United we stand

At first glance, Usti nad Labem is an inauspicious home for the Czech Republic’s fastest growing brewery group, Drinks Union, writes Lyle Frink from Prague. The city - called Aussig during the times of the Austrian-Hungarian Empire - is a centre for chemical and machinery industries, with buildings wearing an ochre stain from nearby factories. The main brewery facility dates back over a hundred years. Inside the brewhouse, production is decidedly low-tech. Wort is boiled in a copper older than most employees and passes its first fermentation in traditional open square vats. Total production for 2004 is expected to hit 945,000 hl of beer.
The group is acquiring more than a domestic presence. Going abroad is driving volume growth, while domestic sales are increasing more slowly.s.

Despite appearances, or maybe because of them, Drinks Union has grown from its post-privatisation origins as two local breweries to become the country’s 4th largest brewing group, with four production sites in the northern and central part of the Czech Republic. ‘It is a question of traditional methods, ­using the traditional people, and meeting clients at the same (quality) level as our competition,’ said board chairman and general director Milan Hagan. In the first half of 2004, Drinks Union sold 107,413 hl of beer in Germany, thus overtaking the traditional export leaders SABMiller’s Pilsner Urquell and Budweiser Budvar. Most brands are exported, not just the flagship Zlatopramen. Exports to Poland are in the initial stages and are expected to hit 235,000 hl of beer in 2004.
More changes are in the works. Drinks Union is negotiating a hundred-thousand-hectolitre-plus deal for licensed production of Zlatovar in Russia at the Moscow Efes brewery. ‘Right now we are running tests on the malt,’ said Hagan. ‘Under no circumstances will we go ahead if it changes the character of our beer.’

What is the union

Drinks Union has progressively evolved over the past decade. It began in 1992 as the two brewery Ústecké pivovary a. In 1998, it joined with Pivovary a sobovkárny Brno as Drinks Union. The new company dropped out of soft drinks production, focusing on just beer and spirits. In late 2001, Drinks Union made the decision to go national and made Zlatopramen 11 degree its flagship under the ‘one degree better’ slogan. For background reference, Czechs traditionally segment their beers into 10 and 12 degree plato beers, with 12 considered more of a premium product. Drinks Union came out of its regional closet with a battery of suggestive ads. One even featured an erect beer bottle and a couple in bed. During 2002, Drinks Union made its two major acquisitions, taking over breweries in Louny and Kutna Hora. While it has been sniffing around other regional breweries, no other acquisitions are in the pipeline. ‘We have had contact with a number of breweries over joining our group. But we have only positively evaluated Kutna Hora. We won’t be stepping into Pivovar Benesov,’ said Hagan.
According to overall market share, Drinks Union’s gradual growth has come as state-owned Budweiser Budvar’s slipped. In 1998, Drinks Union had a market share of 2.72 percent. By the first half of 2004, this had climbed to 5.05 percent. ‘We have not especially targeted Budvar,’ said Drinks Union vice-chairman Jaroslav Lstiburek. ‘We think (Budvar’s decline) is more a result from the difference between private and state ownership.’ However, a very close listening to one TV ad reveals the background announcer is talking about the ‘eleven degree triumph over Ceske Budejovice.’ Hmm, so much for subliminal influence.

Bitter success

KB Liker, the drinks business, was an invaluable learning experience. Like many Czech companies in the 1990s, KB Liker had production capacity, an assortment of brands, but minimal experience in marketing to supermarkets chains with their requests for slotting fees, store brands, and end-aisle promotion stands. Even worse, consumers were increasingly enchanted by Fernet and Fernet Citrus herbal liquors by Stock Božkov which is part of t.