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Löwenbr

Löwenbräu AG

Nymphenburger Strasse 7
Munich, 80335
Germany
Telephone: (49) 89 52 00-0
Fax: (49) 89 52 00 3412
Web site: http://www.loewenbraeu.de

Wholly Owned Subsidiary of Spaten-Löwenbräu-Gruppe
Incorporated:
1872
Employees: 250
Sales: DEM 107 million ($68 million) (2003)
NAIC: 311213 Malt Manufacturing; 312111 Soft Drink Manufacturing; 312112 Bottled Water Manufacturing; 312120 Breweries

Löwenbräu AG brews a range of beverages including light beer and soft drinks. It has production joint ventures in dozens of countries, but has resumed direct imports from Munich to the United States and the United Kingdom. The company replaced its partners in those markets after its brand languished from a lack of marketing support.

In the 1970s, Löwenbräu led the development of the U.S. imported beer market. Sales plummeted, however, after Miller Brewing Company took over American distribution and diluted the integrity of the brand by brewing a domestic imitation. In the late 1990s, Löwenbräu replaced its partners in the United States, the United Kingdom, and Canada.

A series of mergers combined Löwenbräu with the venerable Spaten brewery group. This was acquired by Interbrew in 2002. Since Interbrew merged with AmBev to form InBev, the Löwenbräu brand has been supported by the largest brewing group in Germany and the world.

BEGINNING A BRAND IN 1383

Löwenbräu, German for "lion's brew," is considered to be one of the world's oldest brand names. It dates back to a beer made by the proprietor of Munich's Zum Löwen, or Lion's Inn, in 1383. One story, retold in the brand's U.S. television ads of the 1980s, maintains that the lion was chained to the beer barrels to discourage pilferage. The earliest recorded instance of the word "Löwenbräu" is in the 1746 Munich brewers' registry. The Löwenbräu trademark was first registered in the United States in 1897.

No country is more closely associated with beer than Germany, and Bavaria is the source of much of the country's drinking culture. A number of brewing regulations have come from the region since the 12th century, some of them detailing medieval punishments such as beatings, exile, or death for bad brewing. In 1516, Germany's famous "Reinheitsgebot" purity law was decreed by Wilhelm IV, Duke of Bavaria (a similar code had been adopted by Munich brewers some 30 years earlier). The Reinheitsgebot allowed only four ingredients for beer: water, barley malt, yeast, and hops. It remained in practice centuries laterminus the rule limiting the price of a liter to one or two pfennig. (The law did not become mandatory throughout the whole of Germany until 1906.)

Löwenbräu beer's production was rooted in the local geography. Water flowed from pristine Alps. Southern Germany was famous for its hops. The locale had its drawbacks; it was far from seaports, which would make exporting expensive.

FIRST OKTOBERFEST IN 1810

Located in Munich, Löwenbräu has remained one of a handful of brewers allowed to participate in Oktoberfest. Its history at the event goes back 200 years. The first of these festivals was held in 1810 to celebrate the marriage of crown prince Ludwig of Bavaria and Therese of Saxon-Hildburghausen.

Georg Brey acquired Löwenbräu in 1818. He and his son Ludwig relocated the brewery to Munich's Nymphenburger Strasse between 1826 and 1851. This would remain its home for more than 150 years. By 1863, Löwenbräu was Munich's leading brewer, according to Datamonitor. It became a joint stock company in 1872 after the Breys sold it.

By 1900, according to company literature, the brewery was one of the biggest in Europe. Production was halved during World War I due to rationing. Löwenbräu merged with Unionsbrauerei Schülein & Cie. in 1921, and returned to rapid growth between the wars. The company began making a wheat beer in 1927. Production exceeded one million hectoliters (26 million gallons) in 1928.

Allied bombing devastated the brewery during World War II, however. It was rebuilt after the war and soon expanded its international distribution. It became a leader among the 2,000 breweries in West Germany alone. By the mid-1970s, Löwenbräu, which produced its own malt, was using about 20,000 tons of barley a year.

The United States was then importing only 1 percent of its beer, according to Beer Blast. Löwenbräu had become its top German import, more or less tied with Heineken of The Netherlands in market share. A shift to local brewing, however, ended up watering down the brand.

