in overcrowded beer tents. Yet elsewhere, the German beer industry is in crisis.
Demand is falling in a country where there are more than 6,000 different brands of beer. The theory goes that you could drink a different one each day for more than 16 years without having to taste the same one twice. In fact, today fewer Germans regularly drink beer at all. Since the early 1990s, domestic consumption has dropped by more than a quarter. Consumption per head peaked in 1976 and has been falling ever since. The result has left mass-market brewers suffering from overcapacity and fighting a long-running price war. More than two-thirds of all the beer sold in supermarkets is offered at a discount.
Some big breweries are hurting badly. Warsteiner has cut jobs, while this summer workers at the Holsten brewery in Hamburg went on strike to protest against plans to axe almost a fifth of its jobs. "We are in the midst of a fierce consolidation process that will generate more negative headlines," says Holger Eichele, chief executive of the German Brewers' Association.
Nowhere epitomizes the crisis more than Dortmund, a working-class city on the eastern edge of the Ruhr, Germany's old industrial heartland. Five decades ago, it was the biggest beer town in Europe. Eight breweries were based there, employing 8,000 workers and collectively churning out 10 percent of Germany's beer production.
Today, once-mighty Dortmund beers such as Kronen and Ritter are all owned by Radeberger, Germany's biggest brewery group. "Complacency was at the heart of the decline of Dortmund's beer industry," says Karl-Peter Ellerbrock, a historian heading the city's Westphalian Economic Archive. Brewery owners missed three trends that started in the 1960s, he says: the sharp increase in demand for bottled beer, the decline of the "export" variety, which was crowded out by Pilsner, and the canny marketing that positioned beer as a premium product.
On top of this, times have changed, says Uwe Riehs, chief marketing officer of Krombacher, Germany's largest beer brand. The country has an ageing population and lifestyles are different. "A 64-year-old just drinks less beer than a 44-year-old," he says. "And a 44-year-old today drinks less beer than a 44-year-old did 20 years ago."
As Bergmann's booming business shows, however, a new kind of German brewery is flourishing. With just 10 employees and €1.5m in annual revenue, it is Dortmund's only independent beer maker. Newly relocated next to a retired blast furnace, it seems the very image of a post-industrial start-up. Yet this start-up has a heritage stretching back more than 200 years.
Founded in 1796 by the Bergmann family, the brewery was later acquired by Berlin-based Schultheiss, only to disappear finally in 1972. More than four decades later, it is back. When Thomas Raphael discovered by chance that the Bergmann trademark had expired, he made a snap decision to register it again. "At that point, I had no intention of becoming a brewer," he recalls.
Raphael found it cool to own a historic beer brand but realized he could only keep it if he used it at least occasionally. A first batch of 6,000 liters of Bergmann beer, brewed by a small regional rival, emerged to an enthusiastic reception from a group of 20 friends who committed to buy 300 liters each. Raphael believes their success is partly driven by a general nostalgia for Dortmund's long-gone beer heritage and for its former glory days as a major coal and steel city; as well as being the name of the beer's founding family, Bergmann is also the German word for miner. The reinvigorated brand's slogan "Harte Arbeit, ehrlicher Lohn" ("Hard work, honest reward") taps into this history.
Bergmann is not alone in this. As drinkers crave alternative tastes and authentic, local brands, 200 small, new breweries have been founded over the past decade. By contrast, a blind tasting by German broadcaster ZDF in 2016 showed that very few drinkers can tell the difference between the leading industrial beer brands. Quality, not quantity, is what German beer drinkers want now.
In a remote part of the Black Forest mountain range, deep in Germany's south-west, one man has the luxury of ignoring most of his industry's negative headlines. Christian Rasch, CEO of Rothaus brewery, focuses on what the brewery has been doing for the past 227 years: making one of Germany's best — and most expensive — beers, the iconic "Tannenzäpfle" ("small pine cone").
Rasch, a straight-talker who lives in a company mansion next to the brewery, has a very clear view on the discount war that has damaged many German brewing companies. "We just don't participate." Rather than competing over volume, Rothaus has also chosen to reduce the amount of beer it produces. "In the short run, this is surely the harder way of doing business," says Rasch. Yet it's an approach that is paying off.
