Duvel is different


These are not the best of times for beer brewers inEurope. Since global economic growth began to sputter in 2008, beer production has fallen by 6 percent, consumption has taken an 8 percent hit, and beer sales in bars and restaurants have fallen by 15 percent, according to a study by Ernst & Young. A growing sense of economic insecurity has led beer drinkers to consume less, and, more often than not, imbibe at home. 

But throughout this period of declining thirst, a well-known Belgian brewer has bucked the trend. Duvel Moortgat, Belgium’s fourth-largest brewery group, has not only managed to keep its sales and profits in the black,  it has actually flourished. Over the past three years the company’s stock price has more than doubled, even as the Belgian economy careened into a double-dip recession.

Duvel (pronounced “doov-ul”), family-run for four generations, has defied the downturn by catering to European and American consumers’ changing preference for specialty beers and premium brands. It is a crucial niche. While Westerners are drinking less these days, they’re becoming increasingly choosy. Instead of reaching for mass-market lagers like Stella Artois, beer drinkers look for high-end beers made by Duvel, including its namesake ale and its smaller brands, Maredsous and Vedett.

“People tend to drink stronger ales with higher alcohol content,” says Hans d’Haese, an analyst at Bank Degroof, an independent private and investment bank in Brussels. “So they’ll drink one or two stronger beers, rather than five lagers.” Duvel beer, which analysts estimate accounts for nearly half the firm’s annual sales, is a strong blonde ale with an 8.5 percent alcohol content. 

The company’s success is remarkable given the landscape in its home country. While Europe remains the world’s second-largest beer producer behind only China, per capita consumption has fallen sharply. At the same time, from 2006 to 2010, the number of breweries in Belgium fell 9 percent, to 122, according to a report by the consulting firm Euromonitor International. The remaining Belgian brewers have instead been forced to turn overseas: exports rose 7 percent over the same period. 

Duvel  – founded in 1871 by the Moortgat family in Steenhuffel, in the heart of Flanders – has been among the most successful at this transition. It has built up its stash of beer brands over the past decade by carefully picking and choosing small breweries that lack the scale to export, and turning them into profitable entities.

One of duvel’s recent buys, de Koninck of Antwerp, was seen by the industry as particularly savvy because it married the company’s marketing and distribution muscle with a struggling brewery that produced high quality beer. At the time of the purchase, in 2010, Duvel’s chief executive Michel Moortgat made clear he would market de Koninck both at home and overseas. The gambit has paid off: more than a third of the 19 percent sales gain at Duvel in its latest fiscal year was due to de Koninck.  

Duvel revenues have increased 61 percent to €162.5 million since 2008, thanks to growth in overseas sales. In its 2011 fiscal year alone, sales in the US, The Netherlands, France and the UK jumped by 23 percent. Analysts attribute such gains to the company’s ability to leverage its made-in-Belgium name. In all, Duvel now exports to some 40 countries.

In the US, where competition from a growing number of microbrews is stiff, Duvel has done well with specialty beers at the brewery it bought in 2003 in Cooperstown, NY, Brewery Ommegang. It recently offered “Seduction”, billed as a full-bodied ale mixing the flavours of Belgian chocolate and tart cherries, and “Gnomegang”, a golden ale with hints of clove. Last year, sales at the brewery rose across the board, and the place drew top chefs to host dinners with beer pairings.

Duvel stock has had such a good run that some analysts worry the price – at just under €80 a share in early May – has peaked. But even those sceptics seem upbeat about the outlook, thanks to the company’s sterling track record. “The question is, how big will growth be going forward?” says Kris kippers, an equity analyst at Petercam, an independent financial group in Brussels. “If they keep focused on their long-term strategy, I don’t see any hurdles at all.”