Czech Republic: New packaging brings extra-costs for small brewers

Despite a domestic fall in per capita consumption, most Czech brewers experienced a healthy 2005, and, according to first-half estimates, look to continue this growth trend in 2006, Czech Business Weekly released July 31.

A number of factors have helped brewers, including increased exports, along with lasting heat waves at home and, in June, a FIFA World Cup football tournament that featured a Czech presence for the first time in 16 years.

Some larger beer makers’ flagship brands saw a new look this year. These redesigns have caught customers’ attention but left many smaller brewers, according to their own accounts, in a tighter financial situation (see “Battle brewing,” CBW, Feb. 20, 2006).

In February, the number two brewer, Prague-based Pivovary Staropramen, owned by Belgian beverage company InBev, came out with fresh labeling and new green bottles. In addition, the bottles are 60 grams lighter, and a fully loaded truck now weighs 1.5 tons less, saving costs. “It’s getting an incredible reception from retail partners, who’re giving [Staropramen] more shelf space,” said Tunc Cerrahoglu, Staropramen’s general director. “We see that in our sales, too; in key accounts, the sales of Staropramen have increased by 30 percent compared to last year.”

Similarly, the market leader, Plzeň, West Bohemia-based Plzeňský Prazdroj, owned by multinational brewer SABMiller, launched new packaging for its best-selling brand, Gambrinus, at the end of last year. Gambrinus has a 26 percent market share. The brand stuck with the classic brown glass but switched from the half-liter NRW bottles used by most Czech brewers to new “gold” types of the kind used by other SABMiller brands. These bottles are also lighter in weight, by about 20 percent.

SABMiller reported a 2 percent growth in sales volumes in the Czech Republic for the fiscal year ending March 31, helping to increase slightly its market share to 49 percent.

The other two major breweries — Starobrno, in South Moravia, and state-owned Budějovický Budvar, in South Bohemia — have also made the switch to new, green bottles. The result, say smaller breweries, is a rise in sorting and logistics expenses for returnable bottles that smaller breweries feel are being forced upon them.

“The main thing is that breweries haven’t solved the problem of sorting bottles, and the old and new bottles are mixing,” said Josef Hlavatý, general director of Pivovar Náchod, in North Bohemia. At present, a solution to this ongoing debate doesn’t look likely, he said. “At the beginning [small breweries] proposed a higher deposit for new bottles but nobody wanted to discuss this.”

It’s also still uncertain what kind of extra costs these new bottles will bring. “We’ll be able to determine these extra costs after a longer time,” Hlavat said. “Certainly, expenses will jump for the human resources involved with sorting, as well as logistics.”

However, larger breweries, like Staropramen, are taking a wait-and-see approach. “I’m not sure I can call it a problem unless I see facts,” Cerrahoglu said. “Solutions are being looked at, but I want to make sure I see numbers in front of me.”

Jiří Fusek, president of the Czech Association of Small and Independent Brewers (ČSMNP) and general director of South Moravia-based Pivovar Černá Hora, in June proposed that new legislation should come into place stating who would pick up these costs.

“A law would definitely help if it determined also the share [of money] for regional [beer] producers,” Fusek said. “Small brewers can’t solve the problem alone.”

Other than this tempest in a beer bottle, currently breweries have little to complain about. Industry-wide, exports grew 17 percent in 2005 to 3.1 million hectoliters, and first-half estimates for 2006 show a 20 percent growth, according to Jan Veselý, head of the Czech Beer and Malt Association (ČSPAS).

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