Since 2010, the strategy has chipped 11 percent off Rothaus's revenues, which in 2017 stood at €75m. But the brewery continues to be eye-wateringly profitable — its operating profit margin exceeds that of giant Heineken. Rothaus is debt-free and recently financed a €30m investment in a new bottling plant out of its own cash flow. "We always expand in small steps," says Rasch.
The brewery's success certainly rests on high-quality beer, a strong brand that has acquired a halo despite its tiny marketing budget. Yet Rothaus also has a patient owner: the German state of Baden-Württemberg. It is one of just three breweries in Germany in public hands.
A visit to Rothaus, an hour's drive from Freiburg, is like a journey back in time. "We brew like we did 100 years ago," says Rasch (although the technology is state-of-the-art). This means using only local ingredients made by farmers who often have been supplying the brewery for generations; water from seven sources nearby, and an elongated fermentation and storage process that takes at least double the time of many rivals. Pasteurising the product to extend its shelf life is also a no-no for Rothaus.
Rothaus has not only risen to become market leader in Germany's wealthy south-west; it is also fashionable in the hip clubs of Berlin. "We have no idea how this happened," says Rasch, who only recently hired a salesman for the capital. "For us, selling to Berlin feels like exporting the beer."
"Beer is a cultural good," says Uwe Riehs in a plush, wood-panelled meeting room in Krombacher's visitor center 80km east of Cologne. The brewer, which controls about 11 per cent of the German market, has turned the threats to the industry into an opportunity. As the traditional market for beer shrank, the family-owned company, which traces its roots back to 1803, invested heavily in newer areas including alcohol-free brands and shandies. Bucking the wider trend, its overall beer production is up close to 9 percent since 2010, and revenue over the same period increased by almost a fifth to €639m in 2017.
"We worked on the quality of our alcohol-free beer for so long until we were able to say: now it deserves the name Krombacher," says Riehs. He believes that in Germany alcohol-free beer has been transformed from an unloved surrogate into a lifestyle product for healthy people. It accounts for 6 percent of the beer market, with 10 million Germans drinking it occasionally.
Krombacher is a textbook example of the small- and medium-sized companies that form the backbone of the country's economy — the famous mittelstand. Yet one mittelstand hallmark is missing: global success. The world's biggest brewer, Belgium-based Anheuser-Busch InBev, is 100 times larger than Krombacher, which sells less than 4 percent of its beer abroad. By contrast, Germany's car industry exports four out of five vehicles made.
The failure of German beer makers to go global has contributed to their troubles. The five largest German breweries hold a global market share of just 2 percent between them. How is it that one of the world's biggest export nations fails to woo international drinkers? A country so obsessed with beer quality that, five centuries ago, it introduced a "purity law", decreeing beer must only be made from the three natural ingredients water, hops and malt?
In fact, it was the very popularity of beer in Germany that led to beer makers failing to expand elsewhere. For decades, ambitious brewers such as Krombacher did not have to venture abroad to expand. Brewers in smaller countries such as Belgium (AB Inbev), the Netherlands (Heineken) and Denmark (Carlsberg) had to look elsewhere much earlier; these now dominate the world market. The fall of the Berlin wall in 1989 added to the Germans' quandary, says Riehs. At a time when foreign rivals started to eye the world, "our growth markets were created by reunification". It is only in the past decade that Krombacher started to think strategically about export markets. "In the old days, we just followed the German tourist abroad," says Riehs. As a consequence, Italy and Spain are still its largest export markets.
Back in Dortmund, Thomas Raphael and Herbert Prigge are evaluating the next steps for Bergmann beer. The pair have kept their old jobs and each devotes about 50 per cent of his time to the brewery. Selling out to a large, growth-hungry beer maker is not on the agenda, says Raphael. "So far, nobody has knocked on our door and we are not waiting for this."
Currently, their beer is distributed within a radius of roughly 20km from the brewery, but "one idea is to go to Berlin and open up a sales kiosk in the Bergmannkiez [neighborhood]". For now, though, the brand is racing to meet even local demand. A few weeks after my trip to the brewery, I visit the local supermarket and manage to buy its four last bottles of Bergmann. "They were stocked this morning, and it's all gone again already," says an assistant.
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