The Prague Post
http://www.aaaradiotaxi.cz/index.php?xSET=lang&xLANG=2
October 12th, 2008
Endowment Fund     Business Listings ONLINE      Reservations      Classifieds    Subscriptions
Prague accommodation
Prague Art & Antiques Prague Art Prague Antiques
Prague Real Estate
Shuttle Bus to/from Prague Airport

Home » Archives » Business

Beer run

Heineken acquisition reshapes brew market

By Victor Velek
Staff Writer, The Prague Post
April 2nd, 2008 issue

Biggest brewers


SABMiller (South Africa)
45 percent of total production in the Czech Republic
Brands: Pilsner Urquell, Gambrinus, Kozel, Radegast

InBev (Belgium)
16 percent
Brands: Staropramen, Braník, Ostravar, Kelt, Velvet

Heineken (Netherlands)
14 percent
Brands: Starobrno, Krušovice, Zlatopramen, Hostan

Budějovický Budvar (ČR)
6 percent
Brands: Budvar, Pardál

Source: Czech News Agency

Fans of Zlatopramen, Břežnák, Dačický and Louny beer, brands on tap across central and north Bohemia, should start mashing their local pride with some globalization hops.
The Dutch beer giant Heineken has taken over Drinks Union, a large Czech-owned brewer known especially for its flagship national brand, Zlatopramen. The companies announced the deal March 25 without disclosing the price.
The takeover is yet to receive the green light from the Anti-Monopoly Office. According to Drinks Union spokesman Josef Vejlupek, the transaction should be complete by midyear.
Heineken’s acquisition is a continuation of its attempts to win more space on the country’s crowded beer market, which is now almost entirely dominated by multinational breweries.
With Starobrno and Hostan already in its portfolio, Heineken swallowed the Krušovice brewery last year, making it the third-largest player on the market, surpassing state-owned Budějovický Budvar.
Adding Drinks Union pushes Heineken’s annual production close to 3 million hectoliters, giving it a 14 percent share of the country’s overall beer output and a market share of 12 percent. The brewer is now neck-and-neck with the No. 2 player on the market, Belgium’s InBev, which owns Pivovary Staropramen and produces 3.2 million hectoliters a year.
The wafer-thin margin between Heineken and InBev is likely to result in further takeover attempts, said Honza Kočka, editor-in-chief of the beer Web site Světpiva.cz.
“Heineken is going to seek ways to beat Staropramen,” he said.
At the moment, Kočka continued, there are only three ways of expanding on the Czech beer market: Winning the privatization tender for Budvar or by taking over the large local independent beer groups PMS Přerov or K Brewery Group.
While InBev and Heineken jostle for second place, SABMiller remains firmly in control of the market, brewing almost 9 million hectoliters of beer under its Pilsner Urquell, Gambrinus, Kozel and Radegast labels — 45 percent of the country’s total output.
Shutdowns ahead
Beer pundits expect the Drinks Union takeover will result in some breweries being closed. Apart from Zlatopramen, brewed in Krásné Březno, north Bohemia, Drinks Union controls breweries in Velké Březno and Louny, north Bohemia, and Kutná Hora, central Bohemia.
“We may soon expect a statement announcing the shutdown of the Hostan, Louny or Kutná Hora breweries as a consequence of production optimization,” said Tomáš Erlich, chairman of the Czech Beer Consumers Union.
“A shutdown is imminent,” Kočka agreed. “Louny is a stone’s throw away from the Krušovice brewery, which has free production capacity.”
Heineken admitted changes are on the horizon.
“Any integration process leads to changes; however, it is too soon to provide details,” said company spokeswoman Vivi Hollert. “We will evaluate in depth the state and performance of each of the breweries.”
Even if Heineken closes a brewery, the majority of consumers likely won’t even notice, Kočka said.
“I’m sure 95 percent of beer drinkers wouldn’t care,” he said, pointing to previous brewery closures. “Only the Vratislavice brewery shutdown [by InBev] provoked an outcry and boycott.”
Many beer enthusiasts are critical about the transformation of the beer industry after 1989, saying multinational giants have sacrificed traditional brewing for the sake of profit.
The modernization of breweries cannot compensate for the drop in quality, said Richard Chodora of the beer Web site Pivní.info. Customers are being fooled by ersatz and low-quality ingredients sold in mass advertisements as the “finest ingredients” processed in line with “Czech master brewers’ tradition,” he said.
This is why Heineken’s appetite for local breweries and the eventual privatization of Budvar raise concerns among Chodora and Erlich. Even the acquisition spree of the K Brewery Group, supposedly a company controlled by local investors, is watched with suspicion.
Last year, K Brewery bought several independent breweries and earlier this year swallowed Platan, one of the country’s larger brewers. All the interviewed experts believe K Brewery is a speculative project aimed at building a portfolio large enough to be attractive to multinationals.
Entrepreneurs Zdeněk Radil and Martin Burda, who reportedly represent the K Brewery investors, did not respond to calls for comment by press time.
There is no consensus that the beer industry has been diluted since 1989. According to Jan Veselý, executive director of the Czech Beer and Malt Association, the beer industry has benefited from the influx of foreign capital.
The large-scale privatization of the sector enabled a “vital modernization of the underinvested beer and malt industries,” Veselý said, adding that the further strengthening of already large players is an asset to small, independent brewers.
“It’s a chance for them to produce a wide range of beers, including special drafts,” he said. “[They can] cultivate local patriotism and personal customer care.”
Despite the fact that Czechs consider themselves beer lovers, the community of real aficionados is small, not exceeding 5 percent of consumers, Kočka said. It could use some cultivation.
“For many so-called connoisseurs, beer is only a cheap means to get drunk,” he said. “Low price and quantity are more important than quality.”
On the other hand, the community of people serious about beer has been gradually widening as people travel abroad, Kočka said.
“A lot of [local] consumers have realized that the Czech Republic is not the center of the beer universe, that there are dozens of kinds of beer and they have started to discover this variety,” Erlich said.

Victor Velek can be reached at vvelek@praguepost.com


Other articles in Business (2/04/2008):

Browse the Current Issue

If you enjoyed this article, why don't you subscribe to the print version!
We accept secure online transactions provided by PayPal and Moneybookers

Be the first to add a comment!


Full Name: *
City: *
E-mail: **
This comment can be published in the print version of The Prague Post
Enter the text on the right:
 visual captcha
Comment: *
* Required field. In order to be approved for display, comments must have a first and last name and a city.
** E-mails are required and will only be used for internal purposes.

Most visited in Business Listings

Hotel booking
The Prague Post Online contains a selection of articles that have been printed in
The Prague Post, a weekly newspaper published in the Czech Republic.
To subscribe to the print paper, click here.
Unauthorized reproduction is strictly prohibited.