The Rise and Fall of German Beer

Background

Civilization may not be around today if it were not for beer. This theory has been around since the 1950s and has continued to be explored by researchers over the decades. Farming helped humans remain in a single location, but it’s argued that the brewing of beer led to the development of a civilization. Humans are social creatures and beer helped fuel creative expression as the fermented drink soon found its place at the center of feasts and celebrations.

While nutritional needs led to the domestication of cereal, experts have discovered circumstantial evidence that the desire to brew beer was an important motivating factor. The Natufian culture, hunter-gatherers inhabiting the Levant region in the eastern Mediterranean between 12,500 and 10,000 years ago, are considered among the earliest farmers. The Natufian had tools capable of brewing beer and other evidence, including large hearths and pottery, indicate a social or ceremonial aspect to their culture. “These observations provide more compelling circumstantial evidence that makes it increasingly likely that brewing of beer was an important aspect of feasting and society in the Late Epipaleolithic,” the researchers concluded.

Beer consumption and trade flowed across civilizations and geography. Mesopotamia, Egypt, Greece, and China all had localized beer brewing traditions. In Germany, the first evidence of beer dates back to 800 BC.

During the Middle Ages, beer brewing became more centralized. With large plots of farmland, Benedictine monks had the means, and dedication to manual labor, to produce beer on a much larger scale. Weihenstephan Abbey claims to be the world’s oldest continuously operating brewery with evidence dating back to 725 AD of hops being brewed at the location. The commercialization of Weihenstephan began in 1040 when the abbey received a license to brew and sell beer.

The Reign of Reinheitsgebot

Bavaria could be classified as wine country in the first half of the 16th century, but a drop in temperature along with increased prices led residents to switch allegiances. The rise of beer and a population boom led to skyrocketing grain prices as bakers and brewers tried to meet the new demand. Bread was the linchpin of an individual’s daily caloric intake, which led to local purity limits restricting grain usage in order to better serve the public.

The next milestone in German beer production occurred in 1516 with the introduction of the Reinheitsgebot, or Bavarian beer purity law. Signed by Duke Wilhelm IV of Bavaria, the law would clean up the industry and limit the number of ingredients to just malt barley, hops, and water. Yeast would later be added to the law along with other refinements over the years. For Bavaria, the new law regulated the price of beer while establishing the mechanism for the state to collect profits from breweries. The Reinheitsgebot also protected wheat and rye stocks, which kept bread at an affordable price. A decree from Kaiser Wilhelm II made the Reinheitsgebot the law of the land in 1919.

Further industrialization continued throughout Europe with each country developing their own preferences and techniques. While the Bavarian purity law ushered in change, most beer was classified as ale.

Lagers use a bottom-fermenting process with a type of yeast that’s different from the top-fermenting process used to produce ale. Lagers could be stored in cold caves over the winter and last through the summer until beer production could resume during the fall.

It wasn’t until Louis Pasteur’s discovery of yeast in 1857 that brewers could truly experiment beyond ales or porters. With a better understanding of the role of yeast, lager production skyrocketed. Munich’s rise as a city center helped local brewers adopt new technology and served as the center of the lager boom in Bavaria. Beer production doubled from 8.6 million hl in 1871 to 17 million hl in 1897. Of the 2.6 million hl exported from Bavaria, 1.5 million hl were produced in Munich.

Large lager breweries popped up across Germany following the country’s unification in 1871 coupled with an economic boom beginning in the 1880s. Breweries in Berlin produced 1.94 billion hl of lager in 1890 while Dortmund’s specialty, a strong lager called “Export,” reached 1.4 billion hl in 1900.

The history of German beer wouldn’t be complete without the introduction of Pilsner, which was brewed in the Bohemian, now Czech, city of Plzen. The hoppy, crisp beer became a sensation across Europe. Initially, only a few cities could replicate the brew due to the extremely soft water required to produce the beer, but many breweries adapted quickly to produce pilsner beer. Pilsner remains the beer of choice for Germans, accounting for a 62.5 percent market share.

Before beer was even brewed, Germany had an agrarian advantage that would position it at the heart of the global industry. Germany is one of the largest barley producers in the world. Producing 8 percent of the world’s barley, Germany’s production reached a peak of 14.49 million tonnes in 1991.

Germany is also tops in hops. The other vital ingredient, one hop variety adds aroma while another variety adds bitterness, in beer has a long-standing growing tradition in the country with gardens throughout Germany. The country produced 3847 tonnes in 2014; 29 percent of the world’s hops.

