E-Malt.com News article: 4556

Czech Republic: In 2004 Czech per capita consumption of beer dipped to 158 litres from 161 litres in 2003 and Czech brewers are increasingly looking abroad. The decrease is attributed by analysts to the saturation reached by the country’s beer market. In spite of the flat performance in 2004, Czech brewers exported a record amount of 2.64 million hectolitres or 14 % of all 18.75 million hectolitres produced, a 24-percent rise on the 2003 figure, AFP and EUbusiness press posted on March 26.

Last May's EU accession for the Czech Republic and nine other countries meant the easing of administration, long border queues and prohibitive import duties in some countries. "Paradoxically, EU accession brought more advantages in terms of exports to the new EU member states than the older members in western Europe," Robert Chrt, sales manager with the third largest Czech brewer Budejovicky Budvar, told AFP. "Countries such as Hungary, Poland and the Baltics previously had restrictively high customs duties but with us all in the EU now there is free trade between us," he added.

The brewer, which despite a wave of privatisation and consolidation in the Czech beer industry since the end of Communism in 1989 remains in state hands, exports 46 % of its output. Neighbouring Germany is its biggest market, accounting for 40 % of all exports, followed by Slovakia and Britain. Budvar is also moving into new markets such as Australia, New Zealand and Turkey, always first having to clear the way in a trademark dispute with American brewing giant Anheuser-Busch.

Germany with an equally strong beer tradition is the biggest foreign market for Czech brewers, accounting for one third of exports, followed by neighbouring Slovakia and Britain, where exports last year rose 42 %. In all, Czech beer is now sold in 60 countries. "The retail price of beer is two to three times higher abroad so exporting can be more profitable," Jan Vesely, head of the Czech Brewers' Association, told AFP.

Since the end of Communism, brewers have faced new challenges on the domestic market, he said. "Domestic consumption is stagnating as beer faces increasing competition from other types of drink, particularly wine. Lifestyles are also changing -- people are more career-orientated and have more opportunities and responsibilities than they did under Communism, when workers often went to the pub at lunchtime and didn't return to work," he added. Czechs' exceptionally high beer brand loyalty also makes it difficult to increase market share on the domestic market, according to Chrt.

Even small breweries are successfully expanding abroad. Of the 41 Czech brewers, 38 are exporting. Several have gone further by launching licensed production abroad. The biggest brewer and exporter, Plzensky Prazdroj, recently began licensed production in Hungary, having done likewise in Poland, Slovakia and Russia. "It makes better economic sense to brew under licence, which saves on transport costs," Plzensky Prazdroj spokesman Alexej Bechtin told AFP. Parent company SABMiller has set out to make Prazdroj's brand Pilsner Urquell its flagship label worldwide. Last year around one third of the 1.5 million hectolitres brewed was sold abroad. "The Czech market has reached maximum capacity and the only room for substantial growth is abroad," added Bechtin.

Brewer Drinks Union has also just launched licensed production of its Zlatopramen brand in Russia, a huge market with a long history of importing Czech beer. "EU accession significantly helped exports as high import taxes to protect countries' domestic markets disappeared on the EU-wide market," said Drinks Union spokesman Miroslav Slany. "Before EU accession it was virtually impossible to export to Poland because the import tax was 21 percent compared to six percent for EU member states," he added.

Drinks Union is the largest Czech exporter to Germany. Czech brewers also have their sights firmly set on the United States which, says Vesely, is the most attractive in terms of revenues. "America is a huge, lucrative market where people are prepared to pay more for original quality products," he adds.

Banned from using the Budweiser and Budejovicky Budvar names under an old agreement with Anheuser-Busch, Budvar re-entered the North American market four years ago with the specially-created label Czechvar. This year the brewer hopes to up sales in the US and Canada to 14,500 hectolitres from 2004's 10,600 hectolitres. This year, says Vesely, should bring further double digit growth in exports.

If the EU approves Czech brewers' application for a 'Cesky pivo' (Czech beer) EU-wide geographical protection indicator, the first covering a whole country, it would further boost exports, says Vesely. "Small brewers could particularly benefit from carrying the label, which will be a guarantee of tradition and quality," he says.



30 March, 2005