Brewers forecast sales growth for 2011

Last year's sales of the Czech national product were almost depressing enough for brewers to cry into their beers, but this year's early results from a handful of companies signal tentative growth in the sector, with some standout performances from smaller breweries. Import, distribution and marketing issues continue to complicate the industry, however.

Bernard, a family brewery based in Humpolec in the Vysočina region southeast of Prague, produced a record 101,475 hectoliters in the first half of the year, a 4.1 percent increase compared with the same period in 2010.

"In the next two years, the brewery plans to invest an additional 65 million Kč ($3.8 million)," said Zdeněk Mikulášek, a Bernard spokesman who said the brewery will put its profits back into the operation by expanding tank capacity and the malt plant.

A handful of other small breweries, especially those under the umbrella of K Brewery, have seen windfall gains in their distribution, though not all small brewers have fared as well.

"Six big players produce 80 percent of the market. Three of them are foreign-owned, and three of them are Czech-owned," said Jan Veselý, director of the Czech Beer and Malt Association (ČSPS). "There are 31 other breweries, and while some are gaining on the market, others are hardly surviving."

Svijany, one of the country's largest Czech-owned breweries, predicts 2011 sales will surpass 450,000 hectoliters, up from 437,000 hectoliters in 2010. Though the foreign-owned breweries have yet to release any sales results from 2011, some industry watchers suspect the crisis was comparatively harder on them, since they have higher distribution internationally, including in countries where the downturn hit earlier than in the Czech Republic.

Jiří Mareček, spokesman for Plzeňský Prazdroj, said the company behind the country's best-selling Pilsner Urquell is cautiously optimistic about sales in the first half of the year.

"In the first half of this year, the market has been slowly stabilizing. Our optimism is still rather cautious as beer consumption remains highly correlated with household consumption, which is expected to remain subdued given planned government tax reforms," Mareček said, referring to the planned increase to the value-added tax for basic foodstuffs that could take effect from the beginning of 2012.

Experts say taxes also had a stunting effect on domestic beer sales in 2010, which were down 8 percent, a phenomenon Veselý said cannot be attributed to the crisis alone. A dramatic increase of 33 percent in the excise tax on beer is partly to blame, as is a significant uptick in the amount of cheap imported beer that came to the market that year.

"The amount of imported beer increased [threefold] - most of it low-quality beer from Poland, a country that is not really known for its beer," he said.

Looking forward, there will likely be a rift in the strategies of larger and smaller breweries, according to Veselý. The larger labels that are strong enough to compete with their exports will focus on packaging innovation, whereas the smaller brewers that are not strong enough to compete abroad will focus on production innovations and new types of beer to keep their domestic customers interested.

Plzeňský Prazdroj recorded a healthy 6 percent growth in its export markets last year, and Mareček said they plan to add Brazil and Azerbaijan to the company's roster of export countries. Historically famous for pilsners, smaller Czech brewers are experimenting more and more with wheat beers, flavored beers, various alcohol contents and even light beers.

"I even saw some bars serving green beer on St. Patrick's day," Veselý said. "It has a horrible green color, but they've had to use such tricks to attract customers."

Emily Thompson can be reached at
ethompson@praguepost.com