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Czech Republic Beer Market - 2002


Source: CT 1 – Události
Date: August 26, 2002
Title: Sale of Czech Beer Behind Belgian Beer Jupiler

Bohumil KLEPETKO, moderator
The Belgian police have arrested one person and confiscated four hundred fifty-litre kegs of Czech beer which resellers were masquerading as Belgian beer. The beer concerned is Ferdinand, brewed in the Czech town of Benesov, and was selling in Brussels based pubs, restaurants and coffee shops under the trademark of Jupiler. Investigators determined that the resellers were selling the Czech beer in this fashion for at least the last two months. The management of the Benesov brewery declined to comment on the situation. Our journalist Jiri Frantisek Potuznik is on site in Belgiam and questioning the local police.
Jiří František POTUŽNÍK, journalist
The Belgian police confiscated towards twenty thousand litres of Czech beer Ferdinand in the Brussels quarter of Haren which were earmarked for relabelling to Belgian beer Juliper. Resellers were apparently importing towards four hundred fifty-litre kegs per week for at least the past two months.
Yves BARBIEUX, journalist for Het Nieuwsblad
They bought these kegs in Belgian restaurants and filled them in the Czech Republic with light beer.
Jiří František POTUŽNÍK, journalist
In all probability, the Czech beer was transported to Belgian via transport vehicles and the smugglers only needed to make it across the German border.
Yves BARBIEUX, journalist for Het Nieuwsblad
There’s no more borders to worry about once you make it into Schengen.
Jiří František POTUŽNÍK, journalist
According to some eye witnesses, a small group of blacks were emptying the contents of the trucks by hand at night. The police are determining whether the gang is part of a larger network of resellers and are trying to determine whether only the supplier knew of illegal trade in the Czech Republic or whether the brewery knew about it as well. They are also investigating whether any of the restaurants and coffee shops knew about the scandal. It seems that as much as four thousand kegs might have illegally poured out the taps of the Belgian metropolis. One fifty litre keg of light beer, costing about one thousand crowns in the Czech Republic, would have been sold by three times this value in Belgium under the name of Jupiler.

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Source: CTK
Date: September 16, 2002
Title: Interbrew to Offer Six Million Crowns in Aid to the Czech Republic Due to Flooding
Journalist: dmr

Belgian brewery concern Interbrew, the majority shareholder in Prague Breweries, is offering the Czech Republic six million crowns in aid help for damages caused by the recent flooding. "The funds will be directed at concrete areas in the affected regions and into national projects," so reported today the press spokeswoman for Prague Breweries, Simona Krautova. Krautova stated that three million crowns will be divided among the city districts of Radotin, Smichov, Chuchle and Branik and will be directed at concrete district projects. The remaining three million will go towards supporting nation-wide projects which relate to the Czech beer brewing industry and towards a joint project by the ministry of agriculture and the ministry for internal development called New Homes in Southern Bohemia. Prague Breweries estimates that its losses incurred by the flood should exceed 150 million CZK. "These losses include damages to buildings, equipment and empty cases, and on storage costs incurred for having to rent space out of the flooded Radotin," stated Krautova earlier. Besides the Staropramen and Branik breweries, which were forced to temporarily halt their operations due to the flooding, Prague Breweries also owns the Ostravar brewery in Ostrava. During the first half of this year, the company generated profits of 38 million CZK, up from losses of 105 million CZK during the same period last year.

