2 Feb 2011

Crisis, my ass (II)

You can't blame Austrias for believing there is a crisis in the Czech brewing industry, they are seeing things from a distance and their information is sure second hand. To a certain extent, the general public can't be blamed, either. The 12% drop in production is an undeniable reality, the kind that the media loves for their bombastic headlines, knowing full well that not many people will bother with details.

Jan Veselý isn't Austrian and, in this context, he can't be considered part of the general public. As chairman of Český Svaz Pivovarů a Sladoven (Czech Brewers and Maltsters Association) he is someone who should not much better and yet, when you read the interview he gave to Radio.CZ (kindly reproduced by kindly posted by Pivni.Info) you can almost see him sobbing in despair. There, Veselý goes as far as to say that "in recent history, there have never been worse times than this".

Really, Mr. Veselý?

To me, as a consumer, these are the best of times. Regional beers have never been easier to find in pubs, restaurants, supermarkets and some shops. Microbreweries are booming, only in Prague there are 12 (well, 11 and 1/2, Třebonice brews only in Winter) and many are those that one way or another get their beers to pubs in the city. And if that wasn't enough, getting a wide range of quality imported beers isn't a dream anymore.

OK. Mr Veselý doesn't speak on behalf of the consumers, but as a spokesman for the industry. But even in such role he is missing the point.

Some regional beers are publishing their results for the past year and the picture they give is pretty different:

K-Brewery: They haven't published any figures yet, but it is expected that the combined volume of their seven breweries will be pretty close to 1 million hl, if not more, with a double figure growth. Also, Martín Burda, the biggest shareholder of the company, has said in a recent interview that 2010 was a very successful year from the financial and commercial point of view, and that they expect an even better 2011.

Svijany: They had set as a goal to brew 400,000hl in 2010, which they reached on Dec. 1, as they announced on their Facebook page. Not bad for a brewery that had their death sentence signed in 1998.

Rohozec: 10% growth.

Primátor: 3% increase in sales.

Bernard: For the second year in a row the broke the 200,000hl barrier, setting up another record in production for the brewery.

Havlíčkův Brod: Better known by their brand, Rebel, it had almost 2% increase in production.

Herold: 1.5% increase in production for another brewery that came back from a deep coma.

Chotěboř: The owners of this small industrial brewery that started operations in mid 2009 are very happy with the results of their first full year. So much that they are already evaluating the possibility of investing in order to double their current capacity. (By the way, Mr Vesely, how many industrial breweries opened during those glorious years of 160l per capita a year? How many were shut down?).

But I wanted to know more, so I wrote to a few other regional brewers and asked them how had they done last year. Five of them answered:

Polička: The brewery's boss, Karel Witz, sent me an e-mail with a very detailed description of the operational and financial results of his brewery. In short words, 2010 was pretty good in spite of a slight drop in production.

Žatec: 5% increase in production and around the same in turnover.

Ferdinand: 13% increase in production.

Budějovický Měšťanský Pivovar: 25% increase in production.

Bakalář: The brewery changed hands in the middle of last year and production dropped by 5%. However, the new owners feel optimistic thanks to the trends in the last months.

And all this without taking into account the many micro breweries that opened last year or that invested in order to meet the growing demand for their products.

Yes, I'm sure that there owners worried by the future of their companies and workers wondering whether they will be able to keep their jobs till the end of the year, but that's something that happens in every industry regardless of the global situation in the economy and markets.

So, Mr. Vesely, are these really such bad times? They really don't seem to me.

Na Zdraví!

Choose your preferred Prague hotels and get free transport.

9 comments:

  1. But there is one thing - Mr. Vesely is a director of a group of breweries, that control about 80% of the market. So from his point of view, it was a bad year.

    There could be argues with most of the info you put there - is Bakalar still the biggest microbrewery in our country? Capacity of 300 thousand hectos of beer per year, and doing what? About 12 or 15K?

    Policka is happy, slight drop, but with price of their 12plato lezak for 10 crowns or less? Where could you buy cheaper lezak? Krakonos? etc

    And importing of about half milion (or probably more!) of the cheapest polish beer as privat labels for czech supermarkets makes you happy? That would make sale several times bigger, may be ten times more than combined increase of everything you mentioned in your article...

    Honza, www.czbeer.cz

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  2. Honza,

    That's exactly the point I want to make here. The association has been accused of being not much more than an organ of the bigger breweries, but I get the impression that they still pretend to speak on behalf of ALL the brewing industry.

    As for Polička, Mr Witz told me that they had a 16 million CZK profit (before tax) in 2010 and he also mentioned some investments they are plannig for this year, that doesn't sound like a company in crisis.

