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Get together for drinkers!

“Regulars” know that the list of exhibitors at the event reads like the “Who’s who” of the industry. There could, however, be a few new faces among the familiar ones in 2007. The German Ministry of Economics and Technology has prepared a new promotion programme to help young innovative companies exhibit at leading international exhibitions in Germany and BRAU Beviale 2007 has been included in this programme. This means it is not only financially interesting for such companies to think about exhibiting at this year’s most important international exhibition for the beverage industry ( www.brau-beviale.de).

Europe celebrates an important anniversary in 2007: The Treaties of Rome were signed 50 years ago, when France, the Federal Republic of Germany, Italy, Belgium, Luxembourg and the Netherlands laid the foundation stone for the European Union, which half a century later with 493 million people is the world’s largest economic region in terms of national output.

A review of the past five decades reveals an unparalleled success story. The European Economic Community (EEC) founded on 25 March 1957 has developed into a union of 27 member states. Today, the European Union unites the continent in peace and freedom from the Atlantic to the Black Sea and secures a standard of living never previously known in the history of Europe.

National, regional, local and a few global beverage companies
Until the end of the 20th century, the emphasis in the old trading bloc of Europe was on internal integration. It was thought that economic and political integration would merge the national economies into a single European economy. At some time in the future, there should consequently also be European capital flows instead of national capital flows, European companies instead of national companies and European brands instead of national brands.

When the forerunner of today’s BRAU Beviale European exhibition for the beverage industry – a “training course for brewery owners, master brewers, brewing technicians and trainees” – took place in Bamberg for the first time at the end of the 50s, there were hardly any nationally operating beverage companies, let alone a European beverage industry. The markets at that time were divided between breweries and beverage fillers distributing locally or regionally. There was a growing unsatisfied demand for beverages from Sicily to Sylt. The beverage industry companies hardly profited from the internal integration in the European trading bloc. The wave of consolidation left behind no European beverage companies, but national, regional, local and a few global companies. Even the beverage companies one would like to describe as “European” due to their head office location and stock exchange listing have long had to be classified as global concerns on closer examination. Although they took advantage of the historic opportunity presented by the fall of the Iron Curtain, they also used all the possibilities offered for expansion in other regions of this world at the same time.

Internal trade benefited greatly from the internal integration of Europe, which led to the removal of trade barriers for export and investments. From 1960 to 2003, trade between the EU-15 grew almost twice as quickly as trade with all other countries. Since the completion of the single market in 1992, trade in goods and services between the EU-15 has risen by 40 per cent. The EU enlargement has enabled the single market to expand and trade between the EU-15 and the new member states has doubled since 1993 (G. Brown, Chancellor of the Exchequer in the Blair government, “Global Europe”, 2005). The EU single market is the backbone of the growth. This is shown by the economic growth (2.7 % in 2006 and the highest since 2000), the low inflation rate since the introduction of the euro and the now at last falling levels of unemployment, according to Benita Ferrero-Waldner, EU Commissioner for External Relations (“Managing Globalization!”, 2006). Since 1992, European companies have created 2.5 million jobs and produced 877 billion EUR of additional prosperity. The annual economic growth would have been 2 % lower without the single market.

Europe still a key market for beverage technology
The supply industry for the beverage industry is also one of the winners in the integration of Europe. According to estimates by the Verband Deutscher Maschinen- und Anlagenbau (VDMA), the manufacturers of packaging machinery exported almost 34 % to EU countries in 2006. The figures for the French and Italian companies, which are also the leaders in this industry, make it even clearer: French manufacturers of packaging machinery sold 47 % of their plants in the EU in 2005 and the Italian manufacturers 42 %. If the non-EU countries in Europe are added, the share of exports to Europe was 52 % for the German machinery and plant manufacturers, 59 % for the French and 58 % for the Italians.

European suppliers still dominate among the companies supplying the beverage industry. This is attributable to the abolition of national protectionism and to the resulting pan-European competition, which has spurred the companies into adopting a policy of continuous innovation. The exhibitors at BRAU Beviale have contributed to the “Made in Europe” quality myth for decades, a notional quality label for technological progress under growing competitive pressure.

