A few months ago, a friend mentioned that when he was just starting out as a young lawyer in the mid-1990s, he did some work at a law firm here in Prague. One of his projects back then was the contract for a possible sale of Budějovický Budvar to Anheuser-Busch.
That sale never went through, of course, and Budvar and Anheuser-Busch maintain a “frenemy” relationship today, entering into distribution deals for Budvar (only under its “Czechvar” pseudonym) in the United States while continuing international legal battles over the name “Budweiser.”
But talk of Budvar’s sale (subscription required) has returned, as the Prague Daily Monitor news desk reports, via Hospodářské noviny.
This time, it looks like things really are going forward. First up is a tender in January to decide which of three firms will serve as the Czech government’s advisor for the conversion of state-owned Budvar into a joint-stock company — the initial step toward a sale.
Since the advisor has yet to be chosen, it’s hard to guess how this will play out. Initially, the Czech government will hold 100% of the shares. After that, you’ll have to grab your Magic 8-Ball. Will the Czech government maintain a stake and a say in what goes on, just as the German state of Niedersachsen does with Volkswagen? Will the whole thing be sold off in one fell swoop? Or will they make it a publicly traded brewer, like InBev or Sam Adams?
The only thing we know for sure is that the current government hopes to privatize Budvar before its term is up in 2010. Heineken is currently on a buying streak here, picking up Krušovice earlier this year and reportedly in negotiations for the four breweries from Drinks Union (Zlatopramen, Louny, Dačický and Březňák). In fact, given its $9.6 million net profit in 2006 and strong sales growth internationally, I’m sure many groups would love to get their hands on a plum like Budvar. But given its American distribution deal and the, um, affinity for the name, the most likely buyer simply has to be Anheuser-Busch.
Yes, I know that sounds like sacrilege to many beer fans. But if Budvar is privatized, can you imagine that anyone other than Anheuser-Busch would end up owning it? And does anyone out there consider for a second that maybe, just maybe, this might be a good thing — and not only in terms of the reduced legal fees for both companies?
To put it another way, if you were advising the Czech government on the privatization of Budvar, what would you do?
Both reasoned answers and nonsensical howls are welcome in the comments.
Pivero
I’ve been thinking about the sale of Budvar to AB and I agree with what Aleš Dočkal said the other day, that it is not a good thing, that AB wants the brewery to be able to enter those markets that are closed to that liquid they make that they dare call beer, and that Budvar will become some sort of provincial brand. Of course Budvar has a much much better image than The King of Piss among beer lovers, but then, since when have large corporations cared much about a little thing like that? I hope he is wrong.
As for what advice I would give the government. Don’t sell it, make it a joint stock company a bit like CEZ with the state as the main shareholder. Budějovický Budvar is a profitable company with a well recognised and appreciated product both in the local and the foreign markets. It would be silly to sell it just for a short term profit, but then, since when has the Czech government (or most governments at that) cared much about a thing like that?
Evan Rail
Max, I overlooked your comment here! You bring up a good point. It does seem a pity it can’t remain national property — I mean, how many countries actually own their own breweries? But the government seems committed to selling off Budvar as well as the airport.
And if I’m not mistaken, Budvar was originally founded as a joint-stock company. Ashes to ashes, dust to dust…
Mark Kahnt
The news of InBev seeking to buy Anheuser-Busch raises an interesting twist on this story – on a certain level, InBev are more beer fans compared to the marketing driven AB corporation. They are still corporate, as well, but if they were to come to own both Budweiser brandings, they would recognise that both have their worldwide markets, and likely within ten years, the American edition would be known strictly as Bud, which is how American marketers have been moving the brand, while Budějovický Budvar might gain an “Urquell” type denotation, until the time has past for any confusion.
Evan Rail
That’s an interesting thought, but I can’t imagine that InBev would end up owning both Staropramen (and Ostravar, etc.) and Budvar here.
In other words, if InBev buys AB, it might make it harder for them (or for their AB subsidiary) to then buy Budvar when it is finally privatized, as that would give InBev some 32% or more of the local market.
The Czech anti-monopoly office appears to be fairly toothless and quite business-friendly, but that still might be a bridge too far. Of course, InBev can always point out that SABMiller already has 49% of the local market, so why shouldn’t they team up?
It’ll be interesting to watch this story develop…