U.S., U.K. PARTNERS IN 1974

After Miller, a subsidiary of Philip Morris, Inc., took over the brand in America in 1974, it made some changes to the formula in addition to setting up its own production and reportedly obscuring its U.S. origin on labeling. Other grains, such as corn grits, were added to the barley in the malt, alleged a Federal Trade Commission complaint by Miller's rival Anheuser-Busch, Inc., and there were shortcuts in the fermentation process.

In 1982, the family of businessman August von Finck, reportedly the wealthiest man in Bavaria, acquired 90 percent holding in Löwenbräu AG (through the holding company Agricola Verwaltungs-Gesellschaft). According to London's Financial Times, von Finck acquired the company because of his love of beer. About 10,000 acres of land near Munich was acquired along with the brewery.

In the United States, the brand was being pitched under the tagline, "This world belongs to Lowenbrau," and, indeed, Löwenbräu's influence was being felt globally in the mid-1980s. By one count, the beer was being exported to 140 countries. In 1983, Löwenbräu signed an agreement to have Asahi Breweries, Ltd. brew the drink for Japan, where the German version had been imported for six years. It also was being brewed under license in several other countries.

Later, the slogan was modified to "This night calls for Lowenbrau" (which was coincidentally quite similar to a Michelob campaign, noted Advertising Age ). The television advertising was elaborate, featuring a troop of professional dancers and techno music. Miller Brewing Co. spent $20 million in 1986 to promote the brand in the United States, according to Advertising Age. The TV advertising was later cut, however, to focus on point-of-sale promotion. In spite of the marketing efforts, U.S. sales of Lowenbrau fell 30 percent by 1989. Miller tried producing a light beer version.

COMPANY PERSPECTIVES

When trying to impress a beautiful Fraulein, order her a Löwenbräu. Once it arrives at the table, lean in close and say: Did you knowLöwenbräu is a traditional Munich-style beer that's exclusively imported from the Löwenbräu brewery in Munich. Löwenbräu Original Lager beer is made from the highest quality ingredients giving it a superb natural head, golden color, distinctive, refreshing flavor and a pleasant, enjoyable aftertaste. Brewed according to the Bavarian "Rein-heitsgebot" (Purity Law) dating back to 1516.

Löwenbräu ended the 1980s with a number of new ventures. Siegsdorfer Petrusquelle and Staatlicher Mineralbrunnen were acquired to bolster Löwenbräu's mineral water business. The company was brewing in China, and had bought a former Carlsberg brewery in Greece. In 1989 it acquired a 95 percent stake in Rosenheim, Germany's Schlossbrauerei Hohenaschau, established in 1549.

INTO THE RED IN 1992

The brewery posted its first annual loss in decades, about DEM 8 million, for the 199192 fiscal year. Production volume slipped to about four million hectoliters and turnover fell slightly to DEM 342 million. At the time, Löwenbräu AG was changing into a holding company overseeing three operational units: brewing, soft drinks, and real estate. It was suffering from losses at a former Calsberg brewery it took over in Greece.

Lowenbrau established a U.K. subsidiary in 1993. The brew remained a top seller in its category in the United Kingdom through the early 1990s, in spite of minimal marketing support from its distributor there, according to Campaign. The brand had been controlled in Britain by Allied Domecq. It was part of the Carlsberg-Tetley taken over by rival brewer Carlsberg in 1993. Löwenbräu then formed another U.K. unit, and in 1998 handed off this business to Ushers of Trowbridge.

In 1996, Miller was introducing a line of "Lowenbrau Craftbiers" to compete for the "more adventurous" U.S. consumer, reported Advertising Age. Miller had been producing Special and Dark varieties under the Lowenbrau brand. By this time, Miller's annual ad support for the brand had dwindled. U.S. sales fell as well, to about 400,000 barrels a year from a mid-1970s peak of more than one million. Domestically, Löwenbräu was having a tough time competing against its neighbors in the alcohol-free segment.

BOUGHT BY SPATEN IN 1997

A well-known Upper Bavaria brewing group, Gabriel Sedlmayr Spaten-Franziskaner-Bräu KGaA, acquired a 96 percent interest in Löwenbräu AG in October 1997. (Von Finck's holding company had been renamed "Custodia Holding AG" a couple of years earlier.) While Löwenbräu would brew separately from the group's other brands (Spaten, Franziskener wheat beer, etc.), there was some opportunity for cost savings by combining marketing, administration, and other functions.

