BBAG Osterreichische Brau-Beteiligungs-AG History

Company Perspectives:

What makes a group strong? Is it the clout that comes from a sheer accumulation of resources and market positions? We think differently at BBAG, Austria's largest brewery group. This has to do with the manner in which the group came into being. Taking Austrian history as an example, its own progress has been one of growth through astute marriages. Again and again, since the mid-1920s, successful, long established Austrian brewing companies have been added by mergers or acquisitions. However, instead of pressing these newcomers into the mould of a unified, 'streamlined' group, BBAG has allowed them to retain their individual identity. We believe that the muscle of a group is the sum of the individual forces supplied by its component companies. BBAG has a simple formula for finding the right balance between common features and individuality among its forty or so consolidated companies: the closer to the market they operate, the greater is the need for an individual brand image. The more generalized the activities are&mdash, say, is the case of logistics--the greater the effort that should be made to leverage the advantages of a common approach. Key Dates:

Key Dates:

1921:

Association of five brewers forms Braubank AG.

1923:

Braubank takes public listing.

1926:

Five founding companies merge with Braubank to form Österreische Brau AG.

1929:

Burgerbrau Innsbruck merges with Brau AG.

1968:

Bottling and distribution agreement is signed with Coca Cola.

1970:

Company merges with Zipf Brewery.

1977:

Company acquires Pago fruit drinks.

1978:

Company merges with Schwechat Brewery; acquires Gussinger mineral waters, Lembach catering.

1988:

Brewing operations are spun off as a public subsidiary named Österreische Brau AG; parent company changes name to BBAG Österreichische Brau-Beteiligungs AG.

1991:

BBAG acquires first brewery in Hungary; company also acquires rival Austrian brewer Steierbrau AG.

1992:

BBAG acquires second brewery in Hungary.

1993:

Company regroups all brewing activity under Brau Union AG subsidiary.

1994:

BBAG acquires brewery in Czech Republic.

1997:

BBAG acquires interests in three Romanian breweries.

1998:

Company mergers Brau Union with Steierbrau AG.

2000:

Company acquires Polish brewer Van Pur.

Company History:

Linz, Austria's BBAG Österreichische Brau-Beteiligungs AG has been slaking its thirst for growth through a series of acquisitions that has made it Central Europe's leading brewer--with more than 65 percent of the beer market. The company's majority holding in publicly listed Brau-Union AG gives it a strong portfolio of both national and regional brands, as well as a number of brands--including its best-selling Gösser, one of Russia's top beers--that enjoy strong sales internationally. The company's focus is primarily on beer brands. However, through its subsidiary Pago Fruchtsäfte the company manufactures a line of fruit drinks to the Central European and Spanish markets, and the company also produces natural spring waters under the Gussinger and Gassteiner brands. Led by Karl Büche, the company is a product of the rapid consolidation of the Austrian and Central European beer markets--itself spurred on by the declining beer consumption in Austria and elsewhere. The company's primary subsidiary, Brau Union Österreich, was itself formed by the 1998 merger of two of Austria's leading brewers, Brau AG and Steirerbrau AG. In 1999, BBAG posted sales of EUR 845 million.

Merging Beer Histories in 1921

BBAG Österreichische Brau-Beteiligungs was formed through a long series of mergers that began with the 1921 association of five major Austrian breweries. The economic collapse of what remained of Austria after World War I had placed its beer industry in dire straits. In order to offset the high cost of beer-making, the five brewers--Wieselburger Aktienbrauerei, Poschacher Brauerei Linz AG, Linzer Aktienbrauerei und Malzfabrik, Salzkammergut-Brauerei, and Kaltenhausen Brauerei--joined together to create the Braubank AG brewery. That company went public in 1923.

The five companies remained independent bodies until 1926, when they agreed to merge completely into Braubank AG. The newly expanded company then changed its name to Österreichische Brau AG. Three years later, Brau AG was joined by another brewer, Burgerbrau Innsbruck.

If Brau AG itself was new, its founding members could lay claim to more than 500 years of brewing expertise. The Kaltenhausen brewery, which gave the group its best-selling Kaiser Bier, had been first established in 1475 by Johann Elsenhaimer. The brewery was originally known as the 'Kälte Brau-haus' because of its mountainside location, where cracks in the rock layers gave the brewery a naturally occurring cooling and ventilation system. The brewery remained under Elsenhaimer's leadership until his death in 1498, when the brewer was taken over for the next 300 years by the court exchequer to the royal Austrian government. The Kaltenhausen brewery was later to have such notable owners as the French government, the royal house in Bavaria, and even the Archduke Ferdinand, before being bought up by Deutsche Bank in 1898. The brewery was incorporated as a private company in 1901, taking the name of Aktiengesellschaft Brauerei Kaltenhausen.

