The Oktoberfest Economy.
Germany is known for many things around the world, from its cars and engineering to its sausages, cheese and beer. German beer is closely linked with Oktoberfest, the original incarnation of which is in the Bavarian city of Munich, with the concept now popular around the world.
More than 6 million people descend upon Munich, Germany’s third-largest city, each year to take part in the festival. With crowds of this magnitude, the festival has a huge economic output all of its own, driving hotel stays, restaurant sales, brewery receipts and 12,000 jobs. Six Munich-based brewers supply the festival with the 7-8 million litres of beer sold in the iconic 1-litre Ma? glasses during Oktoberfest each year.
That beer is the centre of an estimated €1.1bn of revenue generated by Munich, with €320million of that spent on the festival grounds alone. Slightly less than that is spent on hotels and hostels, with the remainder being spent around the city. But if you look at the amount of beer sold per visitor, it appears that German beer is more of an accessory than it is a big seller itself: despite an upward trend in per-visitor sales over the years, the average festivalgoer will have barely more than a single Ma?.
The picture is similar in the export market, where Germany exports beer by value than it does hard liquors like Jägermeister. Both exports account for only 0.1% of German exports by value, selling US$1.29bn of beer abroad in 2012 against US$1.31bn of hard liquor that year.
Several factors likely lie behind this low figure for exports of German beer:
- Firstly, beer is mostly water by volume and weight, making it expensive to transport long distances. This means that it is more economical to export liquor than it is to export beer, since stronger drinks are more concentrated;
- Also affecting the transportability of beer and other alcohol are excise taxes and duties, which add costs to foreign alcoholic beverages and thus make them less attractive to foreign markets;
- The above factors mean that German beer sold abroad is instead brewed locally, using recipes and techniques from Germany. One prominent example of this is the Paulaner brewery in Singapore. Although this would show up on the financial returns of the German brewers responsible, they are less visible in export statistics since the finished goods are not shipped overseas. Instead, raw ingredients like wheat, hops and barley are exported. Although these are not all put towards beer or even German beer when exported, Germany sold US$2.75bn of these products to foreign nations in 2012;
- Germany’s purity law, or Reinheitsgebot, restricts the ingredients that may be used in German beer. This puts German beer at a price disadvantage against foreign breweries such as Anheuser-Busch Inbev, who are free to use cheaper ingredients like rice in their beers.
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