#159 A Berlin Hangover
Without a doubt, Germans are a beer-loving people. With more than 100 liters of beer consumption per capita annually, more than 1,500 breweries, and more than 6,000 beer brands, the market is closely eyed by foreign brands, and many have tried to capture a piece of the pie (or should I say, a sip from the Stein). San Diego-based craft beer maker Stone Brewery was one of them.
Stone Brewery, founded in 1996, had only taken a little more than a decade to become one of the ten largest craft beer makers in the US, and it had made the Inc. 500 | 5000 Fastest Growing Private Companies list a total of ten times. Tempted by its success at home and through distributors abroad, the company’s CEO Greg Koch decided that Lager-drinking Germans were ready for American craft beer on a grand scale soon. The company invested 30 million US$ into a historic and equally impressive 43,000 sq. ft. 1901 gasworks complex, and started Stone Brewing World Bistro & Gardens in the Mariendorf district of Berlin – a combined brewhouse, canning line, bottling line, taproom, and a lush outdoor beer garden. It opened to much fanfare in 2014, with Koch pulling a publicity stunt by dropping a small boulder on a collection of German beers, a symbol for his ambitions for the German market. He added, “Just as we breathe new life into this historic space, we will join the German and European craft brewers who together are breathing fresh air into this country’s, and this continent’s, storied brewing culture.” An apparently piqued Berlin newspaper mocked him as the “The Jesus of Beer of America” (which is also the title of a documentary on Stone’s Berlin adventure). Not even five years later, in April 2019, Stone Brewery gave up. Demand wasn’t there for their high-priced specialty brews. Stone sold the Berlin facility to Brewdog, a Scottish craft brewery which operates pubs around the world. The Stone Brewery had gravely misjudged German’s thirst for high-priced American craft beer and they had over-extended themselves financially. While Koch admitted that they went “too big, too bold, too soon”, he also found fault in the Germans. As the company was leaving Germany, he complained about the bureaucracy in Germany, and on his blog he ranted against the German construction industry: “The real challenge was the tendency of our contractors to stop everything when a problem arose. The refrain I heard over and over was, ‘These things take time.’ Got a question? Stop everything. Unanticipated challenge? Stop everything. Review the contracts. Stop everything. Reconsider. Throw the baby out with the bathwater. But most of all, stop everything!”. And he couldn’t help adding that Germans were “ignoring these wonderful beers and buying the cheap stuff.”
Stone Brewery will continue to distribute their beers in Germany through other channels, including their famous “Arrogant Bastard Ale”.
March 11, 2020 @ 12:20 am
It is very interesting to read about all the mistakes big players are making when entering new markets, especially as it makes one´s own failures much less dramatic. Also sharing the pain makes it easier to bear, and sometimes it is a nice change to learn from somebody else’s mistake. Stone brewing definitely followed the right path and made an effort in choosing the right market, but it seems they didn´t do their homework till the end. Corporate and product readiness were reached, so when they selected the target market, Germany seemed to be the obvious choice, due to their high beer consumption per capita. I think that the mistake was made on the entry mode level, when they decided to go in full steam with an investment of 30 million and a construction of a production line, without having tested the market beforehand. Germany is a very price sensitive market, and especially in the food and beverage sector, they are a nation that is proud of its own produce. This indicates that market entry advertising might also not have been the best choice. I´d say, pride comes before the fall 😉
March 16, 2020 @ 4:10 pm
Nice one here.
In my opinion, Stone fully misjudged the pull side of demand. Craft beer in Germany, Nertherlands, Belgium and even parts of northern France are part of a meer nationalist motivation. Craft beer is therefore brewed for locals by locals.
Branding will have been a major topic here as well. Crashing traditional German beers in the opening event is insulting your future customers. The beer market was saturated though, which means the beer crashed was the favorite beer of future Stone Brew customers. (Or non-customers)
A last thing will have been that small craft beer breweries have emerged out of a certain motivation. Beer lovers (not just drinkers) were partly fed up with Heineken and other larger corporations to buy all independent breweries. Drinking craft beer has become somewhat a sign of rebelion. Therefore, drinking the next industrially manufactured beer, that’s even higher priced, just doesn’t make sense.