Another of the founding Brau AG companies was that of Wieselburger Aktienbrauerei, which traced its origins to the 18th century--although brewing had been performed on its Wieselburg site since as early as the 13th century. In the 1770s, the property surrounding the brewery, as well as the brewery itself, was registered under the ownership of Joseph Schauer, who subsequently added a neighboring parcel. The Schauer family remained in possession of the brewery and property until 1823, when it was sold to Nepomuk Mutzer, who operated the brewery until his death in 1860. In that year, the brewery was bought by Josef Riedmüller, whose family already operated a number of nearby breweries. Riedmüller's widow remarried another brewer, Caspar Bartenstein, then working for another Riedmüller-family brewery. Bartenstein expanded the Wieselburg brewery's operations and gave it his own name. By the turn of the century, the Bartenstein-Wieselburg brewery had bought up a number of other breweries, including that of his former employer, before joining Brau AG in 1921. By then Bartenstein's operations had grown to regional importance, producing more than 75,000 hectoliters (hl) of beer per year. The Wieselburg brewery became one of Brau AG's principal sites, and saw a number of expansion and modernization improvements that accelerated production to more than 100,000 hl by the mid-1950s, then doubling to more than 200,000 by the mid-1960s. The Wieselburg brewery moved to a new location in the early 1970s after Brau AG built a new brewery, the most modern in Europe for the period.

Building Brau Union in the 1970s

At that time, Brau AG itself had begun to grow. At the end of the 1960s, the company took a major step and diversified beyond its brewery operations for the first time, when it acquired a license to bottle and distribute Coca-Cola for the Austrian market, a franchise the company would hold until the mid-1990s. But Brau AG was also expanding in its core beer market as well. In 1970 the company acquired Brauerei Zipf AG. The Zipf brewery had originally been named after Franz Schaup, who had bought the property in the mid-1850s. At that time, the brewery produced less than 2,000 hl per year. Under Schaup, however, who eagerly adopted the new production techniques being developed at the time, the brewery topped 20,000 hl by the 1860s. The company later added artificial refrigeration techniques, necessary for the production of lager beer, and then constructed Austria's first electric railroad in 1894. By the end of the century, production had neared 100,000 hl per year, then rose to nearly 150,000 hl before the outbreak of World War I. During World War II, the brewery was taken over and converted to an armaments factory. But the Zipf brewery was returned to the Schaup family&mdashø great-grandson Fritz Kretz, who modernized its facilities and brought production past 200,000 hl by the end of the 1950s. The Zipf brewery continued to expand through the 1960s, notably with the introduction of its Zipf Utryp pilsener-type beer. By the time of its merger with Brau AG, Zipf's production had topped 500,000 hl. The Zipf label was to remain one of Brau AG's top sellers, topping 800,000 hl (half of which were accounted for by its Zipf Utryp brand) by the 1990s.

In the late 1970s, Brau AG made new moves to expand its businesses. In 1977, the company acquired a majority share of Pago Fruchtsäfe GmbH, adding a new fruit juice component to Brau's non-alcoholic beverages production. Pago had originally been founded in 1888 by the brothers Pagitz, but the company had achieved its biggest success with the introduction of the Pago brand--named after the founders, with the 'O' for obst (German for fruit) added on to the end. Pago was fully acquired by Brau AG in 1979.

By then, Brau AG had completed a number of new expansion moves. After a new series of diversification efforts--including the acquisition of a mineral water component, Gussinger Mineralwasser GmbH, and the acquisitions of Lembacher Restaurationsbetriebe, a catering company, and the label printers, Printa--Brau AG expanded its beer label offerings through a merger with the Schwechat Brewery, making of the famous Schwechater Lager. That company had been founded in 1632, but achieved its fame after it came into the possession of the Dreher family near the turn of the 19th century. The Dreher family--particularly Anton Dreher, born in 1810--was credited with the creation of a new type of beer, the 'lager,' named for its process of bottom-fermenting. In 1841, Dreher realized that the key to lager brewing was in the cooling process, giving birth to the modern lager. Dreher built cooling cellars and ice storage facilities, before turning to refrigeration machines in 1877. Dreher gave his name to the company, and Anton Dreher Brauerei AG became one of Austria-Hungary's most prominent brewers. A series of mergers in the early decades of the 20th century built the brewery, renamed for its home Schwechat location into one of Austria's brewing leaders.

Central European Leader in the 21st Century

The merger with Schwechat had helped to transform Brau AG's brewing arm. Meanwhile, its non-alcoholic beverages and its other diversified interests led the company to a reorganization in the late 1980s. In 1988, the company spun off its brewing and malt businesses into a separate publicly listed company, which kept the Österreichische Brau for itself, while the new parent company--which maintained majority control of the newly created company--was renamed as BBAG Österreichische Brau-Beteiligungs-AG.

