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Copyright 2001 Interfax News Agency
Czech Republic and Slovakia Business Report
July 20, 2001, Friday
LENGTH: 1994 words
HEADLINE: SURVEY: CZECH BREWING INDUSTRY
BODY: SURVEY: CZECH BREWING INDUSTRY
OVERVIEW
Beer is perhaps the product most closely bound to its national identity
that the Czech nation produces. It is an understatement to refer to it
simply as the national drink. The history of beer in the Czech lands
stretches back over a thousand years, with evidence of hops being
cultivated in the area as early as 859 A.D. and exported in 903 A.D.
Czechs are first in many beer-related areas, and proudly claim the title
of highest beer consumption per capita in the world. Other Czech brewing
firsts include the first beer museum in the world and the first textbook on
brewing, as well as being the first to produce the world-famous Pilsner and
Budweiser beers.
There are generally five types of Czech beer: light beer, dark beer, lager
beer, 10 % beer and 12 % beer. The percentage denotes the malt extract, not
the alcohol content, which is generally around 3 %- 4 % in 10 % beer and 4
%- 5 % in 12 % beer.
In international terms, the Czech Republic, with its population of just 10
million, is the sixth largest beer market in Europe and numbers among the
twenty largest beer markets in the world. The country currently produces a
total of 18 million hectoliters of beer a year, with 1.5 million
hectoliters going for export.
The main brewing groups in the country are Pilsen Prazdroj (Plzensky
Prazdroj), which claims a 45 % share of the domestic market, Prague
Breweries (Prazske pivovary), which holds a 13 % market share, and
Budweiser, which has an 8.5 % share. A number of smaller breweries account
for the rest of domestic market share.
In a market such as the Czech Republic, where per capita consumption stands
at around 160 liters per year, there is little room for domestic growth. In
general, analysts agree that this very high consumption level will in fact
decrease over time rather than increase, due to competition from other
beverages as well as health concerns. Instead, beer producers are
increasingly turning their attention to maximizing market share at home and
increasing their sales abroad.
The majority of Czech breweries are facing financial problems. The sector
as a whole registered losses estimated at around CZK 1 bn (USD 28 mln) in
1999. Since the fall of the communist regime over ten years ago, many
companies have invested heavily in modernizing their production facilities,
thus increasing their capacity. This resulting over-capacity is largely to
blame for the sector's financial problems. Poor management at a number of
breweries has also not helped the sector. According to analysts, however,
foreign investment and foreign management expertise, along with a greater
focus on developing exports, are likely to keep this sector very
competitive.
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Czech Republic and Slovakia Business Report July 20, 2001, Friday
The following table illustrates the per capita consumption of a number of
countries in 2000:
Country Annual per capita consumption (liters)
Czech Republic 160
Germany 131
Belgium 99
United Kingdom 97
Australia 93
United States 85
Netherlands 78
Spain 77
Hungary 76
MAIN PLAYERS ON THE MARKET
Pilsner Prazdroj
Pilsner Prazdroj is the largest brewer in Central and Eastern Europe,
claiming a commanding 45 % share of the Czech domestic market. Pilsner
Prazdroj is owned by South African Breweries (SAB), which bought Pilsen
Prazdroj, maker of the world-famous Pilsner Urquell, and the Radegast
brewery from the Japanese investment bank Nomura in October of 1999 for USD
629 mln. Radegast and Pilsen Prazdroj merged in March of 2000. In June of
the same year, the group acquired the Velkopopovicky brewery.
The group's main products are Pilsner Urquell, Gambrinus, Primus, Radegast
and Velkopopovicky Kozel.
The group managed to raise its beer sales by 0.5 % yr/yr in 2000, to 7.73
mln hectoliters (hl). The group posted sales of 3.69 mln hl of its
Gambrinus beer, a 6.8 % increase over 1999, while sales of Pilsner Urquell
were up 13.5 % yr/yr. Pilsner Urquell exports were up 26 % over 1999, while
domestic sales climbed 6.6 % yr/yr.
The group's exports go to more than 50 countries around the world. Pilsner
Prazdroj's biggest importers are Slovakia, Germany, the U.S., Great Britain
and Russia.
Prague Breweries (Prazske pivovary)
The second largest brewing group in the Czech Republic is Prague Breweries,
which claims a 13 % share of the domestic market.
Prague Breweries has recently undergone a change in ownership, with
Belgium's Interbrew acquiring the concern from the British giant Bass.
Interbrew, the world's second largest brewer in terms of volume, acquired a
59.41 % stake in Prague Breweries for USD 3.5 bn in May of 2000 and then
increased its share in the firm to 89.20 %. The Belgian company has offered
to buy out minority shareholders at CZK 65 per share.
Prague Breweries spokeswoman Diana Dobalova told the Czech daily Lidove
noviny that the firm believes that Interbrew respects local cultural
habits and has a good reputation with regard to the development of regional
brands, which can only positively influence PP's situation.
