Budweiser Budvar plays the political card in dispute with ministry – comment
In the recent spat with Petr Bendl, the Minister of Agriculture, Budweiser Budvar’s Jiří Boček may have won a round – but not the fight. The long-time manager of state-owned brewery Budějovický Budvar (Budweiser Budvar) cleverly played the political card – Budweiser Budvar falling into the hands of Anheuser-Busch if it were to be privatised – to fend off criticism of his managerial style.
After weeks of public hostilities between Mr Bendl and Mr Boček, following a supervisory board reshuffle at Budweiser Budvar which had brought two of Minister Bendl’s confidents to the Budweiser table, the Czech Prime Minster Petr Nečas was forced to intervene on 7 February 2012 and say that the time was not right for Budweiser Budvar to be privatised.
That may be the case. Nevertheless, it has also shown that Mr Boček’s grandstanding as the sole defender of Czech brewing culture against the overbearing Yankies (aka Anheuser-Busch) is not above reproach in Czech political circles itself.
It’s quite difficult to make out what really caused the acrimonious row between Minister Bendl and Mr Boček, as Czech business media are far from unbiased bystanders. According to one of the less salubrious papers, the Minister of Agriculture is furious with Budweiser Budvar, which he accused of being run like a "state within a state". Mr Bendl reportedly said that Budweiser Budvar is a company with "a CZK 2 billion (EUR 80 million) budget, which has spent CZK 1 billion on marketing over the past three years and more than CZK 2 billion on investments without worrying about the law on public tenders.”
What can this mean? That profits have not flowed into the national treasury, like those of other state-controlled companies, and that measures have not been taken that would have curbed profits’ non-transparent transfer and the influence of lobbyists?
Doubts over Budweiser Budvar’s profit-maximising capabilities seem to have been mounting in recent years, especially when the leading government coalition party, the centre-right Civic Democrats (ODS) took control of the Ministry of Agriculture, which owns Budweiser Budvar.
Let’s be frank: few managers in the brewing industry have had it as good as Mr Boček, 54. He has been at the helm of Budweiser Budvar for over 20 years, steering the brewer through the troubled waters of the Czech Republic’s transition from a planned economy to a free-market economy. All the while Czech industries were being privatised and taught the capitalist mantra of profit maximisation, Budweiser Budvar remained state-owned and was allowed to keep on fighting its trademark battles with Anheuser-Busch.
For the past twenty years, time appears to have stood still at Budweiser Budvar. At least when it comes to management philosophy. It has been amusing to watch the persistent appeal of Soviet tonnage ideology in Budweiser Budvar’s published results. Not exactly a paragon of transparency, Budweiser Budvar has only released beer volume data to the public – sales and EBITs were notably absent – as if volumes are the major criteria to assess a company’s business nous.
The same routine was played to us at the beginning of this year when Budweiser Budvar reported a 5.5 percent increase in beer sales for 2011 to a record 1.32 million hl, while exports rose 7.8 percent to a record 650,000 hl.
Admittedly, total beer volumes and export volumes have been going up during Mr Boček’s reign, but so have they at Pilsner Urquell, another Czech brewer, which was hardly bigger than Budweiser Budvar when it was sold to South African Breweries in 1999 for over USD 600 million. In 2011 Pilsner Urquell exported almost 900,000 hl.
Although Budweiser Budvar has been very economical with publishing its business figures, some data still got out, which show that Budweiser Budvar in 2010 allegedly had a turnover of CZK 1.9 billion (USD 100 million), a pre-tax profit of CZK 220 million (USD 11.6 million) and a net profit of USD 10 million on beer sales of 1.3 million hl. That’s hardly peanuts. However, Czech brewing industry comparisons show that when it comes to EBITDA margins, Budweiser Budvar in 2009 was significantly outperformed by Staropramen (StarBev) and Prazdroj (SABMiller). Budweiser Budvar’s EBITDA margin ( a measure of profitability) was 20 percent, compared to Staropramen’s 32 percent and Prazdroj’s 49 percent.
What is more, some Czech media sources claim that Budweiser Budvar has been allowed to retain profits. When asked by BRAUWELT International what the arrangement is as concerns its profits, Budweiser Budvar was not available for comment.
Now if you were Minister Bendl and did your sums: wouldn’t you come to the conclusion that Budweiser Budvar is basically a self-serving set-up, whose profits don’t bolster the Czech budget but some managers’ egos and their costly legal battles with Anheuser-Busch over the Budweiser trademark?
To push further: what’s really in it for the Czech state that Budweiser Budvar is state-owned? We’d hazard the extravagantly wild guess that privatising Budweiser Budvar, either through a stock-market listing or a sale, would bring in more money for the government than the Czech state has got in dividends from Budweiser Budvar in years.
It’s beyond us to say whether Budweiser Budvar has been well-managed or badly managed or even mis-managed as Minister Bendl has claimed.
One thing is certain: Budweiser Budvar cannot go on acting like a damsel in distress each time they are called upon to clean up their act. State-owned companies above all have to serve their stakeholders: they need to be squeaky clean and profitable. Otherwise they lose their credibility and their licence to operate, national treasure or no.