March 20, 2020 @ 4:17 pm
Clearly, there are many mistakes that Stone Brewery made when they tried to enter the Berlin scene. First, they clearly didn’t do their homework and researched the taste and drinking habits of their German target audience, at least not thoroughly enough. Yes, Germany is a beer loving country with a wide variety of beers on the market – but at a closer look, the people’s taste is also quite traditional, people have strong brand loyalty towards “their” kind of beer and in terms of beer style, the vast majority of customers prefers a few very typical styles such as Pils. That by itself is no reason why there shouldn’t be space for American-Style craft beer in Berlin, as a matter of fact other companies have had success on the German market. However, they also didn’t do enough research on the tightly regulated business- and legal environment – complaining about the high bureaucracy in Germany is in my opinion a sorry excuse for not preparing well enough. I also agree with one of the previous comments – even if dropping a rock on German beers was only a publicity stunt, it demonstrates that the company misjudged the pride of German people for their products.
March 26, 2020 @ 3:29 pm
“Arrogant Bastard Ale”
To me it is a good example of a market research which was incomplete. Yes, the Germans do love beer and yes there are a lot of brands and more than 1500 breweries. These are facts which motivates to go into this market. This is the positive side of the market research but so far this does not tell everything about the market. The main market is dominated by big companies like the Carlsberg group the Veltins brewery or the Warsteiner group. Just some microbreweries try to sell more expensive craft beer on this market. Since years the market is declining. Since the 90´s the beer consumption was dropping by 30%. Also, for craft beer a potential market entrée must face a cut – throat competition.
Next to a promising market (on the first look) the American brewery made another big mistake. I was looking at their homepage and I was shocked. They make craft beer and sell it as canned beer. That is a total no-go to me. Canned beer is associated in Germany and Austria as cheap beer. Another problem is that American beer does not have any good reputation in Germany. American beer simply has no taste. Germany has a big tradition in brewing beer and some breweries are already 1000 years old. German beer drinkers stick to their brand and are not willing to make experiments. I think it was a high risk decision to go with beer on the German marked. Finally, the Stone brewing company was closing their activities in Germany except some distribution channels. You always have to be careful with market researches and you have to be careful that you are not “Arrogant”. This is my learning about this story.
https://unex-group.com/wp-content/uploads/2018/05/UNEX-Bier-Studie.pdf
April 3, 2020 @ 12:53 pm
The Power of Culture
It is quite impressive that even big companies underestimate the power of culture. I mean we often talk about cultural differences and the tools to understand these, like Hofstede’s Dimensions. In the case of Stone Brewery it was the lack of research in the German beer drinking culture and where it comes from. Before the 20th century there were a lot of problems with the beer quality and the used ingredients for beer production. Then the “Reinheitsgebot” was established to control the beer quality. Since then the Germans have a really specific idea on how a beer should taste and also of course the price for it. Even Berlin is more moderate than Bavaria it is still Germany. There is of course also a growing market for craft beer but the market is still very small. I found some numbers to underline my statement. The market size for conventional beer products in Germany is about 3.5 million euros and the market for craft beer is about 290 million euros. And there are of course also established companies in this market. That was probably the reason why this project failed in Germany while it succeeded in the States.
April 19, 2020 @ 8:37 pm
I lived in San Diego from 2014 until 2017 and was, against everything I heard about Amercian beer culture in the past, surprised to encounter a vibrant and high standard oriented craft beer scene. I enjoyed most of the craft beers I had there but the beers were very different from what I knew from Germany and Austria. Especially the very popular but strong in alcohol content Indian Pale Ales or short IPAs. I remember back then in 2014 when a very excited beer loving friend told me that Stone Brewery is going to take a swing at the German market and would open a tasting room in Berlin, Germany. I thought the idea was interesting because it would stir up the dusty German beer market but I was afraid that the Germans weren’t ready for this kind of taste and especially these kind of prices. For Christmas 2014 I brought back a couple of bottles of Stone IPA, which was my favorite, for my friends and family. Some really enjoyed it but most, especially the elder ones, didn’t enjoy it at all and rather had their preferred Austrian brand.
April 19, 2020 @ 11:54 pm
After reading the blog post, A Berlin Hangover, from March 8, 2020, I thought about the importance of a company’s ability to adapt to different cultural environments and to truly understand the culture of the market they are attempting to penetrate through various degrees of market research, which we have discussed throughout this course. In this case, Stone Brewery was unable to capture German consumers as they did not prefer the higher-priced American craft beer Stone was offering to the market. Although Germans are beer-loving people and Stone is a highly successful brewery in the United States, they failed to recognize the demand was not there and put themselves in a negative financial position by expecting it to be. Overall, the company failed to partake in adequate market research and did not appeal to Germans. The company also failed to alter any of their products to appeal to Germans’ tastes and preferences. Lastly, I think that the company’s CEO, Greg Koch, could have handled the situation more professionally by recognizing their mistakes rather than faulting Germany, specifically the construction industry, and also German consumers by saying they prefer cheaper beers. By doing this, I think he may have potentially hurt the brand more. I am curious to see how Stone’s distributed beers in Germany do.
