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Czech beer faring better abroad

Beer consumption down 2 percent while exports grow 4 percent

By Stephan Delbos
Staff Writer, The Prague Post
December 17th, 2008 issue

COURTESY PHOTO
The Czech beer industry has grown more reliant on profits from exports, as domestic beer consumption steadily declines.
Czech beer figures



Domestic consumption fell 2 percent from January to September compared with the same period in 2007
Exports grew 4 percent, prompting breweries to rethink their strategy
Overall consumption is down. Czech breweries' production dipped 0.9 percent to 15.3 hectoliters. Exports accounted for 2.9 hectoliters

In what appears to be counterintuitive results, Czech domestic beer consumption decreased this year 2 percent while exports, which should have been crippled by stagnating neighbor economies, grew considerably by 4 percent. While overall consumption and production are down, the beer industry’s growth in exports is a boon and may point toward future strategies, say industry insiders.  
From January to September, Czech breweries produced 15.3 million hectoliters of beer, down nearly 0.9 percent year on year. Domestic sales of beer dropped nearly 2 percent to 12.4 million hectoliters over the same period, while beer exports rose nearly 4 percent to 2.9 million hectoliters. The Czech beer industry, which accounts for 1.1 percent of global beer production and 3.4 percent of European production, has become increasingly more reliant on exports as domestic consumption has fallen steadily over the past half-decade. Jan Veselý, president of the Czech Beer and Malt Association, said the worldwide popularity of Czech beer and the industry’s increasing dependence on exports has helped diminish the impact of the slowdown at home.
“Two things help us: the number of tourists here and the increase in exports,” he said.
Exports account for 19 percent of total Czech beer production, more than three times the global average. While other export-oriented industries have borne the brunt of the strong Czech crown and the eurozone recession, the domestic beer industry has remained relatively buoyant. Germany and Slovakia are the top destinations for exported Czech beer and, with the exception of Russia, all of the top 10 export target countries have been significantly impacted by the financial crisis. Veselý said he was surprised at how well the beer industry has fared thus far, but admitted that worse times may be on the horizon.
“We haven’t been hurt much by the strong crown, which is surprising. It’s not as dramatic as we would have supposed,” he said. “But there will be a continued decrease in domestic consumption, and what would really hurt us is a decline in consumption in the EU.”
Subject to changes
Czechs are famous for their ability both to produce and to consume beer, and the industry is helped by the golden brew’s international reputation; annual per capita beer consumption reached 158.8 liters in 2007. Veselý allowed that tough times have influenced Czech beer drinkers’ tastes, but the economic crisis is not totally to blame for lower domestic consumption.
“People are slowly drinking less because of increased workloads and also because more people are driving cars,” he said. “We are subject to these changes, but it’s the same in Germany, Austria and other traditional beer countries.”
There are 48 breweries in the Czech Republic, but seven brewers dominate the industry, accounting for 84 percent of the beer produced. Plzeňský Prazdroj, the producer of Pilsner Urquell is the largest, claiming a share of almost 50 percent of the industry’s total profits. Jiří Mareček, spokesman for Plzeňský Prazdroj, declined to give specific numbers but said that current market figures represent nothing out of the ordinary.
“We are experiencing the usual pre-Christmas sales, so the volumes are slightly lower than in the summer, when people drink more beer to refresh themselves,” he said.
Sales of nonalcoholic beer are steadily increasing, with output growing 18 percent year on year to more than 461,000 hectoliters. Though nonalcoholic beer accounts for only 5 percent of total Czech beer production, insiders predict that its popularity will continue to rise, and say such figures are only one example of how beer drinkers’ tastes are changing.
“People don’t reduce beer drinking in tough times but switch to weaker and cheaper consumption,” said Veselý. “The popularity of 11-degree beer is increasing, and this is usually connected with a decrease of 12 degree.”
Max Munson, the owner of Jáma, a restaurant and pub in Prague 1 that has recently begun to offer the 11-degree Gambrinus Excellent, owned by Plzeňský Prazdroj, confirmed that more customers have become interested but estimates that 12-degree Pilsner Urquell is still the most popular brew on offer at Jáma, whose clientele is 80 percent Czech.
“The 11 degree has caught on. Most customers who try it continue to drink it that evening,” he said. “It does not equal sales of Pilsner 12 grade but has surpassed Kozel 10 grade.”
Another likely factor of lower domestic consumption is the increase of premium spirits sales. According to the International Wine and Spirit Record, imported spirit sales have grown almost 4 percent in the past five years, while beer consumption has steadily decreased. Jiří Štětina, managing director of Maxxium Czech, a premium spirits distributor, said that sales on the Czech market from January to October grew 10 percent year on year. Štětina pointed out that, unlike beer, premium spirits are relatively impervious to recession.
“Local consumption reduction will hit mainly local brands, which are predominantly consumed by average and below-average earners, who will be hit most by the crisis,” he said.

Stephan Delbos can be reached at sdelbos@praguepost.com


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