Germans Caught Price-Fixing, Should Have Created Craft Beer Scene

Eno Sarris, January 14, 2014

Five German brewers got slapped on the wrist this week for price fixing. They would have done better to foment a craft beer industry in their country instead.

The full story is this -- Bitburger, Krombacher, Veltins, Warsteiner and Privat-Brauerei Ernst Barre GmbH colluded in 2008 to raise the price of a 20-bottle crate one euro. One euro! That took private phone calls and emails that left a 'paper' trail that led to a $150 million fine. The brewers combined may have sold enough crates to cover the fine in the past five years -- Germans drink the second-most beer per person (106 liters last year), and these national brands make up a signficant portion of the beer market. Maybe it didn't hurt so bad.

But that's not the point. They wanted prices to go up faster than the market was bearing. But they were offering the same Big Beer. Perhaps they should have looked to America.

For one, Germany and America work a similar amount to pay for a pint of the average beer. It takes Germans and Americans both less than ten minutes of work to pay for a pint. So the markets are in similar situations.

But that work-minutes-per-beer thing is based on the average price of 500 mL of beer being $1.80 in America. Peruse the craft offerings at your local market and you'll see that price doesn't reflect the price of 500 mL of better beer. And the health of that craft market, well-documented, is having consequences. Good ones, even for Big Beer in America. From Brad Tuttle at Time Business:

The latest beer-consumption data demonstrate that drinkers will pay more for a product they deem as superior—be it locally brewed craft beer or an upscale mass-market beer like Budweiser Black Crown.

If you needed any more evidence to link these two phenomenon, maybe you should, read the piece... and the headline: "Big Beer's Sales Slump - And Yet Profits Rise."

So it's simple, Germany. Instead of shooting yourself in the foot with back-room conversations, you should have shot yourself in the foot by fomenting a craft beer revolution in your country. Then you could take advantage of said revolution to raise the prices on your own premium beers (which cost about the same to make as your other beer). Premium like Budweiser Black Crown.

Of course, it might take an economy slightly more suited for innovation, and some pain in the short term, but that's the price you pay to raise prices. Legally.

Thanks to wiki commons user Soenke Rahn for the header image.