The other Dutch brewer—Royal Grolsch N.V.: Holland's number two looks to raise its international profile

Modern Brewery Age, Nov 11, 2002 by Gregg Glaser

In the eastern part of the Netherlands, close to the border with Germany and on the banks of the river De Slinge, lies a town named Groenlo. Popularly known as Grolle, and in olden times called Grunloh, it was in this town in 1615 that the master brewer, Peter Cuyper, founded the Grolsch brewery. In 1577 Cuyper was appointed Guild Master of all the brewers in Grunloh and he became the mentor to brewers throughout the town, which became known as center for fine brewing.

Today Royal Grolsch N.V., the parent company of Grolsche Bierbrouwerij Nederland B.V. and Grolsch International B.V., maintains a brewery in the modern town of Groenlo, but this is the smaller of Grolsch's two operating breweries. About 20 miles north and a bit more to the east in the city of Enschede (also just a stone's throw from the German border), Grolsch bought a larger brewery in 1895. This brewery, which also houses the company's corporate offices, was largely responsible for Grolsch brewing 2.95 million hectoliters of beer last year, a record for the brewer.

THE NEW BREWERY

The Groenlo and Enschede breweries' days are numbered, however, because on the outskirts of Enschede, a mere five miles or so southwest, Grolsch is building a large, state-of-the-art brewery in the village of Bokelo. Construction on the new brewery began in November 2001 (design and consultation work was executed by Danbrew, a subsidiary of Carlsberg), and the first beers to come of out of the new facility will debut this fall. Grolsch expects the Boeklo brewery to be fully operational by the autumn of 2003. By 2004, all Grolsch beers will be bottled and canned in Boeklo, and the Groenlo and Ensohede breweries will be permanently shut down in 2004 and 2005. With an initial tank farm capacity of 3.2 million hectoliters at Boeklo, Grolsch has a goal of producing 4.6 million hectoliters of beer by 2006, with the 30-hectare, 120,000-square-meter site suited for expansion to a capacity of six million hectoliters.

CORPORATE STRUCTURE

Grolsche Bierbrouwerij Nederland B.V. is the company responsible for sales and marketing of the Grolsch brand (and other brands, such as the Amsterdam Mariner line) in the Netherlands. Production, logistical and support activities are also concentrated in Grolsohe Bierbrouwerij Nederland. Grolsch International B.V. handles worldwide sales and marketing of the Grolsch brand outside the Netherlands, excluding the U. K. and the Irish Republic.

Royal Grolsch N.y. owns a 51 percent interest in Grolsch (UK) Ltd., which is a joint venture with Coors Brewers Limited. (Coors became Grolsch's partner in this venture when Coors purchased the Carling Brewers portion of Bass Brewers from Interbrew SA. earlier this year.) Grolsch (UK) Ltd. takes care of sales and marketing of the Grolsch brand in the U.K. and the Irish Republic, and Grolsch is brewed in the U.K. under license by Coors Brewers Limited. Grolsch is also brewed under license in Poland by Brok S.A.

In the Netherlands, Grolsch owns 300 properties (cafe/restaurants), which are in effect" tied houses" where Grolsch beer may be served exclusively; European Union laws permit breweries to own tied houses if the brewery has less than a 30 percent market share in its home market. Overall, Grolsch is sold in about 6,000 cafes.

SALES

Grolsch is the second largest brewer in the Netherlands (Heineken, of course, is the leader), with a 15 percent market share. Sales of Grolsch beers break down to 60 percent in the Netherlands and 40 percent international. For 2001, this amounted to 1.8 million hectoliters sold in the Netherlands and 0.8 million hectoliters in the U.K. and the Irish Republic, with the remainder sold in the approximately 48 other countries where Grolsch is available. Outside the U.K. and the Irish Republic, Grolsch's biggest market is the U.S., followed by Canada and France. In the U.K., Grolsch is the fastest growing brand (present in the market since the early 1970s in the Channel Islands and in the rest of the U.K. since 1978), and is the fourth largest selling premium lager (trailing Stella Artois, Budweiser and Kronenbourg), and is sold in more than 7,000 on-trade locations.

Back home in the Dutch market, Grolsch sales are two-thirds off-trade and one-third on trade. This compares to overall sales (including all international markets) of 89 percent off-trade and 11 percent on-trade.

INTERNATIONAL ALLIANCES

In February of this year, Royal Grolsch N.V. entered into a 60 million joint venture with Germany's Warsteiner Brewery. The agreement includes co-operation between the two midsized, but internationally-focused, privately owned breweries, in the procurement of packaging materials, auxiliary materials and other items. The objective, according to a joint statement issued by the breweries, is an "alliance to strengthen the position and competitiveness of both parties in the concentrating beer industry in Europe, while retaining their independent status."

Since August 2001, Grolsch has had a 20 percent interest in Portuguese soft drinks company Sumolis S.A. Earlier in the year, in January, Grolsch named Cereuro S.A. in Portugal as its Portuguese distributor. Cereuro was at that time wholly-owned by Sumolis. Grolsch, brewed and filled in the Netherlands, is sold in Portugal through Cereuro, and a new Sumolis beer, Tagus, is brewed in the Netherlands by Grolsch and filled in Portugal.