Sunday, 2023 January 29

German craft beer made in Shanghai – Interview with Felix Wendlandt, Co-Founder of Brander Urstoff

Beer plays an important role in the alcoholic beverage industry, while China is the world’s largest producer and consumer of beer, with 360 million hectoliters in 2021. Together with rapid economic development and urbanization over the past decades, the habits of Chinese beer consumers are changing significantly as well. Younger generations today value quality and freshness, eager to discover new and unique tastes, which is the reason why they prefer craft beer to mass-market brands. Based on analysis of 36Kr Global Research, there are over 1,000 new craft beer companies registered in China each year. Even tech-giant Alibaba has also launched its own craft beer brand via its Freshippo unit earlier this year.

A unique player in this market is Brander Urstoff, a German craft beer startup that produces and sells its beer and beer-mix-drinks from Shanghai since 2016. Brander’s Co-Founder and General manager Felix Wendlandt and his team have the ambition to refresh the “old-fashioned” image of German beer in China during the turbulent pandemic time. KrEurope chatted with Felix to find out more about the craft beer market in China, the brand story of Brander Urstoff and their post-COVID19 plans.

This interview was carried out by Daria Rybalka and has been edited for brevity and clarity.

Felix Wendlandt, Co-Founder & General Manager Brander Urstoff.

KrEurope: What was the impetus for starting a brewery business in China?

Felix: Germany is famous for its beer brands and its beer tradition. I personally like to try all kinds of beers from different breweries and regions – not necessarily only German beers.I started my career as a project manager at a boutique venture capital company in the south of Munich, and I had several business travels to Asia, especially China. When we had more and more touch points with China, we realized that German beer is very popular and has a good reputation, often associated with its quality. By chance, we came across the owner of Brander Urstoff’s trademarks and recipes, a traditional German beer brand established in the ancient castle of Brand in 1684 and brewed beer until 1969. That’s when chemistry happens – the desire of Chinese market for quality German craft beer on one side, and a traditional German brand seeking a fresh new start on the other side.

Now almost every big German beer company is present in China. So, we decided to make it in our own way and instead of transporting beer in containers without refrigerators, we export only the ingredients and brew our beer onsite in China.

KrEurope: What are typical misperceptions about Germany in China?

Felix: That Germans are emotionless and have a rather cold sense of humour. At least, that’s the idea my Chinese colleagues told me before they actually worked for a company with German origins. And that in business all Germans are very organized, structured and result driven.

In Germany, beer has a very long history and is part of the culture. In China, the perception is that all Germans like to drink plenty of beer – all-day long. Germans really like beer, but as with other stereotypes, that does not apply to everyone!

KrEurope: How popular is craft beer in China?

Felix: Light lagers and wheat beers are very popular in China. In particular, local lagers like Tsingtao and Snow are the predominant beers on the market. Chinese consumers also like wheat beers – whether Belgian or German style wheat beer.

Craft beer is also growing fast. However, I believe that stronger beers (over 5 % alcohol content) as well as beers with quite strong flavors will remain specialty beers and niche products, as in many other countries. On the other hand, there is a trend towards fruitier products as well as beers with lower alcohol content (up to 2.5 % alc.).

In 2016, we started as a typical German beer brand, offering German-style craft beers far from home. Today, we generate 90 % of our sales with beer-mix drinks: we call them Beerpops. In Germany, for example, this product category is called “Radler”: a mixture of lager and lemonade. We currently have eight different flavours – two of them are zero-sugar drinks.

Beerpop, a Ready-To-Drink mix from the company. Source: Brander Urstoff.

KrEurope: How do you differentiate Brander Urstoff from other brands?

Felix: We remain loyal to our German heritage, brew our beers according to the German Purity Law and are based on the traditional recipes of Brander Urstoff. On the other hand, comparing to “classical” German brands, we have a younger and hipper approach and avoid using images of traditional German beer culture. We believe that the Chinese consumer is no longer interested in these old-fashioned images and brand strategies. Younger beer consumers in China especially expect attractive and modern brand communication.

Our brewmaster is German and has been living in China for many years, while our ingredients are mainly imported from Europe and Australia. For our Beerpops, we also buy juices from local suppliers in China, which have to go through an internal quality check to ensure that the product fully meets our quality requirements. The brewery’s equipment ranges from locally made equipment to imported machinery from Germany and other industry-leading suppliers from abroad.

KrEurope: How did you build your local team?

Felix: Having the right people in the right seat is quite challenging – both professionally and culturally. Apart from myself and our brewmaster, who is to maintain the German brewing style and quality for our products, we only hire Chinese colleagues to market and sell our products. Marketing and selling beer in China require knowledge and understanding of local consumers. We focus on Chinese consumers and want to address them in the most natural way: in their own language and in a way that best reflects their emotions and interests.

Brander Urstoff’s Shanghai team. Source: Brander Urstoff.

KrEurope: What’s the business model behind Brander?

Felix: In the past, most Chinese consumers did not really drink a lot of beer at home. Should a sudden desire for beer emerged, they simply went out and buy beer from the nearby convenience store around the corner. Beer is usually not stored at home in cases of 20 or more bottles, as is the case in Germany, for example. This is now changing due to the ongoing COVID-19 restrictions, which force people to stay at home. Young people are also increasingly inviting friends to their homes to reduce the risk of coming into contact with an infected person in bars. These trends are currently encouraging us to push the sales channel through e-commerce and instant delivery platforms.

