Bounced Czech: the plot to do down Budvar

Jiri Bocek, the victim of a sustained campaign of denigration that goes to the heart of the Czech government, was remarkably relaxed in the offices of the Budweiser Budvar brewery. The 54-year old managing director of the state-owned company was affable and even had warm words to say for his arch rival, the American brewer of the other Budweiser brand.

He could afford to smile, as he has seen off his critics and, for the time being at least, can say that Budvar is safe from takeover by a global brewing giant and can continue to export beer to 18 countries world-wide.

It looked rather different in February. Budvar is controlled by the Czech Ministry of Agriculture and the minister, Petr Bendl, announced he was considering sacking Bocek and planned to pack Budvar’s supervisory board with critics of the managing director. They included a lawyer, Tomas Jindra, who would oversee an audit of the brewery’s accounts as Bendl said he was not satisfied with Bocek’s performance.

The minister also made it clear that he felt Bocek had been dragging his feet over settling the long-running trademark dispute with the owners of American Budweiser, originally Anheuser Busch, now AB InBev. Petr Bendl was supported by sections of the Czech media that labelled Bocek an autocrat. One newspaper described Budvar as “a state within the state”.

Bocek shrugs off the attacks. “The beer business is my responsibility,” he says, “and from time to time you have to be an autocrat.”

He answers his critics in the government by pointing out that since he became managing director of Budvar in 1991 he has trebled production and doubled sales and profits. Production now stands at 1.5m hectolitres a year and on 26 April the brewery announced that over the past 12 months net profits had grown by 9.2% to 239.7m Czech crowns. Domestic sales were up 3.4% and exports by 7.7%, compared to 2.7% and 4% respectively for the whole Czech brewing industry.

Jiri Bocek compares his performance with that of the coalition government, which, he says, staggers from one crisis to another. “There have been four to five crises since January and two more in the past three weeks,” he says.

The right-of-centre parties that form the coalition have a free market philosophy that makes them determined to privatise Budvar. That determination extended to going behind Bocek’s back and seeking an agreement with AB InBev that would have ended the trademark dispute by withdrawing Budvar from key export markets.

Bocek says the reason Agriculture Minister Bendl wanted to sack him had nothing to do with the brewery’s economic performance but the MD’s refusal to sign an agreement that would have withdrawn Budvar from North and South America and Western Europe.

The Budvar MD outlined a complex plot that included the sale to AB InBev in January of Mestansky, a second brewery in Budvar’s home town of Ceské Budejovice.  It was owned by an influential Czech businessman Frantisek Savov, whose main company, Harvestor, is registered in Nicosia, Cyprus. Savov is also involved in the media and owns a leading Czech newspaper, E15, which supports the present coalition government.

In 2011, Savov transferred Mestansky’s brewing assets to a new company called Samson, leaving behind a shell company that contained nothing except the former Mestansky’s rights to the Budweiser trademark. Under Czech and European law, both Budvar and Mestansky can sell beer under the Budweiser trademark.

“AB InBev has no interest in brewing at Samson,” Jiri Bocek says. “It now owns the Mestansky trademark and Bendl told Savov he would seek to end the dispute with Budvar without discussion with me. When he presented me with a draft agreement, Budvar’s exports would have been confined to Africa and Asia. Of course, I was not prepared to sign such an agreement, which is why Bendl announced he wanted to sack me.”

The plot to oust Bocek, drastically weaken Budvar’s export drive and hand the trademark initiative to AB InBev rapidly unravelled. Opposition parties in the Czech parliament, which are likely to form the next government, declared they would not privatise Budvar. One leading Social Democrat MP, Jiri Zimola, is also the regional governor of South Bohemia, which includes Ceské Budejovice, and he said he would organise a referendum on Budvar’s future.

Opinion polls showed that a clear majority of Czechs didn’t want the brewery to fall into foreign hands: beer lovers are well aware that other leading Czech breweries are now owned by overseas global giants. Pilsner Urquell, for example, is part of SABMiller, Staropramen is owned by Molson Coors and Krusovice by Heineken.

