Thursday, 14 May 2009

MPs slam power of the pubcos

Review of the beer tie must
not hit independent brewers

Parliament's Business and Enterprise Committee (BEC) wants a full-scale review of the "beer tie" to be conducted by the Competition Commission -- but such a review must be careful to distinguish between the giant national pub companies and family and independent brewers.
The BEC's report this week correctly identified the high-handed activities of some of the pubcos, who charge tenants and lessees exorbitant rents while selling them expensive beer. Many people running pubco outlets have been driven into poverty and destitution as a result of their landlords' policies. The committee of MPs found that many lessees and tenants easrn as little as £15,000 a year in return for working long hours and often seven days a week.
But it's important for any future review to distinguish betweeen the pubcos and brewers who tie their pubs. The tie is the bedrock of independent brewers' business. If the tie were to be totally abolished, the national brewers would swoop on regional brewers' pubs offering them heavily-discounted lagers and keg beers. It would be a disaster for cask beer, the only sector showing any sign of growth at present. It would also mean the inevitable closure of many smaller brewers who would be unable to compete with national beer brands in their own pubs.
In countries where the beer tie is illegal, the situation is far worse than in Britain. In the United States, where brewers are not allowed to retail beer, they sign sweetheart deals with large distribution companies that take only the products from one brewery. It means that smaller craft brewers cannot get their beers on to the distribution companies' trucks. The result is a market skewed in favour of the giant brewers and less choice for consumers.
In Britain, the national pubcos -- Enterprise, M&B and Punch -- need and deserve a thorough investigation and should be told to change their ways. But any investigation must also recognise the vital contribution that independent brewers make to local communities and must be allowed to sell their beers through their own tied estates.

Tuesday, 5 May 2009

Mestansky brewery in financial trouble

Budvar's bitter rival
is up for sale at GBP50m

One of the Czech Republic's oldest breweries - the first to export beer under the 'Budweiser' name - faces possible closure. The Mestansky Brewery - Citizen's Brewery - dates from 1795 and is up for sale with an asking price of 1.5 billion Czech crowns or GBP50 million. The price is considered high and Mestansky's rival, Budweiser Budvar, in the famous brewing town of Ceske Budejovice has said it's not interested in buying the company at that price.
Mestansky has had a chequered history since it was founded as the Burghers' (Citizen's) Brewery in 1795 by merging the town's Big and Small breweries. It was launched by German-speakers at a time when Bohemia was part of the Austro-Hungarian Empire and was able to export using the name Budweiser from the town's German name of Budweis.
Exactly 100 years later, Czech businessmen in the town opened their Joint Stock Brewery, the forerunner of Budweiser Budvar. In the 20th century both breweries ran into dispute with the giant American brewer Anheuser-Busch, owner of the American beer Budweiser: in court cases in the U.S., A-B openly admitted its beer was based on the Czech method of making Budweiser beer.
During the German occupation of Czechoslovakia in World War Two, the Citizen's Brewery became deeply unpopular in the region for collaborating with the Nazis. After the war, Mestansky was confiscated as a result of its collaboration and its property was transferred to the newly-formed and state-owned South Bohemian Breweries, which included Budweiser Budvar. Following the fall of communism, the Citizen's Brewery was privatised while Budvar remained in state hands. The Citizen's Brewery was renamed Budejovicky Mestansky Pivovar (Budweiser Citizen's Brewery) but it was also known as Samson after one of its brands, which commemorated the statue of Samson in the town's main square. Along with Budvar, Mestansky was given PGI status by the European Union, a guarantee of geographical origin. Mestansky then started a series of court actions against Budvar over the rights to the name Budweiser. The cases have been settled, the majority in favour of Budvar.
Mestansky has had a troubled time in the first decade of the 21st century. Its volumes have fallen to 150,000 hectolitres a year - Budvar's are now 1,300,000 hls - and is not profitable. It brews own-label brands for Tesco and Waitrose in Britain. The Tesco beer is called 1795 and is labelled absurdly as a Pilsner, an appellation allowed only for beers brewed in Pilsen.
Now Mestansky is up for sale and there are rumours that if a buyer cannot be found it will ask the Czech government to take it back under state control. Foreign brewers are active in the Czech Republic - Pilsner Urquell is owned by SABMiller and Staropramen by InBev, while Heineken owns Krusovice, Starabrno and Drinks Union - but they are unlikely to be interested in buying such a small producer as Mestansky. InBev is looking for a buyer for Staropramen, with Heineken the most likely buyer. But as Heineken is short of cash as a result of paying too much to acquire Scottish and Newcastle Breweries in Britain it's unlikely the Dutch company would want to add Mestansky to its portfolio.
As Budvar denies it's interested in buying its local rival it could mean that a brewery that played a significant if controversial role in the history of Czech brewing will disappear.
*Budvar reported its biggest ever sales for April in 2009. The brewery is now supplying unpasteurised beer to bars and restaurants in the Czech Republic that have a fast turnover of sales.