WOOING JACQUES AND FRITZ SIX-PACK
Miller Special Premium was supposed to help crack the European beer market by proving American brews don't have to be tasteless. That's what marketers at Miller Brewing Co., owned by giant Philip Morris Cos., hoped when they teamed up with a small Belgian brewery, Alken-Maes, to launch the new beer in 1989. But a pub crawl in Brussels' St. Josse neighborhood shows Special Premium has a ways to go. "We drink Maes here," says Roger de Wyngaert, a regular at the Chez Rita bar. "Just Maes."
No wonder American brewers are having a hard time across the Atlantic. They're not just fighting European tastes. Distribution systems from Munich to Manchester tie pubs to brewers and keep newcomers a rarity in the supermarkets. Ancient purity laws, especially in Germany, create more hurdles.
'UP FOR GRABS.' American brewers can't afford to be fainthearted. Europe is where the action is. In 1990, Western Europeans downed 241 million barrels of beer, while Americans quaffed 206 million. And with domestic growth sluggish, U. S. and Canadian brewers must boost overseas sales, which remain astonishingly small (table).
The European market is also rapidly changing. Until recently the beer business there was largely a collection of local brewers with fiercely loyal customers. But as the 1992 deadline for European economic integration draws near, such big brewers as Heineken, BSN, and Guinness are acquiring smaller breweries and trying to increase beer sales in wine-loving southern Europe. Says David G. Inns, former finance director of Bass PLC, Britain's largest brewer: "The beer market is up for grabs in the new Europe." North American brewers could grab a chunk of that market with acquisitions of their own. If they don't, they may never have the distribution networks and consumer acceptance needed to be major players.
Buying a European brewery from across the Atlantic isn't easy, however. The costs are enormous, partly because of the low dollar, and the culture clash can be explosive. John F. Morgan, president of Canada's Labatt Brewing Co., knows firsthand that Europeans are tough to win over. Morgan spent nearly four months last year pursuing La Cruz del Campo, Spain's largest brewery. The company provided an entree into Spain's young, growing market. For a foreigner like Labatt, Cruz was also a way into a Europewide distribution system.
Labatt lost out, however, to Britain's Guinness PLC. "The choice was between a company 5,000 miles away with zero European experience and a company with a great deal of European experience," explains one of Cruz's investment bankers. Labatt's Morgan is still looking to make an acquisition.
America's groggy beer giant, Anheuser-Busch Cos., also is taking Europe more seriously now. The company has just assigned Jack N. MacDonough, a heavy-hitting marketer who manages product development, positioning, and advertising for all of Anheuser's U. S. brands, to the job of running international marketing. And Anheuser has moved John H. Purnell, its former top strategic planner, to its international business full-time.
GOING PLACES. The moves could mean that Anheuser is finally ready for a big European push--once it removes the longtime irritant of Budejovicky Budvar, a Czech brewery. Budvar has sued the giant for trademark violations, since both make beers called Budweiser. The dispute has kept Anheuser's flagship brand out of most of the Continent. A settlement is within reach, according to former Anheuser executives and industry sources, who figure the U. S. brewer may take an equity stake in Budvar in return for global rights to the Budweiser name. Anheuser executives would not comment.
European rivals concede, however grudgingly, that with its marketing muscle Anheuser has a good shot at Europe where other North Americans may not. One former Anheuser executive in Europe predicts Budweiser should do well in places with weaker beer traditions, such as Italy and Spain. Anheuser could put its advertising prowess to work in Eastern Europe as well.
