I do not think we have to present Budweiser Budvar anymore in the Czech Republic, it is being like the flag for the Czech Republic when we look at the fact that the company is a state owned company. Could you give us a brief historical of Bud Budweiser Budvar?
I will say something about the current situation. There are three main breweries in the Czech Republic and our is one of them. And ours is the only one that is actually controlled by the Czech Republic. Budvar is the largest exporter among the Czech Breweries. On the whole of export we hold 35 per cent. And this is increasing a year by year. Considering our own production we export 45 per cent. And we exporting into 56 countries all around the world. Considering our label it is lager called Budweiser Budvar. As such it is a continuing of a tradition of beer-making in this region which began in 13th century. The process of the making of the beer is a traditional way, the first written notices about the beer-making comes from the 8th century and so it is no wonder that in the year 1265 when the king Premysl Otakar II. gave to the town Ceske Budejovice special rights for beer-making and brewing. This right was connected to tenants and the houses of the town. And that right was inherited from generation onto a generation. And holdersof this right decided in year 1895 to create another brewery. So 1895 ancestor of Budweiser Budvar brewery was founded which was called................... So nowadays our brewery is continuing this tradition and is striking to show the traditional ways of brewing all around the world.
Is not it difficult to keep the tradition even if you have to modernize always your equipment in order to be more competitive?
Of course one thing is the taste of the beer and the second thing is the technology in use. So we hold the philosophy that the Budweiser Budvar beer is light, on a middle scale fermented and a little bitter. These are the basic impressions of the taste and we are determined to maintain them even though we might try to use new equipment and technology but we are just refusing to change the taste of the beer even though we are having new equipment in use. It is possible to brew beer in new technological equipment and in a very economical way. It is possible to use ingredients and products that are speeding up the process. So that the beer brewing would be in the cheapest possible method. But the important thing is that someone has to drink it and someone has to like it. It is not our mission to save money on the production of the beer at all costs and then spend loads and loads of money on marketing just to convince the customer that our beer is the best made in this method is the best. We thing the customer, the consumer is intelligent, he can create his own opinion on the quality of the product and he can appreciate the quality of the product afterwards.
You were talking before about the export markets but if you are looking more at the domestic market, what is your market share and what are you going to do in order to increase this market share? Or is it really a priority for you to increase this domestic market share or would you like better to improve your export?
Customer is the most important thing for us and we do not care if he is here or if he is abroad. Here or there our customer has to be content. Then there are economic aspects and the truth is that the beer we export beyond the border of the Czech Republic we can make better financial profit. That is why we are exporting 45 per cent. And 55 per cents stays in the Czech Republic. If I were here to speak about 1990 just after the political and economical changes the situation was completely different. Because the brewery was exporting 74 per cent abroad. And the rest was staying in the Czech Republic. That was a consequence of the governments political plans. In 1990 when the first condition for free market started to be created in the Czech Republic we had to put with strategy of how we are going to behave business like. So we decided to continue increasing our business activities and between 1991 and 1999 we more than doubled our financial and volume activities of our exports. Both turnover and sales.
And what is the turnover of 1999?
In 1991 we exported 300 thousand hectoliters of beer. And the turnover was 460 mil CZK. And in 1999 we exported 500 thousand hectoliters and the turnover is 1bil 1mil CZK. The overall turnover of 1991 was 620 mil CZK and in 1999 was 2.3 bil CZK. The profit of 1991 was 260mil CZK before tax and in 1999 480 mil CZK. So on the domestic market in 1991 we were selling about 110 thousand hectoliters of beer and although the Czech market is not as profitable we decided to strengthen our position on the Czech market. In 1999 we sold a volume of 750 thousand hectoliters of beer which is 1.5 bil CZK. So we can see the actual situation between the domestic and export market changing. It is also thanks to the fact that the general body of the production of the brewery changed from 1991 which was 490 thousand hectoliters a year to 1 million and 260 thousand hectoliters in 1999. And in 1991 we were on the ninth place among Czech breweries and last year we were holding third position and our share on the Czech market is 7.3 per cent.