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Source: Týden
Date: September 23, 2002
Title: Price of Beer Here is Too Low
Journalist: Michal Uryc-Gazda

Only in Czech and Japan do local brands have the best reputation. Tony Desmet at the helm of Czech’s number two brewery concern – Prague Breweries. Defending the controversial Staropramen commercials and not too keen on the low price of Czech beer.
Beer camps, boys keep together… do you not think that the Staropramen ads degrade Czechs to a bunch of brainless drinkers? Would you use such commercials in Belgium?
In Belgium, one of the most popular beers on the market uses the "male beer" commercial, which is targeted exclusively for the male population. Or in other words, I have two daughters aged 25 and 27. Neither of them live here, but when I showed them the ad, both of them said it was perfect. The ad was masterminded by a Czech advertising agency.
Yes. I have seen a lot of commercials made by beer brewers all over the world and ours certainly is not the most mundane. You don’t believe me? Okay, here’s one: one male was complaining to another that his wife chewed him out because he forgot to go shopping. But everything ends happily once both of them sit down for a glass of beer.
Maybe good taste is not suitable for beer commercials.
These beer camp commercials have earned back a bit of credit to Staropramen. Even those who don’t drink this beer have praised its commercials as funny. You would be surprised to learn how many people have started to take this beer seriously. And you’d also be surprised to learn that these advertisements are ranked as the best among the viewing audience.
Why is Prague Breweries still wallowing in losses? Was it due to poor management by its previous owner – Bass?
I do not want to compare the brewery’s present management with the previous one. It was a different situation at that time. We must also be aware that the lowest beer prices in Europe can be found here in Czech. In a bar, the price of mineral water costs more than beer, which is rather unusual. Furthermore, Bass put combined three breweries: Branik, Smichov and Ostravar.
That is a weak argument.
There is still one more thing. Around 1997, Bass wanted to invest a substantial amount into the brewery, but this was prevented. It was under complex negotiations with its minority shareholders: the National Property Fund and other investment funds. We managed to come to an agreement with them and we ended up buying out their shares for not a crown more than their market values.
So now you control pretty well 100% of the shares?
To be exact, ninety seven percent. This enabled us to put a stop to several legal disputes which Bass was waging against minority shareholders. Then we started focusing on the causes of the losses, investing and still planning to invest hundreds of millions of crowns into better equipment. Now all we need to do is focus on our portfolio of beers.
How should your profits look this year?
Looking at the first six months of the year, it seems that we should end in the black. However, we are suffering from losses incurred by the flooding, which should run at about one hundred and fifty million CZK.
But didn’t the brewery make a lot more money?
There are two ways how one can make money in the beer brewing industry: one is to have more than one premium brand; the other is to export. Prices on international markets are usually several times higher than Czech prices. Furthermore, an exported brand carries with it a better image.
But this does not apply here.
You are correct. The second exception to this rule is Japan, where beers such as Carlsberg or Stella Artois do not stand a chance against the reputation of domestic beers there. The same is the case here.
But Guinness and Carlsberg do have a good reputation.
The group of consumers trying out foreign beers drink about fifty thousand hectolitres of such beer annually, for which reason it does not make much sense to concentrate on them.
Do you pay the large retail chains to have your beers in the "first isle"?
No. Our consumers will find our beer and the competition depends on price. And because the prices are so low, not much remains for promotion. For example, in France, breweries pay for special racks. There are not enough funds for that here.
However, breweries seemed to have scraped together enough money to pay out hundreds of thousands of crowns to furnish pubs.
That depends on the circumstances. We provide to many restaurants. Sometimes an owner is only interested in our beer, other times also in tap equipment, and sometimes in cash for new furnishings in their pub, which can cost as much as two hundred thousand crowns. But offering this to them requires that they dispense our beers over a period of let’s say five years. I should mention though that our beer is also served in pubs into which we did not have to invest one heller.
Some pubs are buying your beer under the table so as to avoid taxes. Apparently someone within your organisation had betrayed these breweries, who were reprimanded for it.
This is not the case at all. The entire order is always written on our invoices. If a pub shows a different invoice to the financial authorities, it is out of our control.
Do you agree with tax benefits to small breweries?
I don’t have any problem with this. This can represent the only single way how a small brewery can survive, and it is quite apparent that this is truly the case for most domestic breweries. The problem would be if breweries of the same size would have different tax breaks.
Tony Desmet (53)
General manager and executive board director of Prague Breweries. He graduated from the prestigious Catholic University in Leuven of Belgium. When he started working at the Belgian brewery concern of Interbrew fourteen years ago, the company was the twentieth largest brewery concern in the world. Now it holds a third place position. With its fourteen percent control of the Czech market, the company maintains a second position here. Desmet worked for Interbrew in different countries around the world, such as in South Korea. In December of 2000, he started working at Prague Breweries, which Interbrew acquired from Bass. He did not throw out anyone, and senator and lobbyist Josef Zieleniec remained on the company’s board of directors. Desmet is convinced that the days of foreign managers working in Czech companies is slowly coming to an end.

