E-Malt.com News article: Belgium: Duvel Moortgat SA grows on mature markets

Duvel Moortgat SA wants to be that rare big brewer that also bottles drinks for the refined palate.
To the delight of shareholders, the Belgian brewer's growth has far outpaced competitors in Western Europe's sluggish beer markets. Sales have doubled in the past five years. It is now Belgium's second biggest brewer in revenue terms, after global leader AB InBev SA, The Bussiness Journal reported on July, 6.

And, for the most part, it has held onto its street creed among beer lovers, although some in the Low Countries now question whether its size has diluted the magic of signature beers such as Duvel, a dry, fruity golden ale also sold in the U.S.

Duvel turned out another creamy year in 2010, increasing net profit to €18.9 million ($27.5 million) from €14.9 million. Its share price has climbed to around €74, from €16 in 2003. Revenue, €137.3 million last year, is expected to grow to €172.1 million in 2012, according to analysts.

"It's the kind of company where it's hard to find flaws," says Kris Kippers, an analyst for Petercam, a Brussels-based private bank. "But maybe people have gotten so excited that the share price is a bit overpriced."

Mr. Kippers and other analysts cite Boston Beer Co., which brews Sam Adams, as a comparable beer company in the U.S., and a model for Duvel. Boston Beer rang up profit of $50.1 million last year on sales of $464 million.

Both share a similar formula: high prices, tasty beers, creative marketing and a rare emphasis on going after consumers in Western Europe and the U.S. while competitors chase growth in Asia, Russia and Latin America.

The West has become a challenging market for brewers, with aging populations drinking less beer. Anheuser reported that its total volumes fell 2.5% in Western Europe and 0.9% in Central and Eastern Europe for 2011. Duvel, however, expanded sales in Belgium by 24%, in the Netherlands by 17% and in France by 10%.

“The secret? We've made ourselves an affordable luxury for consumers here," says Chief Operating Officer Daniel Krug. "Our focus is mature markets. For us, China is not compulsory. We want to appeal to people who are drinking ordinary beer and want to drink something a bit better."

Duvel is an old-fashioned Belgian brewery, founded by the Moortgat family in 1871 in Breendonck, a small church-and-town-square Flemish village north of Brussels. The family still owns three-quarters of the shares and has declined to sell.

In the 1920s, Duvel developed its signature beer, initially named Victory Ale in commemoration of World War I. According to company lore, a local shoemaker noted that it "tasted like the devil." Today, the silky ale accounts for roughly 55% of the company's revenues.

Duvel lumbered along until the 1990s, when a new generation of family leadership decided to transform the business into a more modern company. In 1999, a new generation of family leaders, led by CEO Michel Moortgat, went on the Brussels stock exchange. Mr. Moortgaat, who is still in charge, hired away marketing talent from Anheuser, including current marketing director Johan Van Dyck.

Under Mr. Van Dyck, Duvel has won sales and awards for building its image and brand. Its standard, most famous advertisement is a large photo of its distinctive glass filled to the top with the golden ale. "We say that the glass is a tool," says Mr. Krug. "You have to drink the Duvel with that glass."

Duvel has also outfitted cement mixing drums with the outside of a bottle of Vedett, one of its lagers. "They sell it well, and beer connoisseurs like their beers, and yet it's also a big company," says Joris Pattyn, author of ‘100 Belgian Beers to try before you die’.

Still, the robust sales performance has set up Duvel to grow to 565 employees and expand through acquisition. It now owns six breweries, four in Belgium, one in the Czech Republic and one in the U.S.

Duvel bought the Ommegang brewery in Cooperstown, NY, in 2003. "In the U.S., people are waking up to craft beer," says Mr. Van Dyck, the marketing director. Last year, Duvel launched the Duvel Triple Hop in the U.S., where its sales grew 38.92% last year.
Last year, Duvel bought De Konninck, an old-school Belgian brewer based in Antwerp. It's already increased annual production at the brewery, which has 90 employees, by about 50%.

However, when it comes to being swallowed, the company is not interested. "We're an attractive brewery for other companies," says Mr. Krug. "But we're not for sale."


08 July, 2011