    Bakalář, when was the last time that they brewed at full capacity? I don't know, but I'd bet it wasn't in recent times.

    The Polish beers. An editorial of the magazine Euro (22.11.2010) puts that in a very good perspective. They are mostly eating away the market share of Braník, etc. Once again, it's the macros who seem to be suffering the most from this, and if that is the case, I don't see any reason to be unhappy, they only have themselves to blame. I won't buy Tesco Polish lager anymore than I would buy Klasik, more so now when at many Tesco branches I can buy Svijany, Primátor, Pardubický Porter and a few others.

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  3. Realistically speaking, majority of this country still drinks the big guys beers. OK, we can be happy that there are about 10-15 micros every year opened. But the total volume is about one oercent? MAy be, or may be not...

    Polish beers, cheap crap is imported becasuse breweries like Benesov, Jihlava, Hanusovice decided not to brew those beers anymore. Benesov had a big drop in prduction going back slowly. Bakalar was in full power may be a decade or longer ago. Than it was closed for several years, now is strugelling under seevral owners. The last one, which took over last year, might give him a brighter future as the company imports about 200 000hectos of czech beer to Russia. Now they will bring their own beer home. So Bakalar might go up just becasuse of those circumstances. Reason to celebrate?

    over all, there more and more reasons to be happier than before, but in general, the minus side is still stronger, Much stronger.

    And for Mr. Vesely - yes, there are higher sales of local breweries, but in total volume we are talking about small amounts. So when he represents the majority here, he is right about the situation.

    Honza, www.czbeer.cz

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  4. I don't know if the minus side is stronger. When you have breweries like Ferdinand, Žatec, Herold and even Bakarlář recovering (not to mention Svijany), that is good news. Yes, they might be far from their former glories, but they are still brewing and in quite healthy shape as companies, or at least getting back in shape.

    I've read somewhere that the reason Hanušovice, etc stopped brewing cheap crap for the supermarket chains was that those products weren't profitable for them anymore. If that is true, you can't blame them for that.

    As for the majority. I see it differently. I see it in terms of how each company is doing, regardless of their size/volume. The thing here is that you have disproportionate share of the overall production in the hands of two or three companies, which is what really gives the false impression that the WHOLE industry is in deep crisis.

    Unfortunately, I don't have available the results of all the industrial breweries, but it'd be nice if I did.

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  5. By all capitalist accounts it is competition that drives progress and innovation. I agree that it's great news these smaller breweries are able to grow even as the overall market feels the crunch of people's emptier pocketbooks. And I hardly think the drop in overall production is putting any of the majors in a particularly tough spot, they've just gotten soft from keeping all the cream for themselves.

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  6. OK, one more time:)

    - Mr. vesely is the vice chairman of the organization, you can not expect to hear anything else from him. The organization is coverg majority of the beer industry...

    - as much as I am happy with the progress we can see now here - new micros, new mutli tap beer bars etc, it is still very marginal in overall situation. ask on the street how many poeple know near by Nymburk, Benesev breweries etc. How many people drink Kocour in VArnsdorf?...

    Honza, www.czbeer.cz

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  7. I think there's something to be said for positive marketing though. You notice how even the smaller beer companies who aren't exactly bursting in sales managed to put their results in a positive light. It gives a good impression and makes the company (and by extension the sector in general) look good.

    Sales are down, but unemployment is up and cuts are being made everywhere, so that's to be expected -- it does not constitute a crisis for the industry, even for the major brands represented by Mr Veselý. It would be better for them if, instead of lamenting over an industry-wide crisis, they were to focus on ways in which they are adapting to the new conditions and moving forward. Of course, I guess they would actually have to start doing that first. Still, I can't see what good it does them to just complain, they won't be receiving any handouts from anyone.

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  8. Honza, you are right in everything you say and you've put it really clear. Veselý is speaking on behalf of a handful of big players in the market who have seen their sales fall in the last couple of years, no question about that. People are drinking less beer, no question about that. Why is that happening? Well, that's another thing (frankly, I believe that the effect of the increase in the excise tax is marginal, there are other factors).

    What you say about the marginality of Ferdinand, Nymburk, etc. is also true, but their presence in the market is slowly growing. Even breweries like yours are. Do you think you could have sold Kocour to that small pub in Letná, U Kovaldina, four or five years ago, when most people didn't even know what Svijany was? I doubt it. But all this is because the regional breweries are finally getting their shit back together in more than one sense. They will never take Gambáč from the top spot, that's for sure, but things aren't looking bad at all for many of them, either.

    One way or another, for us consumers, things are quite good and getting even better.

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