Budvar deal a drop in the ocean for A-B
The century-old rivalry between Anheuser-Busch and Czech brewer Budejovicky Budvar took an unexpected twist earlier this week when the two brewers signed an import deal for the US market. However, despite the apparent thaw in relations, it will be A-B's other agreements in the US that will have a greater impact on its business. Dean Best reports.
The beer industry this week reacted with amazement to a thaw in relations between long time foes Anheuser-Busch and Czech brewer Budejovicky Budvar.
The shock even extended to staff at both brewers, where employees confessed surprise at the agreement. A-B and Budvar have fought for almost a century in courtrooms around the world over the rights to the Bud and Budweiser trademarks.
The two brewers jealously guard what they perceive as their right to the names and, let's be honest, there seemed no end in sight to the dispute. The only winners, it seemed, were the lawyers.
But in what appears a victory for expediency over emotion, A-B and Budvar have joined forces in the US. A-B will import and sell the Czechvar brand (as you would expect, Budvar cannot use the Budweiser name in A-B's backyard) in the US, where sales of imported beers are booming.
The two brewers have pragmatically set aside their legal differences in an attempt to tap into US consumers' growing thirst for imports. A-B adds another imported beer to its stable, following on from a recent deal with Grolsch, an agreement to handle Tiger and a move to take full control of Kirin in the US.
And for Budvar, the deal with A-B will give its brand far greater access to many more states in the US. Czechvar has been sold in the US since 2000 by US speciality beer importer Distinguished Brands International but does not rank among the top 25 imported beers by sales.
But, the question that springs to mind is: how can two brewers, which for so long have faced each other in the courtroom, have a meaningful business relationship? Naturally, A-B and Budvar are adamant they can work together - and that the agreement will benefit both sides.
"After years of differences, this is a meaningful step for two great brewers to form a relationship
that is good for both of our businesses," says A-B president and CEO August A. Busch.
"The agreement represents a historical turning point between our companies. We have managed to move away from discussions between lawyers and towards a practical dialogue, which is going to be beneficial to both sides," says Budvar CEO Jirí Bocek.
Mark Swartzberg, an industry analyst at US investment bank Stifel Nicolaus, believes the trademark battle between the two brewers will have little impact on the ground in the US. "We're presuming that the [trademark] dispute will be far from the day-to-day running of the import agreement in the US and that the larger trademark issue is a non-US thing."
And consumers, Swartzberg says, are likely to be unaware of the new relationship between the two brewers. "At a consumer level, the product that the consumer sees remains a Budejovicky Budvar product and short of reading the business press, a consumer is not going to know that A-B is involved in distributing it."
A-B executives were unwilling to go much beyond the statement issued when the company announced the deal. On how the relationship between A-B and Budvar will shape up, Dave Peacock, A-B's vice president of business operations, would only say: "Working together is an important step for our companies. This new relationship will benefit both of our businesses. We are hopeful that our trademark issues eventually will be resolved."
Nevertheless, A-B's move to add another import beer to its portfolio will bolster its efforts to expand its presence into the higher-priced segments of the US beer market. Such a move will help A-B absorb the pressure in the mainstream beer category, where although its sales are rising, growth is nowhere near as fast.
Swartzberg argues that while the trademark issues meant the Budvar deal was a surprise, a similar agreement that A-B struck with InBev last year will have far more of an impact on its business in the US.
"Czechvar volumes [in the US] are tiny. The InBev transaction was evidently an important event for A-B and it demonstrates the seriousness of the company's focus on the import segment, and the likelihood that imports will have on the business over time."
Industry watchers have said that the significance of the Budvar deal could be that it signals the two companies could find common ground to end their dispute over the Budweiser trademark. Only time will tell; for the time being, despite the warm language used by both companies when the deal was announced, the fight over the Budweiser name will continue.
No doubt a relief to lawyers on both sides.
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