Beer plan has Czechs feeling empty

CESKE BUDEJOVICE, Czech Republic — Just the thought alone is enough to make a Czech patriot cry in his beer.

The Czech government has kicked off a privatization process that could lead to the sale of one of the state’s most prized possessions: Budejovicky Budvar NP, a beloved brewery considered as much a national treasure as the premium lager it insists is the world’s original Budweiser.

Officials hint that within a few years, Budvar — one of Europe’s last state-owned breweries — may be in private, and possibly even foreign, hands.

Czech beer lovers fear that Budvar could even wind up owned by its archrival, U.S. beer giant Anheuser-Busch Cos. For more than a century, the two companies have been locked in a bitter trademark battle for rights to the Budweiser name.

“We are patriots, and if that happens, we won’t be drinking Budvar any more,” declared Martin Hajny, 27, a waiter in one of the many watering holes in Ceske Budejovice that offer the Budvar brand.

Yet Budvar increasingly has been striking deals with its competitors. In a recent interview with The Associated Press, Budvar director general Jiri Bocek, who rarely speaks to non-Czech media, would rule nothing out.

“It’s absolutely logical for us to cooperate with our competitors,” Bocek said.

He and Agriculture Minister Petr Gandalovic insist the process leading to possible privatization has only just begun. They said it was too early to talk about prospective bidders for Budvar, which posted a $9.6 million net profit last year.

This month, Gandalovic’s ministry began the search for a law firm to oversee Budvar’s transformation from its current status as a state enterprise into a corporation in which the state initially would hold 100 percent of shares. Gandalovic said he expected that transition to start “roughly in September 2008,” and that an actual sale was far from imminent.

“The possible privatization of Budvar is really not on the agenda now,” he said, pledging that the process would be transparent and “all potential bidders will be given equal treatment.”

But a sale is inevitable, said Tony Fletcher, Prague-based business manager at Canadian brewing industry consultancy First Key Consulting Inc., who considers Budvar’s current structure “an anachronism.”

“As far as I know, there are no state-owned breweries left — certainly in western Europe or indeed in the former communist countries,” Fletcher said.

Already, “investment banks and big brewing companies” have expressed preliminary interest in buying Budvar, Gandalovic said. He would not elaborate, saying: “There is simply nothing we can seriously discuss in this respect.”

Fletcher, noting the rapid consolidation of the brewing industry, said Budvar likely would be of interest to major brewers including InBev, Anheuser-Busch, Carlsberg and Heineken.

Budvar, the third-largest Czech brewery, boosted production by more than 5 percent in 2006 to 29.9 million gallons.

Exports rose 8 percent, with a record 14.3 million gallons exported to 50 countries worldwide, and the brewer hopes to maintain if not improve that growth.

In Europe, Budvar recently struck a deal with Carlsberg to distribute its beer in Finland, Sweden, Croatia, Bulgaria, Serbia and eventually Denmark.

In a similar but more surprising deal announced in January, Anheuser-Busch agreed to distribute Budvar’s Czechvar lager in the United States, giving the Czech company access to its U.S. competitor’s unrivaled network of 600 independent wholesalers.