Czech Republic: One of the ways to increase market share is to produce specialty beers

Some smaller breweries face serious threats to their efforts to stay competitive, according to Czech analysts. On the other hand they said the Czech beer market is safe. Annual beer consumption is fairly steady at 160 liters per person, the highest in the world, and market share remains unchanged, according to an article in Czech Business Weekly.

As in years past, brewing group Plzeňský Prazdroj, owned by brewing giant SABMiller, is leading the market with a 49 percent share. The No. 2 group, Pivovary Staropramen, owned by the Belgium-based InBev, is holding on to its 14 to 15 percent share. The other major brewers each account for 5 percent or less of the market.

One of the few ways to increase market share is by producing specialty beers, such as semi-dark or flavored beers, both of which are growing in popularity as the beer-drinking demographic changes to include more professionals and women. But even so, specialty brews account for less than 4 percent of sales.

Imported beers, while growing in popularity in most countries around the world, account for less than 2 percent of sales here. “Imports aren’t a worry at all [for Czech brewers],” said Jan Veselý, chairman of the Czech Beer and Malt Association and vice president of the European Brewery Convention (EBC). Ivo Štorek, sales director at Moravian brewery Pivovar Černá Hora, said the Czech market is opening up to imports, but for now, “imports are not competition.”

Štorek said Czechs aren’t likely to change their habits: Czech consumers are among “the most conservative beer drinkers, not only in Europe, but throughout the world.” More than 90 percent of Czech beer sales go toward a single type of brew — domestically produced Pilsner-style beer.

The brewing industry boasted a 24 percent increase in exports in 2004, and a similarly strong figure is expected for 2005. “Czech exports are becoming a more significant part of every brewer’s business,” Štorek said.

Export success creates a possibility that international groups would focus on acquiring smaller brewers, according to Alexej Bechtin, spokesman for Prazdroj. Černá Hora’s Štorek said some smaller brewers still risk going out of business. “To survive as a small brewer, we have to be specialized and find the segment where we can grow.”

Jiří Fusek, president of the Czech Association of Small Independent Breweries (ČSMNP), said small breweries are keeping a foothold on the market with a 9–11 percent share of total production (see story, page 23).

Small brewers typically use a local sales strategy. Petr Peniaštek, director of the brewery Lobkowiczký pivovar Vysoký Chlumec, said Lobkowicz is sold mainly within a 40 kilometer radius of the brewery, and breweries such as Pivovar Svijany, Pivovar Eggenberg and others also employ the regional strategy.

One way for brewers to increase production is via private-label sales at retail chains, for example Lidl or Kaufland, but this also presents obstacles.

“They always want the price to get lower, which leads to smaller and smaller margins, and eventually to [financial problems],” Štorek said. He added that small brewers generally make their beer using old-fashioned methods, and therefore can’t compete on price.

Veselý said private-label sales can help temporarily, but as a long-term activity, “it spells disaster.” “Brewers have no assurance that the chain will continue ordering, there’s no accumulation of profits and if capital investment is needed, it won’t be possible,” he added.

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