How can the companies in the beverage industry and supply industry maintain their competitiveness in future? Estimates by the EU Commission show that the European food and beverage industry with more than 26,000 companies, 2.7 million employees and an annual turnover of 600 billion EUR is the third largest branch of industry in the EU. Consequently, it is vital for the beverage industry to know how its supply industry is to counter the global competitive pressure in the production of high-tech goods and also for labour-intensive goods and services, according to the European Parliament’s working group on “Globalization and the European economic and social model” (2006).

The economic development in Central Eastern, Eastern and South Eastern Europe, which was accompanied by a distinct rise in beverage consumption, indisputably brought the companies in the supply industry full order books for many years. But the companies in the mature markets of Western Europe also invested in new machinery, plant and technologies in order to maintain their margins despite the stiffer competition. The VDMA figures show that exports of packaging machinery to “old” Europe (84 %) also exceeded exports to the 10 new member states (16 %) in 2006.

Europe in the global competition: Rapid speed of innovation
There are a number of indicators for the innovation capability of economies: the number of researchers per 1,000 employees, the spending on research & development (R&D) in % of the GDP or the triad patents (patents registered in Europe, Japan and the USA) per million inhabitants. If the EU is considered as one economy and compared with the USA, then the assessment by UNICE (Union des Conféderations de l’Industrie et des Employeurs d’Europe) in 2006 was right: The results of the EU are disappointing. Only 1.2 % of the GDP is spent on research and development in the EU compared with 1.9 % in the USA. There were 35 triad patents in the EU, 63 in the USA. A comparison of the figure for researchers – 2.8 in the EU and 7.5 in the USA – also shows that the EU clearly lags behind the USA.
Especially the low total cost of R&D gives grounds for concern: The EU parliamentarians found that the EU is almost stagnating in terms of R&D spending. If this trend were to continue, the expenditure on R&D in 2010 would be 2.2 % of the GDP (UNICE, 2006). This is clearly below the 3 % defined in the Lisbon Strategy of 2000, which was supposed to help the EU develop into the world’s most competitive and dynamic knowledge-based economic region by 2010.

In the case of the European beverage industry and its supply industry, the average figures for the EU are only of limited significance. In terms of innovation indicators, individual European economies come off appreciably better than countries such as the USA. Germany is the world’s no. 6 (after Finland, Sweden, Denmark, Japan and Belgium) as far as the number of employees in company research centres is concerned, according to Deutsche Bank Research (2004). German companies also want to continue to increase their spending on innovations. Germany holds 5th place in the world for triad patents, after Switzerland, Finland, Japan and Sweden, but ahead of the USA. The conditions for innovations are very good in Germany, which is why the World Economic Forum selected Germany as the fifth best country in its Global Competitiveness Report 2003/2004.

Irrespective of this assessment, the voices calling for increased promotion of innovation capacity in the EU are not getting any quieter. Only more research and innovation can help Europe remain globally competitive despite its relatively high wage level. Global is the keyword here: In the past, the internal integration of Europe and the single market favoured the creation of pressure to act. This in turn influenced the competitiveness of the companies in a positive way – also in the European beverage industry and its supply industry. Today, this cycle model is breaking down outside Europe. As Gordon Brown wrote, the race with Asia is not a “race to the bottom”, but a “race to the top”. China and India “produce” more than a million new engineers and scientists a year. India and China would like to outstrip the Europeans in the goods and services sectors in the medium term – and not only in the low-tech area, but also in the field of goods and services with a high added value. European suppliers of beverage technologies have already experienced the ambitions of the new economic powers: For example, suppliers from India have bid for tenders from breweries for some time.

Chancellor of the Exchequer Brown argues that we could not allow any standstill in the global age. Europe must use its opportunities and bring the European economy back onto the path of reform, modernization and growth. This also applies to the European beverage industry and its supply industry, which have long since recognized the signs. In future, it will no longer be a matter of raising productivity in Europe with innovations and so competing with the considerably lower wages and cheaper products of the emerging countries. It will be much more a question of substantially accelerating the speed of innovation in order to keep up with the global competition. Trade visitors at BRAU Beviale in the Exhibition Centre Nuremberg from 14-16 November 2007 can see this for themselves.