Is it really a priority for you to increase your market share in the Czech Republic?
No, because we want to increase sales abroad and in the Czech Republic and we are actually concentrating on business in both directions the same way. We have got two business departments and one is concentrating upon export and one is concentrating upon domestic market. And both departments have to get the best possible results.
Coming back to some new products you launched a few years ago. The Budvar strong beers. And as you told us it is primarily concentrated for the export markets but also for the domestic market. What have been the results and what is the feedback after the launch of Budvar strong beer?
Budvar has its own protection labels and it is used on whole as a whole group. In 1996 on the basis of marketing research we got the information that it would be useful to try to make a specialty. So as the pilot markets for this specialty we chose the Czech Republic, Slovakia, Austria and Russia. And for this specialty the protection label is Bud. It is not a protection mark that we have owned since 1996, it is a trademark from 1969. We chose this trademark because from the whole portfolio of our trademarks we have got it was the most suitable one. The fact that this is a specialty is proving the fact that it is a strong beer. It has got 7.2 per cent of alcohol but even though it has got this amount of alcohol it is quite gentle and tender. And it is not only special because of the alcohol percentage but also because the aging process is extremely long. And that is up to 250 days. So you can see that our rules in this case are not the speed rules therefore produce quickly, sell quickly.
Budweiser Budvar is still state owned, the government did not want to privatize it. Even though it is the best state owned company in the Czech Republic, in the future would you be as the general manager looking into making partnership with any foreign partners.
For one thing I would like to say that the fact we are state enterprise does not mean that we are sick. On the other hand it is nothing unusual that some of the companies are state owned. There are state owned breweries in Germany as well. To look into spirits field Vodka Absolut and also Vodka Finlandia are made by companies state owned as well. So it is not a problem for us that the government still has not decided about privatization. So the decision that was very important for us was a decision in 1996 when the Ministry of Agriculture refused to let Anhalzen Bush to buy us out. Because the negotiation that lasted between 1991 and 1996 proved that this would not be the best step to be made. That proved that he would not be our strategic partner but rather our strategic terminator. From 1996 up until now government still has not decided about a way of privatization. So we are waiting for the decision to happen this year. |
The Czech Republic is expected to join the European Union in 2003. Is it going to change something for you?
We are not really expecting the fact that in 2003 the joining of EU would be a problem for our company. Thanks to the fact that the sales of beer is free and liberal. And our brewery has been exporting into EU countries for a long time. So have known for a long time how to adjust to the laws in different countries from the aspect of production and labeling and etc. So thanks to the facts that we have been doing business with the countries of EU for a long time I think we are actually a little bit ahead of the Czech Republic.
Considering the fact that Anhalzen Bush wants and tries to p..
That Budweiser is their own trademark and brand. What is your strategy and what is your response to them ?
We are very well aware that Anhalzen Bush that have got the name to globalize Budweiser label for themselves but not for beer that comes from Ceske Budejovice. So we had to come back to the meaning of the word Budweiser. So get back to Europe and to the beer labeling. So even before the first trademark was created it was a habit that according to a certain food product their were named after the region they came from. So we should know that the trademark institution as such was created in the second half of the nineteenth century. But even before that there were names of certain products that were famous because they were good. Especially it is considering products from the food field. So we can speak about Viennese steak. Or Frankfurt sausage, or French cheeses or wines. Champagne or Bordeau. So this works with beer as well. It was named according to where it came from. So we can say Pilzen beer or Budweiser beer. Budweiser is just a German for Budejovice which is a name of town where the beer comes from. Anhalzen Bush did this especially because in St.Luis there was a big German community and they created this just to remind them of Europe and because the beer was so well known and famous they knew it was worth it. But all we want is to sell freely as the original Budweiser beer. Under the label of Budweiser Budvar. Because this philosophy of ours is absolutely incomparable with Anhalzen Bush for this reason we are leading this battle for the trade mark. Our aim is just to increase the already good name of this original Budweiser Budvar beer. That is all.
