König Brauerei GmbH & Co. KG

views updated

König Brauerei GmbH & Co. KG

Friedrich-Ebert-Strasse 255-263
D-47139 Duisburg
Germany
Telephone: (49) (203) 455-0
Fax: (49) (203) 455-2515
Web site: http://www.koenig.de

Wholly Owned Subsidiary of Holsten Brauerei AG
Incorporated: 1858 as Bayrische Bierbrauerei Theodor König
Employees: 400
Sales: DM 350 million ($180 million) (1999)
NAIC: 31212 Breweries

König Brauerei GmbH & Co. KG is one of Germany’s large breweries, and, with a profit-to-sales ratio of over five percent, one of the most profitable ones. König Brauerei’s König Pilsener and alcohol-free Kelts are among Germany’s best known national beer brands. In a shrinking German beer market, König Brauerei invests about DM 50 million or 15 percent of its total sales in advertising. A family business for 142 years König Brauerei was acquired by the Hamburg-based Holsten brewery in early 2000.

Theodor König Founds a Brewery in 1858

Theodor König, the founder of König Brauerei, was born into a wealthy farming family that owned a large estate in Münsterland, in western Germany. He grew up on the family farm and as a boy paid visits to the brewery at a nearby castle. After his military service, the young man worked on a large farm for two years, which also ran a small brewery. Realizing that he was more interested in beer brewing than in farming, König decided to learn the craft from scratch where the best beer was made. At age 25, he began his life as a journeyman, which lasted five years and took him to Munich, the capital of beer brewing at the time, and then to Vienna, where he learned about the Pilsener beers being brewed in Bohemia.

Around 1855 Theodor König returned as an experienced beer brewer. The first job he took was at a local brewery in Beeck, a small town in the lower Rhine region. At the time an idyllic setting located on the Emscher river, Beeck was soon to become one of Germany’s newest industrial centers. In 1856 König purchased a piece of property on Beeck’s main thorough-fare and started working on his dream of a brewery of his own. He set up a brick factory at another site and thus, when he was finally granted a brewing concession in 1858, part of his brewery had already been built. The Bayrische Bierbrauerei Theodor König sold its first beer in its own beer hall, a public room that every brewery at that time had. In the first years Theodor König invited his brother Franz, who was also a brewer, to help him set up the business. König’s beer hall soon became popular among the workers from nearby factories.

Within a short period of time, Beeck and the surrounding region developed into an important industrial center of the emerging coal, iron, and steel industries. König started delivering his beer to the neighboring towns. German industrialist August Thyssen was a frequent visitor to König’s brewery and consulted him about real estate he was planning to buy for new mining sites. In the end, Thyssen persuaded König to sell him his own property— his brick factory in Alsum and a farm and restaurant in Hamborn—which Thyssen developed into one of Europe’s largest iron and steel makers, the August Thyssen-Hütte AG.

Meanwhile, for König, sales went up almost steadily, interrupted only by the wars in 1866 and 1870. König expanded and modernized the brewery to keep up with growing demand. In 1888 the first steam engine to power a cooling unit went into operation at the brewery. In 1891 founder Theodor König died at age 66. By that time, beer production volume had increased three-fold over the past ten years, and was at some 70 times the brewery’s output during its first year of operation.

The Second Generation Takes Over in 1891

After Theodor König’s death, his oldest sons Leo and Her-mann König took over the business. Because of the uninterrupted industrial growth that was drawing more and more people into the region, the brewery and its beer production continued to expand at a rapid pace. Given increased demands for new equipment as well as compensation for Theodor König’s other heirs, the business was transformed into a public company in 1899. In 1900 beer output reached 50,000 hectoliters (hi) for the first time. (One hectoliter equals about 26.5 gallons.) The only factor that dampened growth was a growing anti-alcohol movement of the time. In 1906 a new steam-powered generator and cooling facility replaced the old one; in 1912 the old brewing tanks were replaced by aluminum and steel tanks. The first delivery automobile was also purchased around this time.

In the first decade of the 20th century, consumer taste in beer began to change. The more well-off beer consumers, in particular, began to shift from heavy, bottom fermenting beers to the lighter Pilsener, which contained more hops. Around 1911 König Brauerei began developing a new specialty beer under the name König Pilsener, which soon became exceedingly popular. When World War I broke out in August 1914, however, the brewery suffered a serious setback. During the war, supplies of raw materials, such as barley, malt, and hops, were rationed by the government. The “war beer” brewed in 1917 contained so little hops and malt that the final product hardly tasted like beer at all. The war was followed by hyperinflation which was finally ended by a currency reform in 1924. During those turbulent times, in autumn 1921, the third generation of the König family first entered the company’s management. In 1925 Max König, son of Hermann König, and Leo König’s son, Richard, took over the family business.

