Strange brew: beer patents under the microscope

The annual Munich Oktoberfest is not just the world’s best-known beer festival; it is also a magnet for economists, as evidenced by features published by The Wall Street Journal and Harvard Business School. Curiously, it has attracted little attention in terms of the impact of intellectual property. Thus it is plainly time to examine the beer industry through the eyes of patent analytics.

The first surprise is that while patenting in the beer industry is actively pursued, only a small percentage of patents held by leaders in the brewing industry relate to the drink itself – packaging, beverage dispensers and manufacturing processes are far more likely to be patented. Table 1 below illustrates this: while Japanese brewer and distributor Kirin, with 310 beer-related families, is well ahead of the pack, this holding accounts for just 20% of its patent portfolio.

Source: Cipher and Thomson Reuters

Kirin’s portfolio is echoed by the practices of its Japanese competitors, which tend to own significantly larger patent portfolios than European or US brewers. The four top positions in the patent-owning table are held by Kirin, Suntory, Asahi and Sapporo, which itself holds eight times as many beer-related patents as the highest-placed non-Japanese company, AB Inbev.

Anyone thinking of investing in a beer producer will want to know not only what its market share and trademark portfolio look like, but also details of its prospects for expansion into new markets and different products – and this is where patents come in. A beer brand (eg, Budweiser or Heineken) may have no chance of succeeding on a whisky, an aperitif or a soft drink, but technologies relating to bottling, packaging, storage and maintaining the shelf life of active ingredients may have commercial applicability far beyond the original beer product base. The charts below show the clusters of patents held by Heineken, Kirin, AB Inbev and Tsingtao.

Source: Cipher and Thomson Reuters

Source: Cipher and Thomson Reuters

Source: Cipher and Thomson Reuters

Source: Cipher and Thomson Reuters

The charts show an even spread among Kirin’s holdings, where patents for derivatives, active ingredients, acids, agents and other innovations which may have applications beyond the company’s core activities are a clear strength; while Heineken appears to have concentrated its innovation in fields relating to pressure, valves and containers. Tsingtao – as befits an enterprise based in the world’s main manufacturing zone – focuses on the manufacturing process itself. AB Inbev is the only one of the four to look beyond processing a product, engaging consumers and beer consumption by devoting 6% of its portfolio of patent families to “user/social accounts”.

Will the current Japanese patent hegemony continue? Figure 1 below illustrates patent families filed since 1995 and growth in patenting over the last three years, and suggests that a shift in the geographical balance of power in the beer industry is already underway. Although Japanese companies have been dominant and are likely to remain so for some time, it appears that they are slowing down and others might be closing the enormous gap in patenting seen over the past decades, with the strongest growth found among Chinese companies.

Source: Cipher and Thomson Reuters

Curiously, given that beer is a commodity consumed in most of the world’s markets, the tendency towards a global – or at least a regional – strategy when it comes to brand protection through trademark registration does not appear to be closely mirrored by patent filing. This is because the Asian companies appear to have adopted a patent filing policy that most closely fits the footprint of their local markets, while the European and US companies appear to have opted for a wider patenting strategy. Figure 2 illustrates this: China’s Tsingtao brewery is focused only on China, and Asahi patents in Japan alone. However, Heineken and AB Inbev have spread their portfolios more widely across the board.

Source: Cipher and Thomson Reuters

Aside from the analytics, one point should be emphatically made. The beer industry is one of the most competitive in the world. Barriers to market entry are extremely low, there is little industry regulation and the incentives to enter the market and compete in it attract the giants of the sector. The continued growth of microbreweries suggests that this is one of the easiest product markets for a start-up to enter (see www.brewersassociation.org/insights/4000-breweries/ and www.pbs.org/newshour/rundown/map-50-biggest-craft-breweries-quiz/). This competitiveness does not appear to have been hampered by the large number of patents, trademarks and other registered rights that abound. Rather, the opposite is true: the protection of investments in innovation makes it all the more worthwhile for those who would improve their product, its presentation or its production.