Czech change is no small beer

Just in case the Prague Post is not delivered to your door every day, I thought you might be interested in the thoughts of former Czech president Vaclav Havel on the state of the country 20 years after the end of communism.

As it was Havel, playwright-turned-politician, who was instrumental in overthrowing the old regime, you might think he found everything hunky-dory in the new Czech Re-public. But, in an interview in the Prague Post last week, he bewailed the blatant consumerism of the country, the growth of the super-rich, the development of a home-grown Mafia, and vulgar "palaces" where the better-off flaunt their ill-gotten gains as they swill expensive food and drink.

He didn't mention the local

brewing industry. But he is a well-known beer lover. He set one of his plays in a brewery and famously took Bill Clinton for a glass of Pilsner in the Golden Tiger pub in Prague, so I doubt if he is happy with the dramatic way Czech brewing is changing.

Last week, two of the global brewers with major investments in Central and Eastern Europe announced they were reducing their commitments in the vast region. The world's biggest brewer, A-B InBev, formed last year when InBev bought Anheuser-Busch, said it wanted to sell 11 breweries worth $2.5bn in seven countries — Bulgaria, Croatia, Czech Republic, Hungary, Montenegro, Romania and Serbia.

This is not small beer. Between them, the breweries produce 15 million hectolitres a year. One of the groups A-B InBev wants to sell is Prague Breweries, best known for its Staropramen lager, the third biggest-selling beer in the Czech Republic and a successful brand in Britain.

At the same time, Heineken said it planned to close two or three breweries in the Czech Republic in its Drinks Union and Starobrno groups. The best-known of these breweries is Krusovice, which I visited in the depths of winter back in the 1980s, my hands held by representatives of the "Czech tourist authority", otherwise known as the secret police.

I would hate to sound like an apologist for the hated old Stalinist regimes of the Soviet bloc, but they did keep breweries open and they didn't run them purely for profit. I recall a director of the big West German brewery Bitburger telling me that when his company bought the Kostritzer brewery in the former East Germany: "They were selling beer at cost price. We had to tell them to make it cheap and sell it dear: that's how to make a profit."

It's that attitude that is driving the changes in the Czech Republic and neighbouring countries today. Significantly, neither A-B InBev nor Heineken plans to reduce their presence in Russia and the Ukraine. The reason is simple: they are vast countries with countless millions of existing and potential beer drinkers. Carlsberg, which owns the Baltika group in Russia, and has 12 breweries there and two more in Ukraine, makes 40% of its annual profits from that region.

Shining light​

The countries where A-B InBev and Heineken are pulling the plug on breweries have small and even tiny populations. In some cases, incomes are so low that people can no longer afford the price of a pint. When I first went to Prague in the 1980s, beer cost around one penny a pint by British standards. It still seems cheap to visitors today, but it's expensive for those not swilling in Vaclav Havel's despised food palaces.

The attitude of the global brewers, who bought privatised breweries for a song in the 1990s, is simple: if the volumes and the profits aren't high then they wield the axe.

Many of the threatened breweries will close and choice for drinkers will decline. The price demanded for Prague Breweries will deter most potential buyers. SABMiller, the most powerful global brewer in the Czech Republic, and owner of the world-famous Pilsner Urquell, already controls 45% of the Czech beer market and would not be allowed to buy another large brewery.

The only gleam of light amid the dark clouds shines on Budweiser Budvar. It's still owned by the Czech Government, although it could be privatised if a right-of-centre coalition wins this October's general election. But, in the current climate, who among the global brewers would want to buy it?

Before the creation of A-B InBev, the most likely buyer for Budvar would have been Anheuser-Busch, owner of the rival Budweiser brand, who could have ended the century-old trademark dispute between the two companies.

But now InBev calls the shots and aims to retrench in the Czech Re-public rather than expand. The best future for Budvar is to remain in Czech hands, run by beer-loving shareholders.

I'll happily donate 50 kopeks.