Our new e-commerce strategy includes social media marketing via RED (Xiaohongshu), Douyin (the Chinese version of TikTok), and WeChat as well as e-commerce platform marketing using various tools of the respective platforms. We work with a professional social media agency on the execution side, so that we can focus on the core brand strategy and content creation.

We still sell most of our products offline to supermarkets and hypermarkets. However, due to the COVID-19 restrictions in China, the on-trade channel (bars, restaurants, hotels, KTV, etc.) has suffered greatly and we lost many customers over the course of the pandemic.

KrEurope: Who are your biggest competitors in China?

Felix: Our competitors are mainly European brands like 1664 and Hoegaarden, which also offer beer-based mixed drinks, and other brands that offer fruit beers, like Fruli and Lindemann’s. In the perception of Chinese consumers, we also compete with brands like Tempt and Rio, which are actually not beer-based RTDs (Ready-To-Drink), but RTDs based on vodka, rum, etc. The competitors for our traditional beers are imported and local premium beers as well as local craft beers.

In Germany, there are local brands like Augustiner from Munich that don’t really invest in marketing but are very popular through word of mouth – even in Berlin and Hamburg. In the US, there are many iconic craft beer breweries that have changed the whole landscape of the American beer industry. In China, too, there are many local breweries that stand out from the crowd by occupying a niche in the market. We are always learning from success stories of others and to understand what made them great brands particularly.

KrEurope: What marketing strategies do you use?

Felix: Since founding of the company in Shanghai in 2016, we have set up our WeChat public account, which remains our main channel for interacting with followers. Beyond that, we communicate through point-of-sale promotions in bars, restaurants and supermarkets. In addition, beer festivals and exhibitions are an important way to connect with new B2B and B2C customers. We try to attend every major F&B fair in China and participate in several beer festivals throughout the year.

The next step is to build a stronger social media presence. We experimented with live streaming before the pandemic and will try again as part of our updated social media strategy. In the first step via existing live stream channels of KOLs and as soon as we have a sufficient follower base on our own channels, also with in-house live streams.

As the pandemic has severely impacted our cash flow, we have significantly reduced our marketing budgets and have to rely on word-of-mouth and natural visibility through listings in existing bars, restaurants and supermarkets.

Brander Urstoff official WeChat account

KrEurope: What’s the impact of COVID-19 on brewery business in China?

Felix: Generally speaking, two developments can be observed within the craft beer industry in China:

1) Many consumers are moving back from buying premium products to industrial beers – mainly to save money.

2) Many bars and restaurants have ceased operations due to COVID-19 restrictions, so overall consumption in the on-trade channel has decreased.

Overall, multinational companies and well-established brands have coped with the pandemic much better than smaller companies that do not yet have established distribution channels. I also believe that mass-market products have regained market share, as consumers are currently reluctant to buy premium products and prefer to opt for cheaper substitutes.

As our warehouse is located in Shanghai and we were not prepared for the lockdown, like many small businesses, we could not ship goods from Shanghai to our customers outside the city. Although we had several orders during the lockdown, the beer could not be shipped, causing us significant losses. Moreover, some of our suppliers also manufacture their goods in Shanghai, so we also did not have the opportunity to brew another batch of our products on short notice to meet the demand of our customers outside Shanghai.

It was a difficult time for us because the lockdown also had a personal impact on everyone involved. Also, business was very slow and there were few big deals or milestones to celebrate. We have introduced flexible working hours, the possibility to work from home and implemented various tools that allow our team to work from anywhere. I don’t think there will be a return to business as usual. Rather, there will be a new normal to which everyone will quickly adapt. Our team did well during this difficult time, despite all the tough circumstances we were facing, there was still a very positive spirit in the team.

KrEurope: What’s your secret to building strong customer relationships?

Felix: The most important insight I have gained in China so far is the fact that you have to adapt your strategy and sometimes even your entire product portfolio to the Chinese market – without giving up the principles of your brand. The tastes and behaviors are simply different, and as a successful brand you have to adapt to meet the preferences of consumers in China. Chinese consumers expect a certain degree of localization, but above all appealing and modern brand communication in their language.

Our first customer was Beerlady, a famous beer supermarket in Shanghai. For now, the most valuable customers are mainly owners of KTV chains and owners of bars and restaurants with a high beer consumption. However, these customers also need decent customer relationship management, as they are targeted by several brands that have larger budgets for marketing and promotions.

KrEurope: Where do you see Brander Urstoff in five years?

Felix: Despite the pandemic, we want to continue expanding our presence in southern China, especially in Guangdong and Fujian provinces. With our new e-commerce and social media presences, we also want to further increase the customer base in our existing core markets in northern China e.g. Heilongjiang, Liaoning, Henan and Tianjin.

Meanwhile, due to the pandemic and the continued strict zero-COVID strategy in China, we are also exploring other Southeast Asia markets such as Thailand, Vietnam and Cambodia, in order to reduce our dependence on China. We plan to brew our beers near Shanghai and export to Southeast Asia first, if everything works out, we may consider brewing locally there too.

Of course, we are always happy to talk to partners in Germany, and explore the potential of bringing Brander Urstoff back to its old home!

Daria Rybalka
Daria Rybalka
Daria Rybalka is a digital media manager at KrEurope in Berlin. She has a master degree in Chinese Studies at Julius Maximilian University, focusing on Chinese economy and society. Daria is a veteran in content creation and marketing campaigns. She loves fashion & design, and is passionate about Asian TV-series.
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