But a onetime Anheuser executive says the company has until now ignored the recommendations of a McKinsey & Co. report, which says the best way for Anheuser to go international is to buy or build its own breweries. Instead, Anheuser has been licensing the Budweiser name to a British brewer, exporting from its U. S. breweries, and selling beer outside Britain under the abbreviated name of Bud. Anheuser's Purnell says the company has also considered some big acquisitions, only to be deterred by sky-high prices. As "prices become realistic, then we may move," he says. Adolph Coors Co., America's No. 3 brewer at home and No. 10 in the world, is also acutely aware of the need to crack Europe soon. "As the number of players gets smaller, we could be locked out of distribution channels that are better than others," says Mark Stankovic, Coors' director for international marketing. Last summer, Coors began selling its Coors Extra Gold in Greece and says it is looking into other European deals. Meanwhile, Miller, the No. 2 U. S. brand, is sticking with its Belgian joint venture for now. While Miller executives don't expect to sell Special Premium in huge volumes, the beer could eventually help launch the Miller name on the Continent.
It's bound to be tough going against seasoned European brewers. The Netherlands' Heineken, for instance, began buying interests in European breweries in the late 1970s, betting on the eventuality of a single European market. The world's No. 3 brewer now makes its well-known product in breweries in France, Greece, Ireland, Italy, and Spain. Equally important, Heineken dominates other premium beers on Europe's supermarket shelves. Gerard van Schaik, Heineken's chairman, is busy scouting Eastern Europe to expand beer sales, which totaled $3.8 billion last year.
North American brewers also have to exercise considerable patience. Anheuser, for example, has been licensing Budweiser production in Britain since 1983 but has made headway in the market only recently. It's taken that long for Anheuser's advertising to overcome pub patrons' prejudice against American brews.
At least one U. S. brewer seems to have gotten it right in Europe. C. James Koch, founder of tiny Boston Brewing Co., tried to export his company's Samuel Adams beer to Germany in 1985. German beer officials wouldn't let it in, claiming his beer contained a meat tenderizer sometimes used as an additive and thus violated the country's stringent beer purity law. Koch hired a consultant who found that the enzyme occurs naturally in both Samuel Adams and German brews. Now, Samuel Adams has cracked the German beer market, shipping about 3,000 barrels annually.
SUDS SHAKEOUT. The biggest North American breweries, however, still seem to have the best chance of carving out more than mere niches in Europe. More and more, Europe is heading toward the megabucks marketing approach that American brewers largely invented. As Heineken, BSN, Guinness, and other European giants roam the Continent in preparation for 1992, the chances for a shakeout among smaller brewers increase. And TV advertising costs are skyrocketing on the newly deregulated airwaves, giving the edge to brewers with the deepest pockets.
Changing tastes could also play to North American brewers' strengths. British drinkers, for example, are shifting from the traditional ales and bitters to the kinds of lagers that Anheuser makes. American "lifestyle" advertising is already popular for consumer products because many Europeans assume that Americans know how to relax and have fun. It's unlikely that the King of Beers will ever rule Europe. But sooner or later, North America's big brewers could be part of the coming beer battle.NORTH AMERICANS HAVE BEEN STAY-AT-HOMES...
Brewer 1990 Foreign sales as
volume * percent of total
1. ANHEUSER-BUSCH (U.S.) 85.5 3%
2. MILLER 43.5 1% or less
3. ADOLPH COORS (U.S.) 19.0 1% or less
4. STROH 16.4 1% or less
5. G. HEILEMAN (U.S.) 12.0 1% or less
6. MOLSON (CANADA) 10.5 12%
7. LABATT (CANADA) 9.5 24%
...VS. EUROPE'S MORE GLOBAL BREWMEISTERS
Brewer 1990 Foreign sales as
volume * percent of total
1. HEINEKEN (NETHERLANDS) 43.4 85%
2. BSN (FRANCE) 21.3 57
3. UNITED BREWERIES (DENMARK) 17.0 75
4. GUINNESS (BRITAIN) 17.0 65
5. INTERBREW (BELGIUM) 11.0 55
*Millions of barrels
DATA: BW, BEVERAGE INDUSTRY, PRUDENTIAL-BACHE SECURITIES INC.,
BARCLAYS DE ZOETE WEDD INC., AND COMPANY REPORTS
Julia Flynn Siler in Chicago, with Patrick Oster in Brussels, Mark Maremont in London, and bureau reports