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Source: CTK
Date: November 4, 2002
Title: Big World Buyers Circling Around German Brewery Gilde
Journalist: hp

Three large, global brewery groups, including owners of large Czech brewery concerns, have expressed interest in Gilde-Brauerei, Germany’s fifth largest brewery concern, so reported a press spokesman of the German company to Reuters today. The spokesman stated that Gilde is negotiating for its sale with Belgian brewery concern Interbrew (which owns Prague Breweries), Heineken of the Netherlands, and South African group SAM Miller, which owns Czech’s number one brewery of Pilsner Prazdroj. Gilde is one of the oldest companies operating in Hannover and is 85% owned by 120 families, who have already expressed their interest to sell their shares in the company. Last year, the brewery brewed more than 400 million litres of beer and pulled in revenues of 306 million Euro and net profits of 20 million Euro. The German press estimates the value of the sale at as much as 450 million Euro. The German beer brewing industry is dominated by small, primarily family breweries who usually have a strong position in their regions, although they lack sufficient size to expand on other markets. This makes them attractive prey for global giants where, for example, Interbrew last year acquired Brem brewery Beck & Co., and this year Heineken acquired a share in the Carlsberg brewery.

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Source: CTK
Date: November 4, 2002
Title: The EU Ended Cartel Investigations of Carlsberg and Heineken without Result
Journalist: hp

The European commission concluded without results its investigations concerning its suspicions of cartel agreements made between Danish brewery Carlsberg and Dutch brewery group Heineken. The executive arm of the EU today announced that it had not found evidence proving that an agreement had been made between the two companies dating back as far as 1995. The commission blamed both brewery concerns of coming to an agreement between each other and stipulating that they will not try to penetrate each others markets, an agreement which was allegedly to apply between the years of 1993 and 1996. But the commission could not find evidence to such an agreement after May of 1995. EU rules give the commission power to impose fines on companies found guilty of signing cartel agreements and which they were proven to have fulfilled to the latest five years prior to commencement of the investigations. In this case, the investigations had started in the year 2000. Both of the companies sent statements to the commission denying any agreements made concerning division of the market or any other form of cooperation. In August, the commission stormed the companies’ headquarters, but did not manage to find any evidence of such agreements following 1995.

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Source: CTK
Date: November 25, 2002
Title: Prague Breweries to Increase the Price of its Kegged Beer by Six Percent Starting Half Way Through December
Journalist: dmr

Starting the 16th of December Prague Breweries is to increase the price of its kegged beer by an average of five to six percent. "For pub and restaurant goers, this translates into a price increase of about 50 hellers per draught beer extra," stated today the company’s press spokeswoman, Simona Krautova. Krautova says that this means the consumer will pay an average of 14 Kc for a ten degree Staropramen and 18 Kc for a twelve degree. According to the company’s sales director, Vladimir Vavrich, at the start of next year, Prague Breweries will implement a slight price adjustment for its bottled and canned beers as well. "The reason for the price increases is rising costs," stated Vavrich. The company last increased its prices on February 1, by an average of seven percent. In January, Pilsner Prazdroj will increase the price of its beers by an average of four percent, which is by about ten hellers. It was reported that the price of bottled beer is to increase by 1.5%, where kegged and cistern beers, ordered primarily by restaurants, are to go up by six percent. Following Pilsner Prazdroj, Prague Breweries is the second largest beer brewing concern in the country, controlling a fourteen percent share of the domestic market. The company is also the third largest exporter of Czech beer. Prague Breweries’ majority shareholder is Belgian brewery concern Interbrew, which is the third largest brewery concern in the world, following Anheuser-Busch and SAB/Miller.

