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Czech Out Them Suds
Oh sure, Munich's "Wiesn" (a.k.a. Oktoberfest, Sept. 22-Oct. 7, 2001) is always a big brew-haha, getting loads of giddy press. So großes deal--if you fancy hemorrhaging Deutsche marks and dodging acres of boozy Bavarians (not to mention trashed touristen). What you really want is right next door: lots lower prices and acres of crocked Czechs--plus fewer tourists and some of the best damn brewskis you ever swilled. There may not be no big hoo-ha with tents and such mobbed by six million schnitzel-snorking drunks, but for pivo (beer) and klobásy (sausages), the Czech Republic boasts some of the best on earth at less than half the price (try 25¢ a quart). So after--even instead of--makin' it in Munich this fall, zip over to trendy, jawdropping Prague, crammed with medieval beer halls like U Zlatého Tygra, U Vejvodu, and U Dvou Kocek (U Flecku's too touristy), then hit the road on a tour of sudsy stops in little old cutesy-poo towns from Zatec (with its hops museum) to cheap, sample-sodden tours of breweries in Pilsen (pilsner ring a bell?), Ceské Budejovice (when you say Budweiser...), Nosovice, Brno, Cesky Krumlov, Trebon, and Humpolec--not to mention Prague itself (list at www.radio.cz/beer/breweries.html). Just don't take the wheel if you're whizzed, OK?
Czech Beers & Websites
July 29 2000
It had to happen sometime: SABMiller will produce its flagship export brew outside the Czech Republic for the first time. But Plzen isn't crying in its beer.
Plzen has prided itself on being home to the famous Pilsner Urquell brew since the first tap was broken in 1842. Now, its owner, South African Breweries, wants the world to tap further into what it aptly dubs, "The World's First Golden Beer."
SABMiller announced plans last week to begin producing its premium export beer in Tychy, Poland, marking the first time the pride of Czech lager is brewed outside its home brewery, Plzensky Prazdroj.
Poland is a natural starting point as sales of Pilsner Urquell increased by 62 percent there in the second half of last year. The brewer expects sales to double in Poland this year over last.
SAB, which merged with U.S. beer maker Miller Breweries in May, made Pilsner Urquell its flagship export beer when it bought the brewery in 1999. It kicked off a $10 million advertising campaign this year to boost name recognition in Western Europe and in the United States, where it hopes to reap the biggest gains. SAB has said its goal is to propel Pilsner Urquell into the category of the top five export beers, a tall order management says will depend on expanding its production system, building greater efficiency and going head-to-head with the likes of top European exports Heineken and Carlsberg.
Plzensky Prazdroj confirmed last week that it has been conducting test production of Pilsner Urquell at the SAB-owned Polish brewery Kompania Piwowarska and that it would like to move forward with licensing production in the Polish market. Plzensky Prazdroj is awaiting final authorization from top SAB officials, who had already said producing outside of Plzen would probably be required to feed Pilsner Urquell's rising exports.
Petr Rada, manager of the Plzensky Dvur pub in Brno, said he can't imagine loyal beer drinkers will lose faith after production begins in Poland. "Customers know that we will keep tapping from Plzen, not from Poland," he said.
Plzen officials and previous managers at Plzensky Prazdroj have for decades strongly resisted any talk of producing the beer outside of the country. The fear was that doing so would harm the beer's quality and good name.
The beer's history and tradition sprang out of Plzen more than 700 years ago, when records cite the first reference to brewing in the town. In 1840, the brewery that made the first golden Pilsner lager came into existence under the name Burgess Brewery, and in October of 1842, the first bottom-fermented lager was produced. The brewery filed for a trademark in 1859 for the term "Pilsner Bier."
For management and politicians, this history has always justified the fight to keep production tied to Plzen. But changing times have meant a changing attitude. Plzen city officials now acknowledge that the city has a partner in the new SAB ownership of Plzensky Prazdroj, and its efforts to build the product will be good for the city in the long run. Statements made by top city officials late last week seem to illustrate a new openness toward SAB's ambitions.
