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BRAU Beviale 2008: The Changing Beverage Market

BRAU Beviale 2008, the get-together for the European beverage industry, takes place again in the Exhibition Centre Nuremberg from 12-14 November. A good 1,400 exhibitors of beverage raw materials, technologies, logistics and marketing ideas have confirmed their presence. On the demand side, the industry's most important capital goods exhibition this year expects some 34,000 potential customers.

Energy and IT theme pavilions provide solutions
Visitors should certainly schedule a visit to the two theme pavilions. "Energy & Water" celebrated its premiere in 2007 and is more topical than ever in 2008 due to constantly rising prices, regional conditions and climate protection laws. On the exhibitors' side, the impressive presentation in hall 7A – organized by NürnbergMesse in cooperation with the Competence Pool Weihenstephan (CPW) at the Technical University of Munich – is attracting an outstanding response. The display space has more than doubled. 25 companies show products and services for optimizing industrial energy and water management on an area of approx. 1,000 m2. The spectrum of themes ranges from energy purchasing, use of renewable forms of energy, rational use of energy, emission trading, water recovery and treatment to scientific project support and consulting for development programmes. Suppliers discuss their solutions with potential users at the forum – also in hall 7A.

The aim of the organizers of the IT@Beverage Industry theme pavilion, NürnbergMesse and the Research Institute for Management and Beverage Logistics at the Brewery Research and Training Institute (VLB), Berlin, is to simplify business transactions in the beverage industry using modern information and telecommunication technology. 15 companies present software solutions, mobile solutions, online services, outsourcing of IT services, RFID, IT security and more on approx. 600 m2 in hall 9. A forum also offers the opportunity for exchanging views here.

The chief reasons for visiting are preparation of investment decisions, market orientation, information about new products and cultivation of business contacts. But events like the BRAU Beviale Evening, the presentation of the European Beer Star Award or the many evening invitations from the exhibiting companies are also perfect forums for discussing future scenarios for European consumer behaviour.

What will Europeans drink in 2015?
Many of the LOHAS (Lifestyle Of Health And Sustainability) community from Stockholm to Athens will then be prepared to pay a premium surcharge for brands with ethics, or will they have long been forced to become bargain hunters because the dwindling income available makes the figure on the price tags the most important purchasing criterion? Sociocultural, political, economic, technical and ecological aspects are incorporated in the various future scenarios of the beverage market created by the European institutions. After all, the European beverage industry is a significant job creator. Whether it can maintain its competitiveness in the future depends on factors such as how it reacts to the challenges of a changing demand.

Key economic factor: European beverage industry
The manufacturing industry in the European Union (EU) is a major independent sector of the economy, which accounts for around one-fifth of EU production and about 34 million jobs. The food and beverage industry, which is ascribed to the manufacturing industry, produced some 2% of the European gross national product in 2006. This doesn't sound much, unless you know that this sector achieved total sales of about 870 billion EUR in 2006 and that the food and beverage industry with 4.3 million jobs is the largest employer in the manufacturing industry.

It had to cut many jobs in the past years as a result of globalization and consolidation. Despite this, the beverage industry – especially the alcohol industry – does not need to hide its light under a bushel when it comes to the number of jobs: The spirits industry employs 50, 000 people directly and approx. 250,000 indirectly. The brewing industry has even more impressive figures to offer: The 3,000 breweries in Europe provide work for 164, 000 people, and create another 2.6 million indirect jobs. This corresponds approximately to the economy of Finland, Denmark or the Slovak Republic (International Center for Alcohol Policies, 2006). It is assumed that each job in the brewing industry supports one job in the trade, two in the supply industry and almost twelve in the catering trade. The wholesale beverage trade, supply trade and catering trade profit most from the economic power of the brewing industry. If the 3,000 jobs in advertising agencies, 38, 000 in the packaging industry (bottles, cans, cartons), 15,000 in machinery manufacture and 145,000 in agriculture are added, this gives a good 3 million jobs or 2% of all civilian jobs in the EU that are due to the brewing and spirits industries.

