Interview

The just-drinks Interview - Budejovicky Budvar CEO, Jirí Bocek - Part I

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Last month, I travelled to Czech to take in a tour of Budejovicky Budvar's brewery in the south of the country. While there, I was granted an audience with group director Jirí Bocek. During our time together, we discussed the firm's ownership structure, its plans for future expansion, and that legal row.

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For as long as any of us can remember – over 100 years - Budejovicky Budvar has been fighting Anheuser-Busch – and latterly Anheuser-Busch InBev – in courts around the world over who owns the Budweiser trade mark. While much has been made, at virtually every turn, of the David versus Goliath scale of this battle, this trip to Czech was the first opportunity for me to see how... small this David really is.

With only one production facility, located in the southern city of Ceské Budejovice, the company holds the number four spot in its domestic beer market, with a paltry 8% share (here's some more facts, fans). Granted, around half of its production is exported, but Budejovicky Budvar is still a relative tiddler.

And yet, the company is state-owned. "My boss," as group director Jirí Bocek explains, "is the Minister of Agriculture for the Czech Republic." Bocek admits that this national ownership is not a typical structure for a brewer. "We don't receive any financial support from the Czech state," he notes. "We pay all our taxes and give part of our profits to the state. We go about our business as a commercial brewer."

Prior to meeting Bocek, it had been suggested to me by several Budvar employees that the reason behind this curious state of affairs stems from the legal battle with Anheuser-Busch InBev. Could it really be the case that, should the firm be privatised, ABI would eventually snap it up, therefore taking full ownership of the Budweiser trademark – a move that could even see ABI close the brewery? Bocek is quick to row back such conjecture, preferring to put the matter into historical context.

"In 1991, following the Velvet Revolution two years before, the Czech Government decided that all nationalised companies would be privatised in two waves," he says. "Our brewery was set to be included in the second wave. But, in 1999, our brewery was removed from the list."

Also in 1991, the Government opened discussions with Anheuser-Busch about a possible sale, A-B, which was bought by InBev in 2008, proposed at the time that it would buy 30% of Budvar's shares following a privatisation, then increase its stake to around 67%.These negotiations closed in 1996, Bocek says, when the Czech side decided not to proceed.

"Then," he continues, "in 2007, the Minister of Agriculture said he would start an analysis of a possible trademark risk for the Budvar brewery if it was transformed into a joint-stock company [the first step towards privatisation], but this analysis was not finalised."

With this analysis vanishing into the ether, the possibility of it returning crops up every now and again, usually linked to a change of government. Coincidentally, elections held a couple of weeks prior to my visit led to just such a change. A concern for Bocek? He smiles. "We can't forecast the future ownership of the company," he says. "The election 'winners', the Social Democratic Party, have bigger issues to deal with in this country!"

A case of 'business as usual', then? Bocek concurs:"We are the management of the brewery," he says. "We are not the decision-makers for privatisation."

We turn, then, to said business, and I can see Bocek relax a bit more – Budvar's ownership status and its trade mark dispute (which we will come to!) are clearly well-worn topics for Bocek. How's the business performing? "Very well!"

Would you care to expand on this? "2008, 2009 and 2010 was a very complicated time for all brewers," he says. "Consumption was flat globally, while in Europe, Russia and North America it was declining. Only Latin America and Asia were growing. This was a very unpleasant situation. The brewing sector is very sensitive to the economic situation for consumers.

"Then, from 2010, global beer consumption has risen slowly. In 2014, we think beer consumption will total around 2bn hectolitres – that's roughly 30 litres per capita per year, globally.

Domestically, Czech has adhered to the template for a developed market in recent years. "In 2008," Bocek says, "the split between the on-trade and the off-trade was 55% to 45%. This year, that has reversed completely, and that is due to the economic situation in Czech. Our performance domestically is flat, and that is an excellent result: Between 2008 and 2010, total beer production in Czech fell by around 15%. we lost only 0.3%, because we have been able to replace our domestic activities with export activities.

"The imported beer segment in Europe and the US is still rising. Our strategy is to focus on exports – today, 50% of our production is exported to 60 countries."

The second part of this interview, which can be found here, sees Bocek discuss Budvar's export performance in further detail, and tell the story of when he met the head of Anheuser-Busch in a Prague hotel.


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