Once upon a time, there was a rare East German success story – strongly indebted to the fairy tale of Little Red Riding Hood, or “Rotkäppchen” in German. In this version, set during the Cold War, Little Red Riding Hood is East Germany’s solitary sparkling wine manufacturer; the Wolf represents its rivals in the West.

From 1949 until 1989, Rotkäppchen sekt, with its distinctive red-foil cap, was the only brand of sparkling wine the people of the German Democratic Republic could buy. Its manufacturer, the Kloss and Förster Sekt Haus (established in 1856 in the city of Freyburg), had been taken over by the Communist authorities after World War II and turned into a Volkseigener Betrieb (VEB) – or "company owned by the people".

The firm’s monopoly meant that sales remained steady for 40 years, reaching a peak of 15.3 million bottles in 1987. But when the Berlin Wall collapsed just two years later and East Germans were able to buy Western brands of sekt for the first time, they transferred their loyalty almost overnight. Additionally, the firm was hit by the collapse of its established distribution channels – the East German retail chains. By 1991, sales of Rotkäppchen had plunged to just 1.9 million bottles.

In 1993, a group of employees at the company, by now called Rotkäppchen Kellerei, decided to resist the Western onslaught. They staged a management buyout, assisted by West German drinks tycoon Harald Eckes-Chantré, and began forcefully marketing the wine as a German product – with no mention of the East.

Consumers in the west of the country were convinced to try it. Jane Kreuzter, a teacher in the north-western city of Bielefeld, remembers that “it was relatively cheap, so that was one reason to buy it, but also it tasted as good as many more expensive ones. It was definitely the best in its price range.”

Kreutzer adds that neither she nor her friends had any idea the firm was still East German-run. “We just assumed that Rotkäppchen had been taken over by a West German company” – like the handful of other major brands from the East that survived unification. Florena cosmetics, for example, is owned by Beiersdorf, a multinational skincare company, while the iconic East German laundry detergent, Spee, belongs to cleaning products and toiletries giant Henkel.

Growing numbers of East Germans also switched back to the long-familiar brand, including Kreutzer’s cousin Georg from Rostock: “We still drink it and so do our friends,” he says. “It tastes good, and now they have different varieties so there is something for everybody.”

Rotkäppchen will not disclose the exact blend of its traditional sekt, but spokesman Ulrich Ehmann indicates that it has not been changed since Communist days: “The goal of the brand Rotkäppchen was, and is, always to reach the well-known and well-liked taste.”

He adds: “We don’t talk in detail about the grapes that are used. We can only say that the grapes are from classic wine areas with high capacity all over Europe.”

On January 16, 2002 – when yearly sales had risen to 49 million bottles – the company marked one of the most momentous days in its history, buying the Western labels Mumm, Jules Mumm and MM Extra from Seagram. Other buyouts followed: Geldermann Privatsektkellerei in Baden; Kloss & Förster (a West German company formed by Günther Kloss, grandson of the founder of the original Freyburg firm, who fled from the East after the war); Eckes Spirituosen & Wein; and Blanchet.

These acquisitions gave the firm “three pillars” of production – sekt, spirits and wine – as well as vital distribution networks in the west and a new name: Rotkäppchen-Mumm Sektkellereien. As in the children’s story, Little Red Riding Hood had been reborn after the Wolf was vanquished.

The latest available sales figures show that the company’s success is continuing apace. In 2010, turnover grew by 5.4 percent, taking total sales to 224.9 million bottles, including 162.5 million bottles of sekt.

Company chairman Gunter Heise, who began working for Rotkäppchen in 1973 and led the management buyout, reports that attention is now turning to exports. Even though Rotkäppchen has grown to become the second-largest sparkling wine producer in the world (after the Spanish cava producer Freixenet), he concedes it will be a challenge: “German white wine is still viewed as sweet, palatable and cheap. German sekt suffers from that same reputation.”

But with Germans drinking more sparkling wine than any other nation (a quarter of the world’s production), there are still plenty of new customers at home. Rotkäppchen is currently marketed as a “traditional sekt with sparkling elegance and a dry bouquet”; its East German origins are not mentioned.