Becherovka gets booted from the Pernod Ricard’s House of Brands
Pernod Ricard is looking to sell off its Czech Becherovka brand for up to USD 200 million, according to media reports in April 2014. Becherovka, formerly Karlsbader Becherbitter, is an herbal bitter, often drunk as a digestive aid, with an alcohol content of 38% ABV - in case readers have never had it.
The pending move marks the end of the French drinks company’s effort to take the traditional Czech liqueur to a more global audience, strengthen Becherovka’s sagging local market, and use the company as an entry point to launch the full range of Pernod Ricard beverages into the Czech Republic.
Potential buyers include Stock Spirits, the SPI Group and “other eastern European-based interests”. Many think that Stock Spirits are not really on the list as they already have a full portfolio of bitters. SPI Group, with its Stolichnaya vodka and Latvia’s Balzams herbal bitter, would look like a much closer fit.
Pernod Ricard stepped into Becherovka in the 1990s. In this optimistic time, with the fall of communism and the opening up of central European markets, what could possibly go wrong with the Pernod Ricard’s plans?
Well, just about everything. The problems fell into four categories: political football, brand integrity, unrealistic promises, and – perhaps the most critical – a resurgent local competitor that never went away.
Becherovka entered the 1990s loaded under the burden of history. The saga started in 1807 when Josef Becher, a pharmacist from Karlovy Vary (Karlsbad), began selling his own mix of herbal bitters. Production expanded under his son’s guidance and the beverage became an intrinsic part of the Karlovy Vary spa culture of medicinal water and was nicknamed the “thirteenth fountain”.
After World War II and the expulsion of the Sudeten Germans, the company was nationalized under the Benes Decrees and became part of the national culture of the newly socialist country.
While Becherovka was a cultural icon within Czechoslovakia, the locals had quietly started switching their drinking habits. Stock Plzen-Bozkov saw domestic demand and consumption of its far more bitter Fernet Stock pick up in the 1980s and 1990s. Shots of Fernet Stock could be easily consumed by an intellectual in a café or knocked back by a worker along with his beer, pointed out Martin Petrasek, then manager of Stock Plzen to this reporter.
After the fall of communism, Becherovka was considered part of the Czech Republic’s family silver, an exceptionally valuable company which embodied the country’s cultural heritage. Other parts of this “family silver” were Budweiser Budvar and Pilsner Urquell. But, by 1993, the government began considering its privatization options and finally put Becherovka up for sale.
The two most important bidders for Becherovka were Pernod Ricard and Stock Plzen-Bozkov. Pernod Ricard took a more political path to its business proposal, bringing in the Czech blue-blood aristocrat and politician Karel Schwarzenberg as a member of the consortium.
While Stock Plzen offered more cash, Pernod Ricard won the bid on other points (think international expertise and know-how) amid allegations of back-room arm twisting. In the otherwise sterling career of Karel Schwarzenberg, this was a low point. After approving the deal, the coalition government promptly broke up.
Pernod Ricard stepped into management and was in a position to buy the remaining stake in 2001 after performance criteria for production and exports were met.
Stock Plzen, then part of Germany’s Eckes Group, did not sulk after failing to win Becherovka. In 1997 they launched Fernet Citrus, a line extension of the flagship Fernet Stock. With a sweeter, citrusy taste and a lower alcohol content of 30% ABV, the new product became a runaway success and money-spinner. Within three years, it became the most popular liqueur in the country, topping consumption of the traditional Fernet. Priced the same as Fernet Stock, it was still cheaper to make thanks to the lower excise tax burden.
Overall, Stock aimed its marketing squarely at the mass market. Its ads were slightly misogynistic, slightly sleazy, with the wink-wink, nod-nod slogan of “Men have their days too”. This was a much different message to the upscale message of Pernod Ricard. But it worked.
To fight back, Pernod Ricard rolled out two extensions of the Becherovka product line: Rapid – designed for the classic Fernet drinker and Limet – a roughly comparable beverage to Fernet Stock Citrus. Both were not successful.
In the years since, some things have changed. Pernod Ricard has placed most of its brands in the Czech Republic. Lemond, a lighter variant of Becherovka for the young adult market, has been successfully launched. A new production facility was built, increasing the total capacity to 9 million litres. Annual production was 7 million litres in 2013, of which roughly half was exported.
While some Becherovka is sold in 40 countries around the world, the biggest markets are the Ukraine, Slovakia, Russia and Germany. That’s why it would not come as a surprise if Becherovka were acquired by some eastern European investors.