Prague Breweries produces the prominent Czech beer Staropramen, as well as
Velvet, Branik and several other smaller brands.
Despite its second place position in market share, Prague Breweries has
faced financial difficulties. In the first six months of 2000 the firm
managed to cut its losses to CZK 164 mln (USD 4.1 mln) from CZK 198 mln
(USD 4.95 mln) for the same period in 1999. Sales revenues increased during
the same period, from CZK 1.04 bn (USD 25.1 mln) in 1999 to CZK 1.1 bn (USD
27.5 mln) in the first half of 2000.
Budejovicky Budvar
The Budejovicky Budvar brewery (BB), which produces the world famous Budvar
beer, is the Czech Republic's third biggest brewer, with an 8 % share of
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Czech Republic and Slovakia Business Report July 20, 2001, Friday
the domestic market. BB is also the biggest Czech exporter of beer, with a
35 % share of overall exports.
Demand for BB increased steadily in 2000. The company's total beer
production increased by 7.1 % in 2000 over the previous year, reaching 1.35
mln hectoliters, compared to 1.26 mln hl in 1999. Domestic sales for 2000
were up 18.5 % over the previous year and exports increased by some 8 %
over 1999. BB exported a total of 504,000 hl in 2000. The company's
revenues for 2000 were up 11.4% over 1999 to CZK 2.396 bn (USD 58.5 mln).
BB's net earnings in 1999 came to CZK 325 mln (USD 8.125 mln), an increase
of CZK 20 mln (USD 500,000) yr/yr.
BB remains 100 % owned by the state, though its privatization is under
discussion. According to Finance Ministry spokesman Libor Vacek, the
government will most likely begin drafting a proposal for the sale of
Budvar sometime next year. The Czech Prime Minister Milos Zeman has been
quoted as saying that the only investor showing interest in BB thus far has
been the U.S. brewing giant Anheuser Busch. Zeman has said that he
believes in the potential of American investors but doesn't believe in
American beer.
One of the main issues plaguing BB has been its running legal disputes with
Anheuser Busch over trademark rights to the Budweiser name. BB has
successfully won the right to use the Budweiser name in a number of
countries, including Greece, Switzerland, Latvia, Lithuania and Portugal. A
ruling this year in the London Court of Appeal stated that both BB and
Anheuser Busch have the right to use the Budweiser name in England,
settling a dispute which dated back to the 1970s.
The following table illustrates Czech brewery ownership as of 2000 and
their production for 1999:
Company Ownership Number of Production inBreweries
1,000 hl- 1999
Pilsen Prazdroj SAB (South African 1 4 753
Breweries)
Prague Interbrew 3 2 333
Breweries
Radegast SAB 1 2 307
brewery
Budvar state owned 1 1 259
(Budweiser)
Moravzkoslezko Czech shareholding 4 970
breweries company
Krusovice German 1 853
South Bohemian Czech shareholding 3 656
Breweries company
Velke Popovice SAB 1 643
Starobrno Austrian Brau AG 1 621
Total 14 395
Source: Czech Beer and Malt Association
SMALL INDEPENDENT BREWERS
Small independent brewers (SIBs) as defined by the European Union are those
brewers which produce up to 200,000 hectoliters per year.
The Czech Union of SIBs counts a total of 22 members. In 1999, Czech SIBs
produced a total of 1.6 mln hectoliters of beer, accounting for 10 % of
total beer production in the country.
DISTRIBUTION
The larger breweries in the Czech Republic maintain their own distribution
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Czech Republic and Slovakia Business Report July 20, 2001, Friday
and warehouse systems, distributing their products to retail outlets and
restaurants themselves. Large independent breweries often distribute their
products around the country using wholesalers and distributors.
The small independent breweries generally supply their local areas,
distributing their products themselves.
Imports are distributed via Czech-owned importers as well as wholesalers.
CZECH BEER IMPORTS
Czech beer imports are very low. While they are increasing at approximately
8 % per year, they still only amount to around 1 % of total domestic
production.
Slovakia is the leading beer exporter to the Czech Republic in terms of
hectoliters, selling 72,000 hl to the Czechs in 1999. Austria is in second
place with 29,279 hl , followed by Ireland (2,723 hl ), the Netherlands
(1,809 hl), and Mexico (1,255 hl)
There are currently no licenses required or quota restrictions on beer
imports to the Czech Republic. According to HTS of the Czech Republic, the
MFN tariff on beer stands at 20 %, though some countries have trade
agreements giving them lower tariff rates.
PIVEX BEER FAIR
The Pivex beer fair is the most important trade show for the brewing
industry in Central and Eastern Europe. The fair is held every March in the
city of Brno and is followed by the Days of Czech Beer festival, a less
formal beer showcase in the same location.
For more details about the Pivex 2001 trade fair, go to: www.bvv.cz/pivex-
gb
LOAD-DATE: August 03, 2001
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