For many years Heineken ruled the import sales in the US market despite using an independent importer and employing wine and spirit houses as major distributor networks. Only when Corona caught fire and rocketed past Heineken in the 1980s did Heineken change. They first took over importing rights, and later, moved distribution rights to the beer network.
The change caused brand sales to grow dramatically, but Heineken still could not catch Corona. They did, however, develop one of, if not the best, marketing departments for beer in the US. Then the recession hit.
In 1999, 18 European countries adopted the Euro as their currency. Initially the exchange rate against the dollar was established at 1:1743. Prior to the establishment of the Euro, countries had their own currency. When Warsteiner came to the US in 1980, the exchange rate against the mark was.80:1. The dollar was stronger than the mark for many years until the Euro was created.
The exchange rate made selling beer for Europeans very lucrative. Exchanging marks for dollars was just good business. Many of the imported brands did well as their breweries invested in the US.
By 2000, the dollar’s strength against the Euro increased, going from the 1.17 exchange rate to a low of .8252. It did not stay that low for long, and by July of 2008, the dollar against the Euro was at a high of 1.6038.
For the European breweries, enough was enough, At Warsteiner, for example, controlling (accountants) started raising prices dramatically and reducing overhead including, staff and marketing. The result of these moves cost these breweries sales and market share, the exception being Stella. Heineken also lost sales and share, as the cut backs hit everyone hard.
For years the European economy has been stagnate, and coupled with the changing demographics, this has resulted in slowly dying beer sales. In fact, NAs dominate some countries. In Spain, the NA market is over 10%. One brewery in Germany estimated that by 2020, their overall sales could be 22% NA.
Breweries pushed for growth in other countries starting with Russia. That country, however, tripled beer taxes recently, thus resulting in a decline in sales. China has been targeted, but business there has also been a challenge. Africa and South America support locally made brands.
In the last several years, European breweries have attempted to return to growth in the US. Heineken has ramped up marketing and staffing, as have other smaller importers like Warsteiner. So why now?
The exchange rate for the Euro closed recently at 1.23. It has been declining for some time. As the dollar gets stronger, this makes the US beer market much more attractive for these overseas breweries. Recent IRI numbers for Heineken are now in the plus side.
The decisions made by these companies in the middle of the last decade are now being reversed. Breweries such as Bavaria, Carlsberg and others, will look back to the US as the dollar regains strength. They will attempt to recapture what they walked away from as the executives behind these decisions have retired.
These European breweries have been around for centuries, for them, the sooner you fall behind, the more time you’ll have to catch up.
Beer Fodder; http://www.citylab.com/
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