April 22, 2020 @ 10:02 am
When it comes to beer I would state the German citizens have a certain pride in their beer history and breweries. Even though the craft beer movement came over from the US, it was adopted quite fast by European breweries and also kickstarted a new wave of microbreweries.
Entering the German market with a high-quality craft beer selection seems like a pretty good idea on paper but as we have seen in the example of Stone Brewery there are a lot of hurdles to take.
By looking at the facts it seems that Greg Koch, the CEO of Stone brewery was wildly successful in the US with his product and seemed to be quite sure that his product was superior enough to convince every beer-drinking german with its taste.
The marketing strategy looked a bit too aggressive, especially the PR stunt with dropping a boulder on a selection of German beers, might have instilled a feeling of repulsion to the “cocky” American brand which thinks it is better than “our” own beer here in Germany.
Also the approach of “go big or go home” might not have been the most clever way to try out a history beer market like Germany. The beer culture is deeply woven with the german culture in general. You should not mock the “Reinheitsgebot” and other traditions so shamelessly and not try to downplay the quality of German beer. In my opinion, thorough research of german beer drinkers and their view on new craft beer brands and a closer look at German culture & society and its ties to the beer culture would have been very helpful for Stone brewery. With that information, they could have also picked a smaller beachhead market or started out with the cooperation of a local microbrewery.
On top of their lack of knowledge about the German beer culture, it seems that also the pricing policy was not adopted. With prices for beer, you can only go that far. If there are already well established European craft beers on the market it does not make sense trying to sell American craft beer at a premium price, especially when it is hard for the customer to tie this premium price to the taste of quality.
April 24, 2020 @ 11:08 pm
After reading the post above about Stone Brewery, the first thing that popped to mind was product readiness and how the brewery just jumped into a somewhat unknown market. Their inability to match the prices for the sought after local beers already put them in a bit of a hole, and they followed that by a less than ideal stunt that bashed the beer history of the population that they were attempting to attract. I feel that if they had respected the products that had been there before their arrival it may have warranted German and other locals to give their product a try. It isn’t often that the bad guy style of business works out and putting down other products is not something that I would do in order to gain popularity in any market, even if it is one that I am well known in. I enjoyed this post very much.
April 24, 2020 @ 11:12 pm
After reading the post above about Stone Brewery, the first thing that popped to mind was product readiness and how the brewery just jumped into a somewhat unknown market. Their inability to match the prices for the sought after local beers already put them in a bit of a hole, and they followed that by a less than ideal stunt that bashed the beer history of the population that they were attempting to attract. I feel that if they had respected the products that had been there before their arrival it may have warranted German and other locals to give their product a try. It isn’t often that the bad guy style of business works out and putting down other products is not something that I would do in order to gain popularity in any market, even if it is one that I am well known in. I enjoyed this post very much.
April 27, 2020 @ 6:12 am
At first glance, it looks like everything was planned Okay. In my opinion, deeper insight can be helpful. In General, German culture is careful and sensitive to financial issues. If we look at this article as a triangle with three dimensions, the first is high beer consumption, the second is financial sensitivity and the third is Stone Brewing luxury products. The third dimension does not fit this triangle, because the other two are contradictory. Canned style was also of matter due to inner culture, and brand age -or originality- is also important, Stone Brewing is young. I learned that number of consumers does not always mean a suitable market.
June 29, 2020 @ 5:44 pm
In the first place it seems like someone has rushed through essential steps in the planning process and did not thoughtfully think about Porter’s Five Forces. Not only the usual beer consumption, legal drinking age and favours in taste extremely differ between Berlin and the US – it also takes some time to introduce inhabitants to new products, flavours and trends. To reach this goal: desk and market research are essential steps in the management and cannot be skipped. Handing out samples and promoting the product with well-known, German celebrities are just some ways to do it. Overall Berlin is a city, which tolerates cultural differences and welcomes them with open hands. It is just a matter of time and willingness.
July 21, 2020 @ 1:20 am
As a fan of Stone Brewery, I was surprised to find out that it did not do well in Germany. Unlike the U.S., Germans are known to prefer quality over quantity when it comes to their beer as best represented by their beer halls. Whereas, in the United States the beer of choice is often depicted as being of a lower quality that makes up for it with low, affordable prices, and often through quantity as well. Do not get me wrong, Americans love craft beer as much as Bud Light and Coors Light, all what I am saying is that breweries and large corporations like Coors have different strategies when it comes to their businesses. Which brings me to the article, I was surprised to see how the CEO of Stone Brewery went about promoting the company. I can see where the Germans were coming from regarding their statement about the CEO portraying himself as the Jesus of beer. If I were in the CEO’s place I would of came from angle that focused on the company’s grass roots, and what separates it from other breweries. Especially when it comes to the festivals in Germany like Oktoberfest, where the focus is more about community and sharing good times with others rather than on profits or capturing a market. For me that is why I like to enjoy craft beers, for that and the taste.