Expansion in the 1920s

After World War I and the economic depression that followed, the two König brands—König Export and König Pilsener—started regaining their prewar popularity. To take advantage of the trend and to make the company more crisis-proof, the management decided to expand beyond its regional market. The first long-distance König customers were attracted in Cologne and Dusseldorf in 1924 and 1925. Soon thereafter, the König brand became well known throughout all of the Rhineland. The brewery’s efficiency was greatly assisted by new delivery trucks, which replaced older horse-drawn wagons. However, König Brauerei limited the area in which the company’s own trucks would deliver, so more distant customers traveled to purchase beer directly from the König brewery. The widening demand called for new investments and modernization. In addition to building new production facilities, the company also bought up neighboring real estate. By 1929 the König distributorship network had greatly expanded; more than 100,000 hi of beer left the brewery that year. In 1934 the last wooden keg and the last horses left the brewery.

In 1929 the Great Depression began, spreading from New York City around the world. The industrial region around Duisburg went into a sudden economic downturn, forcing numerous businesses and factories, big and small, to close down. Many citizens lost their jobs, and in 1932 about half of all Duisburg inhabitants subsisted on welfare. At the brewery alone, the workforce was cut in half, as was the output of König beer. As if this were not enough to contend with, the German government increased the beer tax by 46 percent in 1930 and two years later required all breweries to significantly cut beer prices. König Brauerei reacted with a strict cost cutting program as well as a successful expansion into the Netherlands and Belgium. The economy began recovering in 1934 and by 1938, when beer output once again passed 100,000 hi, König Brauerei had become a leading German brewery. In 1937 König Brauerei was transformed into a private company again to preserve its character as a family business. Its new name was König Brauerei K.G. which was managed by Max and Richard König.

The outbreak of World War II in September 1939 brought a lot of soldiers to western Germany, and König beer consumption increased. On the other hand, malt became scarce again. König’s master brewer Schüler started experimenting with new ingredients around 1941, discovering that molke, a byproduct of dairy factories, could be used as a replacement for malt. The resultant new “war beer” made with molke became a bestseller and pushed output up to 170,000 hi. Also during this time, other breweries having transportation or production difficulties began contracting with König Brauerei to serve their Duisburg-based customers. At the same time, 22 subcontracting breweries brewed König “war beer” for distant customers. However, when the war reached inside the borders of Germany, the horizon darkened for König Brauerei. Between October and December 1944 the majority of its production buildings were destroyed in bombing raids. An office was established in the Mühlheim Forest to administer subcontractors and clearing out the wreckage started immediately.

When the American military arrived in Beeck at Easter 1945, a large portion of the rubble was already gone. After the war the company management decided that instead of rebuilding the old facilities it would invest in a completely new state-of-the-art brewery that would significantly increase production capacity and the company’s economic efficiency. In the first years after the war, when food was rationed and unavailable, König Brauerei began providing its employees with meals prepared on the company premises from food that was bartered for beer. In February 1946 the first postwar “beer-like beverage” left the König Brauerei. Soon the old König customers could be served again. However, it took until 1948 before the last subcontracts serving far away König customers could be canceled. In the same year a new currency was introduced in West Germany and the economy began to pick up speed again. New wholesale and hospitality customers were added to the existing network of 28 König dealers. Substantial advertising campaigns also promoted sales of König Pilsener. New customers were won all over Germany, and in 1958, the year of König’s 100th anniversary, beer output reached 500,000 hi for the first time.

Company Perspectives:

The Duisburg-based König Brauerei, with its premium beer König Pilsener and the alcohol-free Pilsener Kelts, is one of the most successful of German breweries. The company, founded in 1858, and the slogan, “Heute ein König” (Today a king), have become well-known far beyond Germany’s borders.

A National Brand in the 1960s

A marketing coup occurred at König Brauerei in the 1960s, as the company attempted to position König Pilsener as a premium quality beer throughout Germany to create a basis for further growth. In theory, marketing beer to Germans was not difficult. In the mid-1960s, beer was a favorite beverage among the German population; they consumed 120 liters of it per capita per year. Moreover, König Brauerei was at that time West Germany’s largest private brewery and was already distributing its beer brands nationally. However, the German beer market was a regional one, and local brands had fiercely loyal followings.

