Strange brew in Budweis(er)
Stranger things have happened. Many still wonder why AB-InBev has purchased Budejovicky mestansky pivovar (BMP) from Czech brewer Pivovar Samson, the smaller of the two Budweiser breweries located in the town of Ceske Budejovice, in December 2011. Will AB-InBev put the BMP brand Budweiser Bier to sleep for good or will they use it as a fighting brand in export markets which are dominated by Budweiser Budvar? In any case, the deal between AB-InBev and Czech brewer Pivovar Samson settles one of the two trademark disputes AB-InBev has been embroiled in for over a century.
As a specially structured transaction, the deal could be designed to give AB-InBev an end-run solution to its global trademark battle with Budweiser-Budvar by finally forcing Budvar and its owner, the Czech government, to the negotiating table.
At stake is AB-InBev’s ability to make Budweiser a global trademark and the Czech Budvar’s effort to restrict the use of the Budweiser name to its geographic origins.
The deal came after Harvestor, a Cyprus-registered company, took control of BMP in late 2011 and divided it into two entities: brewing assets consolidated into Samson pivovar with the trademarks and water source into BMP. As AB-InBev took the BMP package, Harvestor kept Samson.
Neither AB-InBev nor Samson, a small, reportedly loss-making Czech brewery that produces under 150,000 hl beer, disclosed financial details nor the number of trademarks and countries affected in the deal. Moreover, they would not be drawn out on their plans for Budweiser Bier.
“Budvar was offered the same deal and they didn’t go for it,” said Michal Donath, media representative for Harvestor. That may be due to Budvar’s special status as a “state enterprise", that they were not allowed to buy another company. Then there was the price. Recently in the Czech press, there was mention of an asked-for price of over 1.5 billion crowns (over EUR 60 million) for BMP.
Budvar says the deal is a Trojan horse, and AB-InBev is really after them and their “Budweiser” trademarks. “It is highly likely that AB-InBev will not carry out business activities in the Czech Republic, particularly not brewing,“ stated Budvar CEO Jiri Bocek in a press release. “Anheuser-Busch has undoubtedly got hold of the intellectual property of original BMP, at the same time building up its position for joining in the potential privatization of Budweiser Budvar.”
Harvestor may have flogged off BMP, but they might not be out of the picture. Mr Donath told BRAUWELT International that their goals are to boost production of Samson products and open more export market channels, especially to Germany. However, he gave no information on how they would do that nor on how they would make their brewery operations profitable, should AB-InBev lay the Budweiser Bier brand to rest.
While Mr Bocek’s nightmare of a One Budweiser World may be the end game for AB-InBev, it still is unclear how the BMP acquisition will be utilized by AB-InBev. That’s why some media commentators have called the deal symbolic.
More than 20 years after the fall of communism, there is only one “narodni podnik” or "state company" left in the Czech Republic – Budvar. “Privatization is not the issue of the day,” stated Budvar spokesman Petr Samec. Perhaps buying BMP is a way to push Budvar or the Czech government closer towards a privatization deal once the brand gets attacked in its export markets by Budweiser Bier. In 2011 Budweiser Budvar sold 50 percent of its total volume of 1.3 million hl in markets outside the Czech Republic.
Buying the trademarks is the traditional way of ending an intellectual property dispute.
But unlike a typical trademark such as Heineken, BMP and Budvar have special intellectual property protection know as geographic indications. Most commonly associated with wine or spirits, this type of name protection can be used in a limited way with beer – especially with countries that are signatories of the Lisbon agreement.
“If a producer wants to use the Protected Geographical Indication logo, all raw materials, production process and THE PLACE of production must be in accordance with the PGI specification/definition,” explained Mr Samec.
Specifications for the Budweiser Bier clearly call for water to be drawn from the Cesky Budejovice aquifer, less clear is whether the processing can take place in a different location.
Theoretically, AB-InBev could send the water to other locations and still keep the Budweiser indicators intact. But, another question is why: Why should they ship the water elsewhere when they could have it “processed” by the friendly folks at the Samson brewery?
The three claimants to the Budweiser name – Anheuser-Busch, BMP and Budvar – have been going at each other’s throats for over a century. Anheuser-Busch accuses Budvar of pick-pocketing their brand building efforts. Budvar points out that the locals in Ceske Budejovice were happily brewing beer at a time when Indians were running bare-bottomed about Missouri. And then, BMP is upset that everyone ignored their claim to be the “original” Budweiser.
The battle picked up when the Americans pushed the Czechs from the U.S. market in 1939 and then progressively displaced them as the American Budweiser brand went global.
Relations have also been litigious between Budvar and BMP. “There are +/- 45 cases within the past 20 years,” said Mr Samec. “From this number, 35 cases were finished – and 27 cases resulted in favour of Budweiser Budvar brewery.”
Despite the tough talk and approximately 20 court cases between Budvar and Anheuser-Bush, there are still business links between the two. AB-InBev handles the U.S. distribution for Czechvar, Budvar’s premium lager for the United States.
As things stand, the Budvar-Budweiser trademark dispute could drag on for generations to come.