July 21, 2020 @ 7:06 am
While I’m not personally much of a beer drinker, I do have family members who are big fans of the Stone Brewing Company. This is a surprising article for me since the company is very successful here in the states and I’ve only ever heard great things about the brand.
It seems like they made the mistake many companies going international make, they made their decision to enter a market based mainly on the market size. Yes, Germans love beer, but there is more to it then that. If the company had done more research prior to entering the market they would have seen that Germans are more price sensitive when it come to beer, and that the market was already very saturated. Here in the U.S. the Stone Brewing Company is able to charge a premium for their beer because of the high quality, however in Germany you can find equally high quality beer at more affordable prices. Furthermore, if they had done more thorough research, they would have also been aware of how the German construction industry operates. They could have planned construction costs and timelines more accordingly, thus possibly preventing at least one headache in Berlin.
December 2, 2021 @ 6:14 pm
After reading how Stone Brewery gave up on doing business in Berlin, Germany, I am not surprised. With over 1,500 breweries and 6,000 beer brands already located in Germany, it did not seem logical from the start to try and join in with the numerous competitors already cemented in the market, regardless of Germany’s current economic success. 18 years after Stone’s CEO opened the company, the move to international waters seemed a little early and more research needed to be done. Regarding product research, when attempting to reach other international markets, Stone Brewery should create a trial test of the product and service in the desired country. In general, if the beer does not taste good, then people will not buy it. Therefore, samples in largely populated areas can go a long way. Also, if the facility where the beer is served does not match the vibe of country, then people will not feel welcome to drink beer at this facility. Therefore, on top of the taste, research of culture also plays a big role with international success. For example, what type of values do the country’s people stress as most important? What type of food is popular to eat with their beer? What do they like to do for fun? What type of architecture is popular within the area? What is the most popular music genre in the area? Overall, answering questions like these can help a business, like Stone Brewery, mold their product or service with the desired product or service of the specific international market.
December 18, 2021 @ 1:28 am
“German’s thirst for high-priced American craft beer and they had overextended themselves financially”…. The sentence that tells us it all. This was a super interesting read. The CEO of Stone brewing should have done more research before entering the market. This Is a classic example of a successful American company thinking their product would be like where ever. However, they were completely wrong. It makes me laugh that the CEO said that the Germans were too busy buying cheap German beer. Germany is the beer capital of the world and they by far know how to make great beer. The CEO also blamed a lot of their failure on the Germans when in all reality if they would have done more research, and tasted more German beers they would have probably succeeded. It wasn’t that they didn’t have a nice facility or the equipment. It was that they didn’t know the price and taste the Germans were desiring to pay when grabbing a cold one with family and friends.
January 20, 2022 @ 5:08 pm
This is a very interesting case, as it would hypothetically make sense that one of the biggest craft beer companies in the world would successfully target beer-loving Germans. In order for Stone Brewing to have implemented themselves and grow steadily in the German beer market, Greg Koch needed to evaluate the pressures for global integration and local community response. I believe that Koch wanted to embody a home replication strategy, as he established a very large gas complex right out the bat. It would seem proper that the advantages that worked for Stone brewing at home in the United States, would work as a competitive weapon in foreign beer-loving markets. However, there was obviously much more to the madness, Germans tend to go for the cheaper beers rather than expensive high-quality ones. Fully detailed SWOT analysis as well as setting strategic and tactical goals describing what advertising techniques would be accomplished to cater to the German community was crucial before heading East. For example, combining the advantages of Stone Brewing with the responsiveness of Germany by simply running a trial prior to the gas complex could have made all the difference. Marketing ideas such as providing beer flights/testers to light expose the foreign market to American beer could have eased the audience into liking Stone beer. In addition, working with one of the local restaurants to pair food favorites with a new kind of beer could have contributed to easing up the bureaucracy in Germany. Unfortunately, it sounds like the local community response was negative and without perseverance. Creating a better strategic dynamic for situations like these before launching an expensive project would have provided Koch with more foreign beer insight.