Under the management of Leo König, who had studied business as well as brewing, and his cousin Renate König, the company employed a young ad agency called “Team” to develop a new ad campaign for König Pilsener. On the national level the campaign was aimed at image building, while on a regional level its main purpose was the “hard sell.” Team was not happy with the DM 500,000 budget, which was rather lean for a national campaign. However, they decided to take up the challenge.

As the story goes, when young creative Team member Jiirgen Scholz visited his client he was surprised by the many happy-faced, good-looking people he saw in the König Brauerei. Asked about this, Leo König declared that in his brewery everybody was happy and “König-treu”, that is loyal to the company. This statement became the basis for the brewery’s new image campaign. While most other breweries used the taste of their beers as their unique selling proposition, the new König Pilsener campaign sold the experience, tradition, integrity, and joy of the people working for König. The photos used in the advertising campaign were taken in the brewery and showed scenes of the day-to-day business of brewing beer, using the real brewmasters in their traditional work clothes. The ad copy covered themes from the König world, including the German purity law, the importance of tradition, and the beer’s taste. Later, popular German politicians and artists gave their testimonials to the beer in ad campaigns as well. With an initial run in two of Germany’s major magazines, the campaign was very successful, especially in persuading more upscale restaurants and bars to carry König Pilsener as a specialty beer. By the beginning of the 1970s, the German beer landscape had changed completely; the national brands led the market.

Alcohol-Free Alternatives in the 1990s

In the late 1980s König Brauerei responded to a new trend worldwide—the demand for “light” products—and created an alcohol-free beer called Kelts. To combat the market research showing that alcohol-free beer drinkers were “party poopers,” the brewery launched several promotion campaigns using humor as their main selling point, one of which featured two comic policeman characters, known as The Kelts-Control, who hung out in popular bars. The company considered the campaigns a success and noted that they resulted in more orders from the hospitality industry.

In 1992 Leo and Renate König retired, and a new four-person management team was put into place. Leo König had managed the brewery for some 25 years, during which time total sales at the König Brauerei jumped by 375 percent, from DM 87 million to DM 326 million. During the same time period its beer output increased by 240 percent from one million to 2.4 million hi per year. Most importantly, König Pilsener had been established as one of the best-known and most successful German premium beer brands. One of the new managers was Leo König’s daughter, Doris König, at that time 37 years of age, who took over responsibility for marketing. In 1991 König Brauerei spent about 6.5 percent of its total sales on advertising. About two-thirds of this budget was spent on König Pilsener and one-third on KELTS.

In the late 1990s consolidation was speeding up in the shrinking German beer market and higher investments were needed to keep pace with the competition. An Arthur Anderson study on the future of the brewery industry in Germany projected that per-capita beer consumption would drop by one-fifth within ten years. Other projections suggested that only one-third of Germany’s 1,283 breweries would be able to survive the increasing process of concentration. König Brauerei’s management decided to team up with a strong partner in order to secure the long-term future of the business. In February 2000 König Brauerei gave up its independence when it was sold to Hamburg-based Holsten Brauerei AG. The two companies were a perfect match; while König Pilsener was mainly distributed in northern and western Germany and the bulk of its customers came from the hospitality industry, Holsten’s market was mainly Germany’s North and East as well as the retail market. As planned, all König brands would be continued and marketed independently by König Brauerei.

Principal Subsidiaries

König Brauerei Verwaltungs GmbH; topGast Gesellschaft fur Gastronomieberatung mbH; Vortmann GmbH & Co. KG.

Principal Competitors

Dortmunder Actien Brauerei AG; Warsteiner Brauerei Haus Cramer GmbH & Co. KG; Brauerei Veltins; Binding Brauerei AG; Brauerei Beck & Co.

Key Dates:

1858:: König Brauerei is founded by Theodor König.
1899:: The brewery is transformed into a public company.
1911:: Brewing of König Pilsener begins.
1924:: Brewery expands its reach beyond regional borders.
1937:: König Brauerei becomes a private limited liability company.
1944:: The brewery is destroyed during bombings.
1967:: Output reaches one million hectoliters per year.
1970:: König Pilsener becomes a national brand.
1989:: The company is transformed into König Brauerei GmbH & Co. KG, and alcohol-free Kelts brand is introduced.
2000:: Holsten Brauerei AG acquires majority share in König Brauerei.