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Source: CTK
Date: November 25, 2002
Title: Le Soir Concerning Expansion of the EU: Belgians and Czechs Share a Passion for Beer
Journalist: sd

Czechs and Belgians share a common passion: beer. So reported today the journal Le Soir on its series concerning the characteristics of future state members. The journal commented that Belgians drink on average 90 litres of beer a year, where Czechs drink 160 litres. "Here everyone drinks beer," says Ivan Slechta from Prague Breweries. "Even children try beer there," added the paper. Le Soir stated that the Belgian brewery of Interbrew began operating in the Czech Republic before waiting for any expansion. "The aim is to penetrate markets which were up until now the exclusive domain of Pilsner: a light beer based on fermentation originating, as the type of beer implies, in Plzen," writes the paper. Starting the beginning of last year, Interbrew has had the final say in Prague Breweries. Le Soir also commented about Bernard beer, from the family owned brewery of Stanislav Bernard and which is supplied to the Czech Parliament, saying that Czech politicians are not distinguished by whether they are left or right but rather by whether or not they are beer drinkers. A proof of this is the popular Pivrncova pub decorated with comic cartoons from Petr Urban. Czech politicians often like posing with a glass of beer, as a means to presenting themselves as closer to the people. This also applies for the former premier of Vaclav Klaus and for the existing president of Vaclav Havel, so writes the journal, and touched on the inclinations to alcohol of the former parliamentary speaker, Milos Zeman.

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Source: Lidové Noviny
Date: November 26, 2002
Title: Czechs are Faithful to their Own Beer and are not Interested in Foreign Beers
Journalist: Zuzana Picková