The European Court of Justice banned the purity law in 1987 to allow imports of beer that did not adhere to the rule. Beer produced in Germany had to adhere to the centuries-old law in order to be labeled as such. Even with a proud tradition, consumption has been declining since peak in 1976 despite German reunification in 1990.

Bye Bye Beer

Taste changes over time, with younger adults preferring beer. As one gets older, there’s a shift to hard liquor or wine. Germany’s aging population means a smaller potential pool of consumers. The core population of beer drinkers, between the ages of 15 and 59, is also projected to continue to shrink.

In a similar fashion, a lifestyle around beer is no longer considered socially acceptable or healthy. A beer in the morning, or a quick pint during lunch, was once a normal part of one’s day. “Das bier ist gesund, zu jeder Stund,” or “beer is healthy at any hour,” was a common saying found on steins. A global shift toward a healthier lifestyle has led to a decrease in consumption across other predominantly beer-driven countries such as Austria, Belgium, and the Czech Republic.

Beer has been established at the center of social functions, from biergartens to traditional taverns, but fewer Germans are drinking beer around other people. On-trade sales have declined by 21.2 percent between 1997 and 2010 while off-trade sales have increased by 10 percent from 2010 to 2013. More people are buying beer from a supermarket, which could limit overall consumption. A drink after work with a colleague could lead to one or two more as the group becomes more engaged in conversation whereas a drink at home may begin and end with dinner.

A decline in popularity could be countered by a spark of creativity. In the US, craft beer has broadened the palate of the country’s beer drinkers. Germany’s traditional approach to beer is another important market factor to consider in its decline.

“Brewed according to purity laws” beers are slipping out of favor as more consumers turn toward spirits, flavored beers, and wine. The true drink of Germans is not beer, but coffee with an annual consumption per capita of 149 liters, or around 630 cups.

Beer producers have failed to adjust to this trend. Beer purity laws fostered an unrivaled quality, but the constraints that were once a strength are now a weakness. Even with thousands of beer varieties, there’s little diversification as one reaches the national level. Local, regional, and national selection is dependent on wholesalers. Local and regional breweries produce beer with a shorter shelf life and at a smaller volume than larger producers. Considering Bitburger, Krombacher Brauerei, and Warsteiner Brauerei, among the best-selling brands in Germany, have a stake in the largest wholesaler, variety is further limited in supermarkets and larger cash-and-carry stores known as Getränkemarkt.

Beyond nostalgic yearnings, Germany’s beer decline has had tremendous financial implications for the country. The German government collected 10.267 million euros in taxes in 2012, down 20 percent from 2002.

Despite the growth of microbreweries, there has been an overall decline in the number of breweries. "Brewery death" of mid-sized breweries is still observed as forecasted increases in growth have failed to materialize.

Outlook

Despite the brewery death observed, microbreweries—typically characterized by smaller production, flexibility, and creativity—have been steadily increasing in Germany. With 677 microbreweries operating in the country in 2015, there is a market for innovative beers. This trend may be sustainable if the government implements regulations similar to a three-tier alcohol system in the US to protect the distribution chain of beer. As conglomerates continue to increase their global market share through mergers and acquisitions, a tiered system would help foster the growth of microbreweries leading to a diversification that could please more discerning palates.

The success of the US craft beer scene could represent one path to a German renaissance. The number of craft breweries has more than doubled from 2009 with 4,269 breweries in 2015 and a 12.2 percent share of the beer market in the US. With this growth, demand for hops, used increasingly by smaller breweries, has also risen. US producer prices for hops reached an all-time high of $11,440 per tonne in 2016, compared to $4,100 per tonne in 2006. As the German beer market, like that of other European countries, reaches maturity, brewers may reap more returns by exporting to markets with room for growth, such as China—currently the world’s largest consumer of beer.

While brewing is part of German culture, the slump in production may not see immediate relief by venturing into external markets unless breweries, currently structured to provide to a local market, adjust accordingly. Breweries are highly fragmented with 1,076 breweries producing less than 50,000 hl a year in 2003. Production at larger scale is done by international companies, some of which already have a presence in African countries, not beholden to purity laws which limit shelf life and can use cheaper ingredients to gain a price advantage.

Finally, the demographic that fueled the peak consumptions seen in the 1970s and early 80s is definitely not the target consumer today. Breweries holding tightly to the long held brewing traditions may benefit from loosening up.