But they are exporting and you are exporting to 56 countries. So in some countries there must be a real fight between you and A.Bush. How do you react on those markets ?
I think as an example I am going to take Great Britain because both beers are sold there and the English Customer is not confused at all because he can tell perfectly well that our beer is the original Czech Budweiser and the other one is American Budweiser. And that is no problem for customer. So this story has been well commented and the general public is well aware and the English customer is actually taking our side. Even the court decision from 1984 and 2000 gave the permission to both trademarks to be selling under the name which is a very unique decision.
And what do expect will be a real solution to that ?
To wait for a final decision that will not happen. We do not have enough capital to buy them and they cannot buy us.
When the Czech Republic joins the European Union do you think it can help you to fight A.Bush ?
We cannot expect the EU to fight against A. Bush. But when the Czech Republic will be a proper country of European Union it will use European Union laws, of course. And in European laws there exists a special appendix 2881 from the year 1992 which is talking about special protection of geographic indication. This is connected with the products I was talking about - French wines, Swiss cheese, German beer, Czech beer. Within EU they are under this appendix and these products are protected thus against falsification and false production and at the moment, when we enter EU we can use this appendix against A. Bush. Because we have got many evidences that the company A. Bush used the origin way of this beer-making in the second half of the 19th century to make their beer. To make their copy of our beer.
Talking about the regions, how do you estimate the role of the company in the development of the region ?
Budweiser Budvar is one of the biggest companies in the south Bohemian region so since 1991 up until today we want to continue to the future as well to behave as a proper citizen of the region. So all the spare financial resources which we have we invest into especially Ceske Budejovice town and South Bohemian region. So we are the biggest sponsors in health care in South Bohemian region, we are sponsoring schools and education system as whole also arts in the form of giving support to South Bohemian theatre. Least but not last we are also giving support to lots of sports activities in the region. Not only clubs that play professional competition in the Czech Republic but also youth sports clubs. Because we are aware that if children are young and they do sports they can skip the temptation of drug taking and alcohol drinking. Unreasonable amount. We are also sponsoring the part of population which is partly disabled. Various communities for blind and death.
As a more personal issue I think in Czech Republic a lot of people want to be in your place so what had been your most satisfying personal achievement as a General Director ?
So the personal success of mine is that I am still healthy and alive because through the last 9 year we have gone through a lot of things. It is very difficult to explain what it is to come from state planned politics to free market politics and business and to be successful. And of course there is the problem with A.Bush which not only he wants to take our intellectual heritage but also to take a capital. From the business point of view it was very difficult to continue in the export activities and increase and expand them. And considering our domestic market after 1990 the domestic distribution of beer went bankrupt and the completely new system had to be built up again. And that means co-operation with private wholesalers. After a couple of years it was proved this was not the luckiest way. So we had decided to build a combination distribution net. The base would be our own distributing centers. And those would be completed by private wholesalers. So my own biggest personal success is that we went through all this and against all this and our brewery is growing very successfully. And it is actually developing even better and growing faster than if we had accepted the offer from A. Bush. I am saying this because I have the knowledge of the fact that in 1992 I had a special business offer in front of us which talked about if A. Bush becomes our partner where we will be in 5 years. And that they will bring capital and in the marketing, technological, technical field they will bring know-how, new markets and huge amount of experience. During those five years we have been much more successful that what A. Bush show us what we would be in 5 years. And I am considering this to be the biggest success of the brewery. Because it is not work of an individual but of a group. People who can work together and co-operate.
What would be your final message to our readers ?
So if the Forbes magazine readers happen to meet our beer I would wish for it to be a pleasant occasion. And so that while drinking our beer they could forget their daily worries and worries that their jobs bring them. And that about such a product that beer is it is not just about brainwashing and plain marketing business. But that it is necessary to taste the beer and enjoy it. And that people who want to drink beer they should listen to their own opinion.
Thank you very much. |