Last month Agriculture Minister Bendl backed down. The Budvar supervisory board has been reduced from 12 members to nine and Tomas Jindra resigned. Two new board members are more supportive of the brewery and most importantly there is now no question of Budvar relinquishing its export markets to AB InBev.
Surprisingly, given the century-old trademark dispute, Jiri Bocek says he was saddened when Anheuser Busch was taken over by InBev in 2008. “They were my enemy but I respected the Americans as professionals. They had a similar approach to quality and stuck to the brewing rules.”

He is sharply critical of the new breed of global brewers. “The philosophy has totally changed. It’s a different culture. Brewing today is only a business. It’s about money, money, money.

“But life is not only about economics. Beer is a special product. It requires emotion to make it well. It’s a social lubricant that connects to the people.”

Bocek has worked for Budvar for 21 years and his father was there before him, from 1945 until 1982, finishing as director of production. Budvar’s methods and philosophy are deeply ingrained in Jiri Bocek and he is proud of traditions based on the finest raw materials and a slow, unhurried system of production with 90-day lagering or maturation.

“I am a brewer,” he declares. “Most CEOs of global breweries are usually financiers or economists. They are only interested in buying cheaply. All the emphasis is on marketing and attempting to convince consumers their beer is good when actually it’s cheap beer.

“We use Czech barley and whole hops from the Zatec region. Other Czech brewers buy German or French barleys but they are not suitable for Czech brewing methods. They change the taste and the character. Consumers can taste the difference – and that’s why they are switching to Budvar.”

But he is quick to stress that while Budvar is state owned it’s not a drain on the government. “We pay beer taxes and VAT and we plough our profits back into the brewery. We have invested in new equipment and we have reduced the costs of energy and water. I have reduced administration costs. There used to be 210 people working in production, now there are 170 – and they make more beer!”

Jiri Bocek is safe in his job but he is aware that the long trademark row is far from over. Thoughtfully sipping a glass of his golden lager, he says: “I would like to solve the trademark dispute --but not at the expense of Budvar’s exports and future.”

Jiri Bocek: key dates

1972-73: Brewing Training Centre, Ceské Budejovice, including practical training at Budweiser Budvar.

1974-77: Technical School of Food Technology, Prague.

1977-82: Institute of Chemical Technology, Prague; Faculty of Food & Biochemical Technology, Department of Fermentation, Chemistry and Bio-engineering.

1982: Practical training in Strakovice Brewery.

1983-84: military service.

1984: Technologist and brewing house foreman, Budweiser Budvar.

1985-91: Junior brewmaster and brewing house foreman, Budweiser

Budvar.

1991-2012: Managing Director, Budweiser Budvar, now third biggest brewery in Czech Republic.

Battle of the Buds

The modern Czech town of Ceské Budejovice was known for centuries by the German name of Budweis. It became a famous brewing centre and, in the German fashion, beers from the town were called Budweiser.

In 1795 two breweries merged to form a German-owned company, the Burghers’ or Citizens’ Brewery, which sold beer under the Budweiser trademark. A century later, in 1895, Czech speakers launched the Budejovicky Pivovar [Budweis Brewery], contracted to Budvar. Both breweries sold beer under the Budweiser trademark.

In between these dates, two German emigrants, Anheuser and Busch, opened a brewery in St Louis, Missouri, and in 1875 launched a beer called Budweiser, aimed at Americans of German origin. As AB grew, it fiercely protected its trademark and sued other American-German brewers who used the Budweiser trademark. AB also took legal action to stop Budvar entering the American market.

Since then there have been 24 court cases throughout the world over the trademark. In countries where Budvar registers its trademark first, the American beer can be sold only as “Bud”. Conversely, where the Americans register first, Budvar has to be sold as “Czechvar”. Britain is one of few countries where a court has ruled that both breweries can use the full Budweiser trademark.

The legal waters are further muddied by the fact that AB InBev now owns the former Mestansky Brewery trademarks.

*An edited version of this interview appeared in the Publican’s Morning Advertiser, 10 May 2012.