The brewery had been losing money, posting a net deficit of DEM 18 million in 199697. The loss was cut in half the next year, though sales fell 13 percent to DEM 250 million. Financial troubles in Asia and Eastern Europe cut sales to those regions, while Austria, Italy, Spain, and Latin America were growth markets. Löwenbräu continued to sign up new joint venture partners. By 1999, Löwenbräu was being brewed in a dozen countries, including India, Israel, and Egypt. Löwenbräu's sales were DEM 121.6 million in 1998, when the company posted a $5.8 million loss.

LABATT TAKING OVER IN THE UNITED STATES IN 1999

Löwenbräu AG replaced Miller as its U.S. partner with Labatt USA in September 1999. Labatt USA, a joint venture between Canada's Labatt Brewing Co. Ltd. and Mexico's FEMSA Cerveza S.A. de C.V., had a mandate to increase ad spending for the brand. Labatt had taken over Löwenbräu's production in Canada two years earlier, replacing Molson Brewery. Labatt Brewing was owned by Belgium's Interbrew S.A. Labatt promptly returned production to the few ingredients specified in the German purity law.

KEY DATES

1383:
The proprietor of Munich's Zum Löwen begins brewing beer.
1516:
The Bavarian "Reinheitsgebot" (Purity Law) is decreed.
1746:
The "Löwenbräu" name appears in the Munich brewers' registry.
1810:
Löwenbräu flows at the very first Oktoberfest.
1818:
Georg Brey acquires the brewery.
1872:
Löwenbräu becomes a joint stock company.
1851:
The brewery relocates to Nymphenburger Strasse in Munich.
1897:
The Löwenbräu trademark is registered in the United States.
1928:
Annual production exceeds 26 million gallons (one million hectoliters).
1945:
The brewery is rebuilt after World War II.
1970:
Production is 40 million gallons (1.5 million hectoliters).
1974:
Licensing deals are signed in the United States and the United Kingdom.
1982:
The Von Finck family acquires a 90 percent stake in Löwenbräu AG.
1992:
Löwenbräu posts its first annual loss in decades.
1997:
Spaten-Franziskaner-Brau KGaA buys a majority of Löwenbräu AG.
1999:
Labatt USA takes over Löwenbräu in the United States.
2002:
After a return to Britain, Löwenbräu Original is again exported from Munich to the U.S. market.
2004:
InBev acquires Spaten and Löwenbräu.

Löwenbräu's total sales slipped to DEM 103 million in 2000; however, the company was able to post a profit of DEM 499,000 after losing DEM 7 million in the previous two years. By this time, its brands included Loewenbraeu Muenchener Hell, Loewenbraeu Premium Pilsener, Loewenbraeu Premium Lager, Loewenbraeu Special, Loewen Weisse, Loewenbraeu Alkoholfrei, and Loewenbraeu Light.

After the closure of its brewing partner Ushers, Löwenbräu was relaunched in Britain in 2001 by Refresh UK PLC, a new drinks marketer. This time, it was imported directly from Munich.

PART OF A LEADING GLOBAL GROUP IN 2004

The Belgian brewery giant InBev bought the brewery operations of the Spaten group for DEM 477 million ($537 million) in 2004. Spaten, which had been brewing for more than 600 years, was shifting to the real estate business. Its brewery business, including Löwenbräu, was officially combined with InBev affiliate Interbrew Deutschland in October 2004. This made Interbrew Deutschland, which also included Beck's, the top brewer in Germany based on total sales.

InBev had been formed by the merger of Interbrew with Companhia de Bebidas das Américas (AmBev). The largest brewing group in the world, InBev was taking the Löwenbräu brand to Romania in 2006. It also took over a licensed operation in Russia from a unit of Heineken N.V.

PRINCIPAL COMPETITORS

Diageo PLC; Heineken N.V.; Paulaner Brauerei GmbH & Co. KG; Scottish & Newcastle PLC.

FURTHER READING

Arndorfer, James B., "Labatt to Up Ad Spending Behind Lowenbrau in U.S.: Brewer Demanded More Support After Dropping Miller," Advertising Age, August 25, 1997, p. 28.

"Austrian Becomes New Chairman of Loewenbraeu," Boersen-Zeitung, September 22, 1992, p. 9.

"Banker with a Bent for Brewing," Financial Times (London), Sec. III, Financial Times Survey, West German Banking and Finance, June 9, 1982, p. VII.

"Beermaker May Export Famed Brew," St. Louis Post-Dispatch, April 16, 1989, p. 1E.

