Around 1980, Albert Cramer, managing director and owner of Warsteiner decided to build an international export department targeting business in North America. At the time, Germany was still divided into two factions: east and west. Albert knew that for the brewery’s long term survival, he had to expand Warsteiner’s international footprint.
What helped Albert make this decision was the fact that the exchange rate between the German Duetsch Mark the U.S. dollar was around .80. Albert established Warsteiner Importers Agency, which allowed the brewery to sell beer made in Germany and receive payment in U.S. dollars. The favorable exchange rate allowed Albert the ability to invest heavily in the U.S. market, subsequently growing Warsteiner to a volume that was, at one time, near 150,000 HL.
As we all now know, Europe’s transition to the euro, coupled with the change in the U.S. monetary policy, caused a reversal in the exchange rate. At one time the rate was 1.50 euros to the dollar. This new rate changed everything. Some European beers, including Bavaria and Carlsberg, pulled out, or pulled back, on their support of their own brands. Due to the situation with the exchange rate, many breweries walked away from volume. Warsteiner, in fact, lost half of their volume, mostly due to decisions tied to this rate. Even today the exchange rate runs 1.10 to the dollar, and although this is much improved importers to continue to struggle with the monetary policy.
Last week, Stone Brewing Co. announced a five percent reduction of its workforce, adversely affecting almost 60 employees. Stone, one of crafts oldest and most successful brewers and distributors in southern California, recently built a brewery in Berlin and has been exporting beer for years.
As successful as Stone has been overseas, it is not nearly as successful as Brooklyn Brewery. Brooklyn recently sold a minority position to Kirin Brewing of Japan, who is said to have purchased 25% of Brooklyn. Brooklyn also announced that their beer would soon be brewed in Sweden by Carlsberg Brewing. Currently half of Brooklyn’s annual volume of 300K bbls. are sent overseas!
It is obvious how the exchange rates drove this export business. It made sense for Brooklyn, Stone and other breweries, including Rogue, to create an international business. With the U.S. dollar worth 50% more overseas, where else could they get such a return on their investment? Plus, these early breweries had little to no competition in the overseas craft industry. Now these breweries have established their individual footprints around the world and they are growing.
As the U.S. market continues to experience slow down, or even push back from craft consumers, coupled with an additional 2,000 breweries coming on line soon, exporting could become a much bigger business. On the other hand, successful breweries like England’s Brew Dog, are importing to the U.S. and building breweries so they, too, can by-pass exchange rates. The success of these breweries remains to be seen.
Stone is reducing their workforce; while on the other hand, Rogue is expanding their sales force by 60%. One builds in Germany, one expands back home. Following these companies will be interesting. Warsteiner lost their number-one status in Germany some years ago, but remains that country’s number-one privately owned exporter of beer. That, in itself, is the definition of a long-term vision.
A nickel ain’t worth a dime anymore!