Czech Republic: Different strategic plans of the world’s beer giants in the country

The world’s two largest brewing groups – London-based SABMiller and Belgium-based InBev – last week announced radically different strategic plans that directly impact their Czech operations, Czech Business Weekly posted on February 27.

SABMiller, owner of the Plzeňský Prazdroj group, just made two deals for further worldwide promotion of its premium brand, Pilsner Urquell, including new sponsorships and newly harmonized global marketing campaigns. The move contrasted sharply with InBev subsidiary Pivovary Staropramen’s announcement Feb. 24 that it will permanently close its Prague brewery Braník, established in 1899.

“Braník reached its maximum capacity and further modernization isn’t possible, due to space constraints and the building’s potential status as a cultural monument,” said František Šámal, production director of Pivovary Staropramen. Braník production will be moved to the Staropramen brewery in Prague 5 – Smíchov in 2007, and 80 employees will lose their jobs.

InBev released its 2005 financial results Feb. 24, with net profits at € 1.4 billion (Kč 39.8 billion) compared with € 898 million in 2004. The company announced its intentions to increase the group’s overall profit margins to 30 percent in 2007 from 28.6 percent in 2005. Closure of the Braník brewery and transfer of its production to Staropramen is part of the plan to raise margins.

Jan Veselý, executive director of the Czech Beer and Malt Association (ČSPAS), had little to say on the closure, except that such strategic decisions are outside the scope of the association’s influence.

InBev announced that the Czech Republic has been identified as the best location for a new InBev European Export and Shared Services Center, and new jobs may be created here. Export, finance and procurement activities for InBev breweries in 12 European countries would take place at the new center. Centralization of the operations should begin in the second half of 2006.

SABMiller increased exports of Pilsner Urquell, one of its three global premium brands, by 6 percent last year and plans to increase exports significantly over the next two years. The group is therefore investing Kč 1 billion over the next two years to expand and upgrade its Plzeň, West Bohemia, brewery, while SABMiller’s global marketing this year includes new sponsorships and global promotion of Pilsner Urquell.

James Crampton, SABMiller’s media relations manager, said the group just closed a deal establishing Pilsner Urquell as the sole sponsor of the International Photography Awards in New York. SABMiller is also recalibrating its marketing for Urquell “to invite consumers to experience the essence of the brand as well as the product.” Veselý of ČSPAS called the enhanced promotion of Urquell “good news” that could enhance the reputation of all Czech beers.

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