Heineken’s sales talk with Molson Coors gone quiet

You snooze, you lose. Or “those who are late will be punished by life itself“. Mr Gorbachev’s famous words will be ringing in Heineken’s ears. Heineken is the number three brewer in the Czech Republic, which it entered late, in 2003, when it acquired the Czech brewer Starobrno. In 2007, it bought the then German-owned Krusovice brewery from Radeberger, increasing its market share to 8 percent. But even with the purchase of Drinks Union in 2008, Heineken’s share has languished at around 13 percent. Same with Molson Coors. It acquired Staropramen in 2012 when its then owner, the private equity-controlled brewer StarBev, was sold for USD 3.5 billion. Staropramen, which is the country’s number two brewer, has a market share of 18 percent. SABMiller’s Pilsner Urquell is number one with a market share of 47 percent. Budweiser Budvar ranks fourth at 8 percent.

It really came as no surprise when in September 2014 Czech media reported that Heineken was in talks about selling its Czech operations to Molson Coors. Needless to say, both Heineken and Molson Coors declined to comment on the rumour.

The reason why Heineken may be willing to part with its Czech unit is that it has not advanced significantly. The former SAB and Staropramen were buying up outlets and signing up hotel owners with generous but restrictive contracts, particularly in Prague, before Heineken came on the scene. A standard technique to squeeze out the competition.

Further, if you look at a map of the Czech Republic, all the Heineken breweries are in economically depressed regional areas, off the beaten tourist track. When Heineken acquired the breweries, it gained many brands, a couple of nice plants, but not much market and limited areas for growth, observers say.

Molson Coors, on the other hand, has three breweries in the Czech Republic. The site which the Staropramen brewery occupies in Prague is now considered prime city real estate. The Heineken offer might be of advantage for that reason. Were Molson Coors to sell the site, Heineken’s Krusovice brewery, located 55 km to the northwest of Prague, could come in handy – depending on capacity, of course.

In theory, Heineken and Molson Coors would make a nice fit in the Czech Republic. Why the rumour mill has gone quiet remains a puzzle. Perhaps the two parties could not agree on price?