January 29, 2022 @ 5:27 am
This article describes some interesting things that many have overlooked regarding the internationalization of their businesses. Most of the time, companies seeking internationalization focus only on the marketing side of whether their products sell in other countries, but this article focused on how difficult to build a supply chain system in Germany. Before building the factory, Koch couldn’t have imagined how difficult and time-consuming it was. Practical problems are not known until you actually start things. This article shows that internationalization has various invisible risks in addition to the assumed risks.
January 30, 2022 @ 10:11 pm
Stone Brewery made the mistake of not researching their entering market properly. Berlin-or Germany in general-was not ready for high-priced beer, when they were already receiving the stuff they wanted at a cheaper price. I think this was poor planning and execution on their part.
February 14, 2022 @ 7:41 pm
This shows that the American Beer company Stone Brewing did not do their research entering Germany. They thought an American highly priced beer would do well in a country that is known for their beer. Also the publicity stunt of crushing other German beers upon opening seems like it is for the wrong crowd. This company made their decision to go international in Germany based solely on the market size. Stone brewing should have entered other less beer dominated countries before going straight to a country that had a very developed beer industry. They didn’t think that Germans would prefer to drink their own beer for cheaper which is a research misstep. The market was already highly saturated. I think they also assumed that the construction in Germany would run the same way as in the United States. If they had done their research, they would have found and been able to accomodate for the fact that Germans like to do things by the books and step by step which can take longer. I think overall, Stone was unprepared upon entering the German market and they did not have an accurate sense of what to expect.
March 24, 2022 @ 1:59 pm
When opening the website the article of “Berlin Hangover” immediately grasped my attention. I am a beerlover myself and I am sometimes also into craft beer especially when I am travelling in the US but over all I still prefer my normal regional Austrian brewed lager. In this case the company simply did not do a proper market research and did probably underestimate the value of the “beer drinking culture” in Germany. Nowadays there is definitely also a market for craft beer but that are mainly small regional microbreweries and people are drinking it because of this aspect. Stone Brewing appears to have made the same mistake that many international companies do when entering new markets: they chose to enter a market based primarily on its size and think they will get a share of it anyway without needing to adopt the product to the specifics of the market. In this case regarding price and probably also quality of the beer. The purity order “Reinheitsgebot” is still a valid argument when selling beer in Germany.
April 13, 2022 @ 1:48 pm
I enjoyed reading this article, because I think Stone Brewing was a little bit ahead of their time. Craft beer has been a niche product at that time, especially in the German speaking regions of Europe. Though Germany might be a really tough place in terms of regulations, that are even more complicated and strict for the food & drinks industry, Berlin was a good choice in terms of open-mindedness, however the location was chosen outside the city-center, difficult to reach with public transport and far away from offices or universities. Asides from that the pricing strategy was most likely contributing to the failure of Stone Brewing. Comparably expensive IPA beer was offered, which is difficult in Germany with a large variety of good cheap beer is available. As beer has not the classy fancy reputation wine has branded itself with, it might be difficult, especially for an unknown brand that has no particular reputation providing reasons to pay more, especially in Germany to sell comparably expensive beer to the local community. After all failure can be found in lack of preparation for the market and the customer, as many brands have proven the possibility of success later.
July 7, 2022 @ 10:59 pm
You can tell why they failed. As someone born and raised in Germany I can tell there is this big drinking culture especially when it comes to beer. Stone Brewery didn‘t do their research, when it came to the drinking habits in Germany. If Germans found a beer they like, it would be hard to convince them to try another brand, especially when the brand is not from Germany. Stone Brewery made the mistake of buying a big complex without even testing the market. All in all if Stone brewery had actually tested their beer it could have been more of a success compared to what it became.
March 19, 2023 @ 10:10 am
I had to comment on this blog article since I work at Puntigamer, an Austrian brewery. I think Stone Brewery made some terrible mistakes because the scenario would be pretty similar in Austria when a foreign company enters the beer market.
The cautionary tale of Stone Brewery’s failed expansion into Berlin highlights the importance of properly assessing market demand and understanding cultural differences when expanding internationally. The company’s investment in a massive complex did not pay off, and they could have started smaller, like a pub brewery, and expanded gradually based on demand. The company overlooked the importance of researching the German beer market and understanding local tastes and preferences. Germans and Austrians are closely linked to local lager and wheat beer brands, and pricing is also crucial, with people unwilling to pay high prices for beer.
In terms of bureaucracy issues, they could have worked more closely with a German construction company to navigate local regulations and timelines.
The failure of Stone Brewery in Germany serves as a reminder that success in one market does not guarantee success in another. Careful research, cultural understanding, and a willingness to adapt to local tastes and preferences are essential for successful international expansion – especially for a product like beer!
Cheers!