Lord Mayor of Plzen Jiri Sneberger said last week that he supports the move to shift some beer production to Poland. "As a Plzen patriot, I sincerely regret that the uniqueness of Pilsner Urquell production will disappear," he said last week. "Nevertheless, I understand the strategy and see it as one of the good solutions to sell beer abroad cheaper. I hope that the beer quality will stay the same."
Plzen Deputy Lord Mayor Jiri Bis said there is more than one way to capitalize on the fame of the Pilsner name, either through the product itself or through strict enforcement of its production trademark. "Licensed production abroad will not be a threat to the Pilsner Urquell brand," he said. "It will always be Pilsner Urquell—that is Plzen beer—in spite of it being produced somewhere else."
A separate peace
The change in attitude of city officials toward SAB's ambitious plans for Pilsner Urquell can be partly attributed to the fact that cities depend less on corporate revenues to feed directly into the tax stream these days. "City revenues are no longer directly connected with the prosperity of local companies," said Zdenek Grundman, an ODS member of the Plzen city council and deputy chairman of Plzensky Holding, a city-owned enterprise that works with businesses on development projects. "Today, we've had to learn new roles so the city is a partner, and not anything else."
Grundman said cooperation between the city and SAB is strong, in part by necessity because the brewery uses city water and disposal systems. But the company also helps fund some city events. Plzen received Kc 20 million (about $650,000) from Pilsner last year toward city events. Cooperation between the city and brewery has improved since SAB took control of the company.
"We can discuss long-term plans," Grundman said. One of the major cooperative efforts between the city and the brewery has been updating the water system to meet European Union standards.
Further, Grundman said, the export of Czech brewing methods does not necessarily have to be looked at in a negative light. The exporting of Czech know-how, particularly Plzen manufacturing know-how, has a long tradition. "Originally Czech people were working in Japan to introduce Czech technology," he said. "It's a very long-term process of exporting know-how. I don't think it's so sensitive."
What could have an impact on the Czech market is that the company may no longer have to raise the price of the beer to offset the cost of shipping it to new markets if it begins to produce it in other countries, as it has decided to do in Poland. Pilsner is among the more expensive premium beers on the world market, and the price has gradually increased at home as the company's production and shipping costs have risen.
Vladimir Palek, Mayor Sneberger's chief of staff, said the company has complained about expenses tied to import taxes and the cost of transporting beer to Poland by train. "It's much more expensive than if it would be if it was production in Poland," he said.
The move to begin production in Poland is clearly linked to Pilsner's rocketing Polish sales in recent years. Polish sales of the lager grew by 62 percent during the second half of 2001, compared with a 37 percent increase in global sales. SAB has said it expects to nearly double sales of beer in Poland this year over last year, to nearly 200,000 hectoliters.
Pricing has continued to be an issue for SAB and for the market as it tries to get its footing in more lucrative markets and gradually increase prices in the developing markets. The company reported "real price increases" in the Czech Republic in 2001, but is unlikely to find much room for boosting prices in Poland because of the country's poor economic conditions. High unemployment persists in Poland, and the economy is expected to grow only 1 percent this year.
Still, Pilsner Urquell holds a 20 percent?and growing?share in the Polish beer market. The brand is included in the portfolio of SAB's Polish brewery Kompania Piwowarska. Pilsner has bucked the trend in Poland, where an advertising ban and a general market slump have hit small producers particularly hard.
Since taking over the Tyskie Brewery in 1998 and merging it with another domestic brewer, SAB has managed to increase Tyskie's market share from 10 percent to about 25 percent.
The company's strategy in the developing markets, particularly in Poland and Hungary, has been to establish strong distribution systems, repackage products and generally reduce or consolidate niche brands in their portfolio to make room for premium products.