Behringer, Wolfgang, Löwenbrau: von den Anfängen des Münchner Brauwesens bis zur Gegenwart, München: Suddeutscher Verlag, c1991.

"Ein Bier Wie Bayern," Horizont, July 31, 1997, p. 71.

"Foreign Beer Prod. Will Start Here," Japan Economic Journal, January 25, 1983, p. 17.

Garfield, Bob, "Lowenbrau Light Makes Bow to Germanic Artistic Imagery," Advertising Age, November 20, 1989, p. 46.

"Inbev Launches New Brand in Romania, Targets Wider Market Presence," SeeNews, April 5, 2006.

"Interbrew Agrees to Buy German Brands," FT Investor, September 18, 2003.

"Interbrew Pays £332M for Lowenbrau Maker," The Independent (U.K.), September 19, 2003.

Jack, Ian, "Labatt to Brew Lowenbrau," Financial Post (Toronto), Sec. 1, August 19, 1997, p. 3.

Khermouch, Gerry, "Miller Hands Off Lowenbrau to Labatt," Brandweek, August 18, 1997, p. 1.

Kramer, Larry, "Brewer Sues [sic ] U.S. Maker of Lowenbrau," Washington Post, November 11, 1977, p. F1.

"Lion-Hearted," Financial Times (London), Sec. I, August 12, 1983, p. 8.

"Loewenbraeu Acquires Carlsberg Atalanti Brewery," Frankfurter Allgemeine Zeitung, August 31, 1989, p. 16.

"Loewenbraeu AG of West Germany Plans to Expand Its Presence on the Mineral Water Market," Frankfurter Allgemeine Zeitung, January 26, 1988, p. 17.

"Loewenbraeu Falls into the Red in 1991/92," Frankfurter Allgemeine Zeitung, April 1, 1993, p. 20.

"LoewenbraeuProfits Expected in Two Years," Frankfurter Allgemeine Zeitung, May 22, 1998, p. 24.

"Loewenbraeu to Set Up Brewery in Egyptian Venture," European Report, January 8, 1997.

"Lowenbrau AGHistory," Datamonitor Company Profiles, July 17, 2004.

"Lowenbrau Forays into Indian Beer Mart, Floats Local Arm," India Business Insight, March 8, 2001.

"Lowenbrau in Comeback," Off License News, April 6, 2001, p. 11.

"Lowenbrau on the Right Path (Lowenbrau ist auf gutem wege)," Suddeutsche Zeitung, May 14, 1999.

Mahood, Casey, "Labatt Wins Lowenbrau Deal; Brewer Will Take Over Job from Miller, Molson and Supply All of North America," Globe and Mail (Canada), August 19, 1997, p. B4.

Pruzan, Todd, "Lowenbrau Expands Its Line; Specialty Craftbiers May Give Needed Lift to Miller," Advertising Age, July 22, 1996, p. 8.

Saraikin, Anton, "Lowenbrau uxodit ot Heineken, bavarskoe pivo budet razlivat' InBev," Vedomosti, October 10, 2005, p. 189.

"Shareholders at Loewenbraeu Holding AGM Approve Name Change," Süddeutsche Zeitung, May 13, 1995, p. 31.

"Shares in Loewenbraeu Subsidiaries in Unexpected High Demand," Boersen-Zeitung, August 12, 1994, p. 17.

"Spaten bringt Löwenbräu auf Kurs," Süddeutsche Zeitung, April 18, 1998, p. 23.

"Spaten-Franziskaner-Braeu Takes Over Struggling Loewenbraeu," Frankfurter Allgemeine Zeitung, September 6, 1997, p. 22.

"SUN Interbrew Limited Announces Changes in Production and Distribution of Lowenbrau in Russia," SKRIN (Russia), October 19, 2005.

Teinowitz, Ira, "Lowenbrau Links New Spots to Old Tale of Chained Lion," Advertising Age, February 22, 1988, p. 4.

Van Munching, Philip, Beer Blast: The Inside Story of the Brewing Industry's Bizarre Battles for Your Money, New York: Times Business/Random House, 1997.

Weiner, Michael A., The Taster's Guide to Beer: Brews and Breweries of the World, New York: Macmillan Publishing Co., Inc., 1977.

White, Hooper, "Beers Battle to Take Over the Night," Advertising Age, September 22, 1986, p. 73.

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