“The Bavarian beer industry welcomes Chinese investment!” The German Bavarian Radio and Television recently reported that due to the new crown pneumonia pandemic, many German breweries are facing bankruptcy threats. And Chinese investors are the hope of the German beer industry. “Now, many beer companies need capital and markets, and the “China-EU Geographical Indications Protection and Cooperation Agreement” involving agricultural products and food has just come into effect in March.” Günterdorf, an agricultural economist from Munich, Germany, told the Global Times reporter. This is a good time for Chinese companies to invest in the German beer industry and even the European food industry.
In total, there are about 1,300 breweries in Germany producing more than 5,000 brands of beer. According to data from the German Beer Brewing Association, the sales of the country’s breweries fell by an average of 23% in 2020, the worst record since World War II. They had to dump tens of thousands of barrels of expired beer every day. Ninety-one percent of companies worry about losing a lot of sales due to the wave of bankruptcy in the catering industry, and 60% of breweries are even worried about bankruptcy.
“We support Chinese companies to invest in the beer industry in Bavaria.” Ritmeier, head of the Bavarian Brewing Association, told the Global Times reporter that this is because the beer industry needs funds. On the other hand, China has been very successful after buying local beer companies a few years ago, and sales have been stable even during the epidemic. He cited, for example, that the King Brewery, which was established in 1881, was wholly acquired by China’s Aitedian in 2017. The arrival of Chinese investors gave this brewery on the verge of closing alive and brought more investors and Chinese tourists to the local area.
“At present, at least 300 beer companies in Germany are about to close. They are looking for investors.” Gunterdorf told reporters that especially the family brewery still faces the dilemma of no successor. This type of brewery has a long history and brewing culture, and the threshold is low, it is worth investing in.
According to the “China-EU Geographical Indications Protection and Cooperation Agreement”, the first batch of 100 geographical indications in China and Europe will be protected from March, including cava, champagne, feta cheese, Irish whiskey, Munich beer, etc. “These European foods related to protected geographical indications are currently sold poorly and lack funds.” Gunterdorf said. For example, Spanish luxury ham producers have been hit by the epidemic, and the current price of the famous Iberian ham is about 30% lower than before the epidemic. According to data from the Spanish Pork Producers Association ASICI, in 2020, the export volume of all grades of dry cured ham in Spain fell by about 3% year-on-year, while in the previous few years it still increased by double digits each year, which shows that its sales have declined sharply. At present, Spanish ham companies are also facing a “buying tide.”
There are many such examples. According to recent data released by the Swiss Chocolate Association Chocosuisse, the total production of chocolate products in Switzerland in 2020 is about 180,000 tons, a decrease of 10.1% compared to 2019, of which exports have decreased to 126,000 tons, a decrease of 11.55 percent. Scotch whisky’s global export volume also fell by 23% last year, and sales fell by US$1.5 billion, a record low in the past decade. Exports of signature foods from other European countries have also suffered varying degrees of losses.
According to a report released by the consulting firm Ernst & Young, last year, the number of mergers and acquisitions by Chinese companies in Europe decreased from 182 the previous year to 132, which is also the lowest level in eight years. In this regard, Günterdorf said that given the current risks of the epidemic that have not been effectively controlled, Chinese investors can focus on small and medium-sized targets. In recent years, Europe is setting up higher and higher barriers to foreign investment, especially in certain key industries, but food is not restricted.
Gunterdorf believes that new investors may wish to learn from the experience of “first movers.” For example, China’s large food group Bright Foods has acquired a number of European food companies in the past few years, including 90% of the shares of Italian olive oil company Salov. Italy’s olive oil is well-known worldwide. Salov’s olive oil brand has a history of nearly 150 years, coupled with traditional and advanced technology, under the current trend of pursuing healthy food, there is no need to worry about no market.
The formal entry into force of the “China-EU Geographical Indications Protection and Cooperation Agreement” can help open up the Chinese market. Chinese consumers value the safety, high quality and authenticity of European agricultural products. In the future, the two parties will expand to hundreds of other names on the basis of the current 200 geographical indication names.
In addition, food sales focus on transportation. The good news is that the transportation network between China and Europe is becoming denser and faster. China-Europe Express trains have added more options for food transportation, and the multiple airports bought by Chinese companies in Europe have also increased the number of air transportation routes, and the prices have also fallen.
However, Chinese investors should pay special attention to European food regulations. European food pays attention to quality assurance from “farm to table”, and every detail of the product must comply with various laws and regulations of the European Union and the country where it is located. Gunterdorf said that if food safety issues arise, the company may not be able to turn over for several years or even have to close its doors.