BBAG began an ambitious expansion program in the 1990s that transformed it into the leading Central European brewer by the end of the decade. Driving the company were a number of factors, including the increasing consolidation of the European brewing industry, which in turn was responding to steadily declining consumption levels in its core markets. BBAG reacted early and quickly to stake a claim to the newly liberated Central European states, while also protecting its position in Austria.

The company entered Hungary in 1991, with the purchase of the Martfu brewery, a position comforted by its acquisition of another Hungarian brewer, Sopron, in 1992. At the same time, BBAG also greatly expanded its Austrian holdings when it bought up the holding company for rival brewer Steierbrau AG and its stable of historic Austrian beers. Among the Steierbrau breweries was that of the Göss Brewery, built on the site of a nunnery-brewery originally founded in 1020. The modern Göss brewing operations had been set up by Max Kober in the late 19th century. By the end of the century, the Göss brewery had become one of the largest in its region, and by the beginning of World War I the company had achieved an annual output of some 300,000 hl. This figure was to rise to 400,000 hl before World War II cut short the company's production. Rebuilding after the war, the Göss brewery once again became one of Austria's most prominent. After its acquisition by Steierbrau in 1977, the Göss brewery continued to invest in modernizing its facilities, increasing production to more than one million hl by 1983 and topping 1.3 million hl by 1991, making it Austria's largest single beer production facility.

Despite the acquisition of the Steierbrau holding, Brau AG and Steierbrau were operated as separated companies until late in the decade. In the meantime, BBAG moved to restructure its brewing operations in light of its increased international growth. In 1993, the company regrouped all of its brewing operations in both Austria and Hungary under its Brau-Union AG subsidiary.

Brau-Union moved into new international territory in 1994 when the company acquired the Czech Republic's Starobrno Brewery. The company next eyed nearby Romania, and in 1997 purchased interests in three breweries--Craiova Brewery in Craiova, Malbera Brewery in Constanta, and Arbema Brewery in Arad--in that country. As with its other Central European acquisitions, BBAG promptly invested in modernizing its acquisition's facilities. At the same time, BBAG remained committed to its long-held tradition of maintaining its acquisitions' individual identities and regional labels.

The following year, as BBAG faced the declining consumption, falling prices, and over-production that marked the beer industry throughout Europe, the company moved to consolidate its own holdings, merging the Steierbrau and Brau AG operations under the single Brau Union Österreich subsidiary. The new entity instantly became Austria's largest brewer, with more than 57 percent of the total Austrian beer market.

After acquiring another Romanian brewery, the Silva Brewery in Reghin, BBAG turned its attention to another important domestic market, that of Poland. In 1999, the company entered a cooperation and licensing agreement with Van Pur Brewery. In that same year, BBAG boosted its Russian presence, reaching a licensing agreement with the Ostmark Brewery in Kaliningrad to distribute the Gösser label, already a popular brand in the vast Russian market. The company then moved to sell off its non-beverage operations, including its Lembacher catering arm.

In 2000, BBAG went ahead and acquired 100 percent control of the Van Pur Brewery, before acquiring stakes in two more Polish breweries, those of Warsawskie Krolewskie, and Kujawiak, in Bydgoszcz. These acquisitions melded with the company's ambition to capture ten percent of the Polish brewing market, a move which in turn would help propel the company closer to taking the firm lead among the Central European market. BBAG's annual production of ten million hectoliters of beer remained small compared to such European leaders as Heineken and Guinness. Nonetheless, the company's focus on the Central European market gave it a solid position among the ranks of Europe's leading brewers.

Principal Subsidiaries: Austrian Breweries International Gesellschaft mbH; Bier & Mehr Heimservice Ges.mbH; Brau-Union AG; Brau Union Österreich AG; Gasteiner Mineralwasser G.m.b.H.; Österreichische Brau-Gesellschaft mbH; Innsbrucker Gastwirte Getränke Service Gesellschaft mbH; Pago Fruchtsäfte Ges.m.b.H.; Steierbrau Gesellschaft mbH.

Principal Competitors: Aachener und Munchener; Guinness Ltd.; Anheuser-Busch Companies, Inc.; Heineken N.V.; Bass PLC; Interbrew S.A.; Brau und Brunnen; Nestlé S.A.; Brauerei Beck & Co.; Paulaner Salvator Beteiligungs; Budvar; PepsiCo, Inc.; Carlsberg A/s; Plzensky Prazdroj; Central European Distribution; The South African Breweries Limited; The Coca-Cola Company; Tucher Bräu; Danone SA.

Further Reading:

"Brau-Union Buys Stake in Polish Brewery," Reuters, April 21, 2000.

Source: International Directory of Company Histories, Vol. 38. St. James Press, 2001.

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