West is best? Well, talk to beer drinkers on the far side of the fallen Berlin Wall and you will find that there is something brewing, writes Stefan Stern

IN THE good old days, before the Berlin Wall came down and when things were so much simpler than they are today, thirsty visitors to the still-divided city had a choice. Should they opt for a Berliner Kindl beer, as brewed in West Berlin, or instead down a bottle (or two) of the Berliner Kindl available in East Berlin?

In one of those quirks of history that characterised the cold war, the Kindl name was preserved on both sides of the Iron Curtain. In East Berlin, some were sceptical about their version of the beer. Berliner Kindl: oben schaum und unten schwindel ran the joke ("a frothy head with nothing underneath").

But then came the fall of the wall in 1989, and the coming together of the two German states. Surely the enfeebled East German brewing industry, like so much else in the country, was set for collapse or takeover by the muscular west? That's what looked like happening at first. East German consumers, long denied the glitzy brands advertised nightly on their west-facing TV sets, sated their thirst for western products: West Berlin's Kindl triumphed.

Two decades later, you might have thought that all traces of the old East German brewers would have been wiped out by the irresistible west. But you would be wrong. In a recent paper, Matthias Heyder and Ludwig Theuvsen, from the university of Göttingen, show how the former comrades from the east have managed not merely to survive, but to adapt skilfully to their new marketplace.

Nobody loves beer quite like the Germans. "Of all the breweries in the European Union, 75 per cent are located in Germany," Heyder and Theuvsen explain. In 2005, there were 1,274 breweries operating in the country - many small and serving local areas.

While only 14 per cent of these breweries are based in former East German territory, they produce 21 per cent of German beer. Perhaps this impressive productivity stems in part from a hard-headed assessment of their market position by brands such as Sternburg and Schulteis.

The huge German market (annual per capita beer consumption is 115 litres, admittedly down from where it was) has been targeted by brewing giants such as Heineken, Carlsberg and InBev. Competition is fierce. But brewers in the former West Berlin seem to be complacent. "Whereas most eastern German brewers consider themselves weaker than their main competitors, western German brewers show distinctly higher self-esteem . . ." the academics say.

It turns out that brewers in the east and west have been pursuing very different strategies. Unsurprisingly, beer is sold at a much cheaper price in former East German territory. But eastern brewers spend more on marketing than their western counterparts.

The easterners have also benefited from some tough investment decisions. Their greater productivity has been made possible by replacing out-of-date facilities with modern ones. "Structural changes in the industry . . . have been much faster and more radical in eastern Germany," Heyder and Theuvsen say. East German breweries are on average larger than west German ones. Their greater economies of scale and efficiency mean they can price their products more aggressively.

Other factors are at play here, not least so-called Ostalgie or nostalgia for the old East German brands and identity. Recent films such as Goodbye, Lenin! and The Lives of Others captured this mood.

Few east Germans would worry about driving a better, western-made car, or using a high-spec mobile phone. But with beer it's personal - and local. The old British brewer Watneys (part of Grand Metropolitan, now Diageo) once provoked a huge rebellion with its launch of a characterless, "national" product, Red Barrel. The Campaign for Real Ale, formed in 1971 as a response, continues its fight to this day.

What lessons can we draw from all this? First, local markets have to be respected, and understood. Global corporations and their killer brands may not always be welcome on the ground. Second, complacency is unwise at a time of rapid change. And third, apparently well-established businesses can be upstaged by those prepared to adapt to new times.

So schmeckt Berlin! runs Kindl's advertising slogan ("This is what Berlin tastes like!"). The vibrant reunited German capital reminds us how quickly things can change.