22 Jul 2010

Things are getting ugly (but so much fun to watch)

Imagine the following, you are the biggest company on the market. Yours isn't a minor product, but one that is very important, very consumed and you have a lot of competitors. Still, you are the undisputed leader with at least 45% market share, while your nearest competitor has only around 15%.

2009 wasn't a good year for your sector. Global consumption fell by 5%, with your sales more or less reflecting that figure, as do the sales of both your two main competitors. This wouldn't be such an issue if it wasn't that some of your (much) smaller competitors had a wonderful year; in some cases, with growth that defies logic. As if that wasn't enough, for a long time already a small group of consumers have been critisising some of your practices and the quality of your products. They are still a niche, but their opinion is slowly dripping towards the mainstream.

No worries, you would say. Your leadership is out of any harm and on top of that, you have a very well tuned marketing and PR machinery that will sure find a way to revert the situation without doing anything foolish or rushed. Am I right?

If your answer's been "yes", then congratulations, you are smarter than some in the management of Plzeňský Prazdroj.

It all started las March when Prazdroj pressed criminal charges against Pivovar Kout na Šumavě for unfair competition and unlawful use of the Pilsner Urquell brand. This was followed by the penalties the company levied on some pubs that had decided to change their beer supplier. To be fair, technically speaking, Prazdroj might be right in both cases (even though I give them the benefit of the doubt in the second one), but still, their attitude is hard to understand coming from a company of their size and position. The only thing they achieve with it is earning the image of a greedy corporative bully afraid of the competition.

But this is nothing compared to the fallout of the "Tetrahopgate".

Mladá Fronta Dnes is arguably the most important newspaper in this country. They carry out and publish regular product tests that are believed to be independent and fair. A few months ago it was the turn of beer (*). The results of that test were published under the sensationalist headline "Pivovary vylepšují pěnu nepovolenou látkou, ukázal test" (Breweries improve head with an unauthorised substance...). You can't imagine the mess this caused.

MF Dnes tested 30 beers from bottlers of all sizes. In six of them they found a product called "tetrahops".

What is tetrahops?

The only description I found on the internet (or actually, the first good one I came across) comes from a company caled Hops Union, a hops supplier for American micro-breweries. According to them, it is a derivate of the aromatic herb.

The "malefactors" were Zlatopramen (Heineken), Staropramen, Janáček (K-Brewery) and Svijany.

While Heineken chose no to comment on the matter and Staropramen issued something written by a PR robot, K-Brewery categorically denied that any of their seven breweries is currently using this kind of product. But it was the people of Svijany the ones who reacted more vehemently.

They didn't deny that the tested beers (desítka and máz) contain Tetrahops, but explained that they only use it for "cold hopping", adding that the product is a hop extract like the ones in use in Czech beer for many years. They also accused the test of being biased.

I don't know if it can be called biased, but it sure can be called sensationalist. Regardless of their nature (or unnature, I'll get back to that), tetrahops is not an "unauthorised" product, as the headline says. Here in the Czech Rep. we don't have any Reinheitsgebot (fortunately). The only case in which their use is banned is for those beers that want to get the PGD České Pivo, which is something optional and entirely up to each brewery.

On the other hand, Svijany insist that Tetrahops isn't a chemical additive, saying that this product has the same Customs code as hops in all its forms. Actually, it isn't a natural extract. In fact, it's the same stuff used by Corona and its various ripoffs in clear bottles to avoid the beer from being affected by the light. The problem here is that, as someone told me, tetrahops has still not been given an EXXX code, which identifies additives used in food products in the EU (e.g. E300). However, I find it hard to believe that someone with the experience and skills of Svijany's brew master is not aware he is using a chemical additive, regardless of how or what they use it for.

Plzeňský Prazdroj decided they would profit from this controversy and launched one of the most rushed and ham-fisted campaigns I've ever seen. Titled "české pivo bez chemie“  (Czech beer without chemicals), it came out just two weeks after the test was published and lasted as long as a fart in basket. Less than a week later, Český svaz pivovarů a sladoven (Czech Brewers and Maltsters Association) urged Prazdroj to pull the campaign out, otherwise they would be expelled from the association, arguing that it was harming the image of Czech beer as a whole, since it gave the idea that the only beers brewed here without the use of chemicals are those from the Czech branch of SAB-Miller. According to the association, the campaign is in breach of article 7 of the Association's statue, which says that its memebers must refrain from carrying out any activities that can be harmful to the association and Czech brewing industry in general.

This opinion was shared with most breweries, led by Stanislav Bernard. One of the managers of another brewer, who chose to remain anonymus said, according to iHned.cz, that Prazdroj has refused to adopt the České Pivo label and now the are accusing all the rest of making bad quality beers, and that all this is because they don't know what else to do to stop their sales from falling.

Prazdroj played the naive card, pulled the campaign out, apologised half-heatedly and prevented being expelled. But things didn't end there. In protest, already seven breweries have left the association, Chodovar, Žatec and five from the K-Brewery. What the consequences of this will be, if there will be others that will follow those seven, it's hard to say, but it's something I'm dying to see. I'll keep you informed.

Na Zdraví!

(*)I'd been wanting to write about this topic for some time, but work, family and sudden attacks of cantbearseditis prevented me from doing so until now thanks to the news of those breweries that left the association

3 comments:

  1. I've been following this as well. Not sure what to make of it all. I suppose it's related to the big hoo-ha between Prazdroj and Bernard over non-alcoloholic beers..?

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  2. It's all positioning in the market and rather unedifying to watch. The non-tetrahop brewers making a fuss are just exploiting the public perception that tetrahop is bad (it *is* bad, but it's not the alien chemical they make out), just because they hope to benefit from a drop in sales of the tetrahop beers.

    The same thing happened in Germany when the "scandal" broke and the Saxony brewers' association put out a smug and disingenuous press story calling tetrahop a "stabiliser" and a "chemical additive" and proclaiming that Saxony's brewers would never use such muck: http://www.sz-online.de/nachrichten/artikel.asp?id=2445524

    The tabloid BILD screamed "Foam enhancer! One in five Czech beers adulterated!" http://www.bild.de/BILD/regional/dresden/aktuell/2010/04/23/jedes-fuenfte-tschechenbier-gepanscht/brauer-institut-weist-schaum-verstaerker-nach.html

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  3. Barm,

    It's not the "non tetrhop brewers" that mare making all this fuss, it's just one of them, and the biggest one at that! That is, to me, what is hard to understand.

    Ian,

    The big hoo-ha it's something else, but yeah, I think this scandal has played at least an indirect part. I'll be writing about it soon.

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