New product developments for healthy food
Both the brewing and food industries are still dominated by SMEs (small and medium enterprises). This is a source of concern especially for the European Commission, which poses the question of how these companies can raise the necessary capital for investment in new product developments to counter the change triggered by factors such as demography (aging of society, migration), sickness (allergies, nutrition-based illnesses, obesity), lifestyle and competition (European Commission, Perspectives for Food 2030). Not to mention the ambitious target formulated in the Lisbon Strategy (2000) of increasing spending on research and development to 3 % of the gross domestic product of the EU by 2010, with 2/3 to be provided by the companies and 1/3 by the public sector. The EU has not achieved this target yet.

The long-term aim of the beverage industry and brewing industry will be to suitably design products with the aid of science and technology so that they can print every desired health claim on the package, such as "Reduces the risk of …" or "Supports the function of …". Everyone is already looking to the Asian market, where research is being pushed in the field of bio-active ingredients of Asian plants contained in Chinese and Japanese drinks. Globally operating companies with – in every respect – well-equipped research and development departments certainly have a strategic advantage over the SMEs in the industry in this respect. On the other hand, the SMEs can resist successfully if they attempt to form partnerships with private investors and research laboratories at an early stage.

"People will always eat and drink" – but how much?
Cautious market researchers are afraid to look into their crystal balls and prefer to occupy themselves with the present situation on the European beverage market. But this is anything but clear, as it is not yet foreseeable how beverage consumption in Europe will develop in the medium term in view of the massive price rises of all important agricultural raw materials. According to an old saying "People will always eat and drink", but the question is how much? For weeks now, European consumers have seen how food and drinks have become more expensive. In view of price rises of over 90 % for the most important agricultural raw materials in the past two years (Food and Agriculture Organization of the United Nations, FAO, April 2008), consumers can consider themselves lucky that the rises did not affect them until much later. Due to intensive competition, many manufacturers have apparently not dared to immediately pass on the exploding prices for raw materials and energy to the consumers.

One thing is now sure: European consumers’ spending on food and drinks will not be able to remain at the present level. Households in Western Europe spent an average of 10 to 20 % on food and alcoholic drinks in 2004 (Economic Research Service ERS of the United States Department of Agriculture). This figure counts as “normal” for industrialized countries. The average American household spent only
7 % on creature comforts. These figures refer only to consumption at home. So when Americans eat and drink comparatively cheaply, this is because their visits to restaurants, hamburger bars and coffee shops were not included in these statistics. Moreover, many items of food are more expensive in Europe than in the USA because of higher taxes, charges and wages.

Due to a relatively low gross national product (GNP) compared with the USA, consumers in countries like Greece (23 %), Italy or Great Britain (both 17 %) and Germany (15 %) pay more for food and drinks in the supermarket in percentage terms. This becomes even clearer in the countries of Central Eastern Europe, whose household spending on food and drinks is around 20 %, and even appreciably more in the Baltic States and Russia: Estonia 21 %, Lithuania 28 %, Latvia 24 % and Russia 37 % (ERS). Such figures mean they are not in an extremely critical situation like most of the developing countries, where households currently spend between
60 and 80 % on food and drinks, but restrictions on consumption and substitution purchases can still have a negative effect on the results of the beverage producers up to the end of the year.

What, how much and at what price the European consumer will consume in the long term is decided by future economic development in the EU after the end of the US credit crisis. Irrespective of this, the boundaries between drinks, food and remedies will become blurred, not least because the legislator and insurance companies will exert growing pressure on consumers and industry not to foster nutritional disorders any longer. But the extent to which the consumption of alcoholic drinks will be restricted and in return drinks with added benefit will become a mainstream product ultimately depends on the decision of the consumers, which they



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