LUNCH WITH... Tony van Kralingen – General Manager of Pilsner Prazdroj
When the South Africans acquired Pilsner Prazdroj, Czech beer drinkers were banging their breasts. After all, no one else knows how to brew beer than us. Tony van Kralingen started running the brewery in the year 2000 and his comrades back home feared it is not possible to do business in post-communist Eastern Europe.
This the present director of Pilsner Prazdroj comes from the province of Natal in South Africa, a region where he started his career as a businessman, after attaining a degree in psychology. "I wanted to become a psychologist and I was interested in how people think and how the mind works," justifies Kralingen concerning his rare educational background for business. "But I gradually came to realise that it wasn’t the right area for me and I started to focus on business." Kralingen’s first job was in a brewery. "I was fascinated by beer and it is a very popular drink among the younger population. I used to work in a restaurant as a student, so this relationship was there as well," he continues while seated in the Pilsner brewery’s restaurant, Na Spilce. He attained his first experience as a "trainee", which is a special position for fresh graduates. Trainees are able to work in different branches within a company – from marketing to finance. In the end, marketing was what captivated Kralingen the most and it didn’t take long before he became the director of four smaller breweries. He later worked in marketing at SAB (South African Breweries), which in 2000 acquired Pilsner Prazdroj. In 1997 the question was put forward at SAB whether or not it should become a global brewery concern. "The question arose as to which brands we should have, if we indeed wanted to become a global player. That is why from 1997 we started studying the behaviour of consumers on all continents and in 19 countries – both developed and less developed. We were primarily interested in their relation to premium brands." In July of 1998 Pilsner Urquell showed up on the list of interesting brands, and we gained control of it within eighteen months. It goes without saying that speculation developed in Czech as to whether the South Africans are capable of "running something as traditional as Prazdroj" and whether they will remain in the company over a longer period. "In South Africa we control a majority of the market and we make more money there than here, because there the market consumes 23 million hl. of beer annually and here only 16 million. Also, there you will find everything you need," says Kralingen, adding that in South Africa similar food and drink is consumed as is in Europe. "From the beginning we tried to convinced Czech consumers and our own employees that we are aware of the tradition that Prazdroj bears, that we realise the jewel we have acquired and that we must take care of it. My task is to make sure that this will be sustained and I believe I have been successful at it," evaluates Kralingen.
I Did not Feel I Needed an Education in Economics
Considering the fact that Kralingen studied psychology, I was curious whether he lacked an education in economics. "Business is about people. If you can understand them, your job is made easier. I never felt a lack of economic education, even though I actually considered attaining an MBA. You can learn about numbers as you go. I had to resolve many problems during my career, and this is the best form of education of all. When problem solving, you learn about issues comprehensively, which is better than learning about things in theory." Kralingen adds that, in industry, there are many common principles which can be applied anywhere, be it in the beer brewing industry or in telecommunications. "Much depends on whether you are able to convince someone to buy your product. You must have an open mind, understand your customer, and prove to them your knowledge and experience – this is in fact a psychological element." Besides attaining good economic results, Kralingen’s goal for Prazdroj is to convince the young to go and work for him. "Everyone, in particular young people, would like to be associated with success. We would like to offer young people perspective and a career within an international environment. I hope that they may find the opportunity to learn much and to try out different things. Above all, I want all my employees to get up in the morning and not dread having to go to work, but rather that they look forward to working. Czechs are a nation of beer drinkers and are very fixed on their own, traditional beers. What interests me is what this may represent for a company like SAB. "We consider Pilsner Urquell as a premium brand and we value it greatly. Gambrinus is sold the most here and from which our marketing is built on. Gambrinus is a beer you drink when in larger numbers – when you are together with your friends. On the other hand, Radegast and Kozel are regional beers." The point is that Czechs are often very faithful to their local beer, such as Moravians are to Radegast. SAB does not plan to acquire any more breweries in the Czech Republic and are satisfied enough with Radegast, Kozel, Prazdroj and Gambrinus. "The merger was approved last year in September and now we must work towards a unified company culture and adopt many changes which will lead to the creation of a uniform brewery group. Just think of how Radegast used to compete against Gambrinus, but now these are brands which belong in a single company’s portfolio. They can no longer complete against one another." In all confidence, Kralingen declares that he wants Prazdroj to become the most-liked company in the Czech Republic. So far Skoda has maintained that position. "We want to become a company of reference, meaning a place where others will frequent and watch how we do business." Kralingen also mentioned that he expect further increases in the sales of "his" beer, so I was interested in determining how he planned to accomplish this: he explained by an "increase in market share", explaining it as follows. "First of all, we must provide a quality service, because consumption of beer here will no longer increase. We must have the best facilities and make sure that all our deliveries of beer is perfectly timed. It is a different matter to supply the hypermarket from supplying the little store on the corner, where a lot of people may frequent in the afternoon, meaning that you must supply the shop in the morning. Satisfied customers always translate into profits for us."
We Will Not Focus on Women
I asked Kralingen whether he planned for sales of other beers of SAB on the Czech market, considering that beer drinkers are so conservative here. "We are not planning for this. We will not try to attempt something which customers essentially do not want." Not even flavoured beer? "We have such beers in our own portfolio, but we will not introduce them on the market in that there is simply no demand for it here," concludes Kralingen. Prazdroj’s competition addressed the female consumer, which is why it interested me if Prazdroj was going to do something of the similar. "Probably not. Women consume a maximum of 40 litres per year, which is much less than men do. We do not expect any increase in this figure, even though beer is a rather healthy drink. So we resign to the fact that beer is primarily a male’s drink, drunk mostly in the pub, and our policies reflect this." What is your relationship to beer? "I prefer most Pilsner Urquell. I knew it even before I came here. It is an unforgettable product and I like to have it with my beer, depending on the occasion." Kralingen admits that he does not visit only luxurious establishments but that he tries to drink his beer where the most customers are. He drinks about four beers a day, but always according to the occasion. The calories he intakes from beer he tries to jog off, and he likes to play tennis or even golf. Besides Czech beer, Kralingen also likes Czech cuisine, which is testified by the fact that he ordered beer and brewery goulash for his lunch in Plzen.
Tony van Kralingen declined an invite by Lidovy Noviny but rather insisted on inviting the journalist himself to the Na Spilce restaurant, which belongs to Prazdroj. He ordered pate (liverwurst) with salad as an appetiser and brewery goulash with dumplings as the main meal, drinking this down with, inevitably, Pilsner Urquell.

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Source: CTK
Date: November 26, 2002
Title: Pilsner Prazdroj Preparing to Invest Hundreds of Millions into Production
Journalist: Václav Prokš

Pilsner Prazdroj plans to invest hundreds of millions of crowns into expanding and improving the quality of its production in its largest plant in Plzen next year. The aim of this investment is to increase the production capacity of Pilsner Urquell, into expanding its ecological equipment, and into developing the Plzen brewery into a cultural and social centre of the region, so reported the brewery’s press spokesman, Amex Bechtin. "The Pilsner Urquell brewing house and the CK fermentation tanks will undergo reconstruction and new construction. Furthermore, the plant will put into operation a new beer can filling line," explained Vaclav Berka, the Plzen plant’s manager. Further investments will then be made into improving overall quality, primarily concerning the purchase of new, high tech equipment for controlling the filling of bottles. The company will also increase the capacity of its malthouse and its entire energy management system. "Investments made into the waste water treatment system should significantly reduce demands on the city’s treatment plants," added Berka. Reconstruction and repair of outer walls and courtyards will also continue on the plant site. "An expanded beer garden will also be available for visitors to the brewery next summer," stated Bechtin, who said that the Summer in the Beer Brewing World event has been planned for next summer due to the general facelift. The brewery will kick off the regular Friday night concerts of popular groups in its courtyard starting May and hold its traditional Pilsner Fest during the first October weekend. "The brewery museum is completing the setup of a new exposition focusing on the history of the brewing industry and consumption of beer during the 19th century," added Bechtin. With its last year’s output of almost eight million hectolitres of beer, Pilsner Prazdroj maintains its position as the market leader, as well as the largest Czech exporter of beer with its exports last year to 50 countries. The group also includes the Saris brewery, which is the second largest brewery concern on the Slovakian market. Saris is a part of the international group of SABMiller plc, the second largest beer brewing concern in the world. The group’s flagship beer is Pilsner Urquell.

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Source: CTK
Date: November 26, 2002
Title: Owner of Prague Breweries Strengthening its Position in Germany
Journalist: irl

Interbrew, the third largest brewery concern in the world, is continuing its expansion into Germany with the planned acquisition of Brauergilde Hannover. The Belgian company today managed to overcome the greatest barrier to the acquisition when it obtained approval to the acquisition from one of the company’s shareholders, the city of Hannover, as was reported in a statement made public by the company today. The city maintains a ten percent share in Brauergilde, which is the parent company of Gilde Brauerei, the fifth largest brewery concern in Germany and one of whose beers is Hosseroder. Two weeks ago, Interbrew made a 523 million Euro offer for Brauergilde and now plans to use the acquisition to strengthen its position on the fragmented German beer market. Brauergilde shareholders offered more than 50% of shares up for sale, but the city’s share was not included. Originally, the city planned to appeal against the German company in the courts because it apparently did not gain enough votes from shareholders for the company’s sale. Interbrew won out in the tender process above its main rivals, Heineken and SAB Miller. In Germany, the Belgian company also owns Beck’s and Diebels, which it had acquired more than a year ago, so reported Reuters. Interbrew operates in 20 countries and supplies its beers to more than 120 countries. It is made up of 65 breweries worldwide and was founded in 1987. Since 1991 it made more than 33 acquisitions or mergers. Interbrew is the majority shareholder of Prague Breweries.

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Czech Republic Beer Market - 2003

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