Czech government saves Budejovicky Budvar NP

Unbelievable - Budejovicky Budvar NP, a beloved brewery considered a national treasure, could be sold. But the government has kicked off a privatization process that could lead to to such a disaster.

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 183.9 million koruna (EUR6.7 million, US$9.6 million) net profit last year.

This month, Gandalovic's ministry launched a public tender for legal counsel to oversee Budvar's transformation from its current status as a state enterprise into a joint-stock company. 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 1.15 million hectoliters.

Exports rose 8 percent, with a record 555,000 hectoliters exported to 50 countries worldwide,and the brewer hopes tomaintain 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.

Although Budvar considers itself the maker of the original Budweiser, it has exported its lager to the U.S. under the name Czechvar since 2001 because Anheuser-Busch has firm control of the U.S. trademark on the name.

Bocek told the AP it would take up to three years to properly evaluate its cooperation with Anheuser-Busch. America's No. 1 brewer initiated the deal as part of its strategy to add more high-end imported beers to its portfolio amid surging sales of imported brands.

"The first signals are very positive," Bocek said. Budvar shipped 930,000 liters (241,800 gallons) of Czechvar to the U.S. last year, and exports in the first half of 2007 were up 58 percent.

That hasn't stopped the two companies' global trademark dispute over the exclusive rights to Budweiser and related names. They're currently involved in 17 lawsuits in various countries, Budvar spokesman Petr Samec said.

Budejovicky Budvar was founded in 1895 in the southern city of Ceske Budejovice - called Budweis by the German-speaking people that populated the area at the time. Beer has been brewed here since 1265 and has been known for centuries as Budweiser.

But the founders of Anheuser-Busch also used the name Budweiser for their product because it was well-known in their German homeland. The St. Louis brewery got its start in 1852. It began producing Budweiser, America's first national beer brand, in 1876.

"Every court dispute is an obstacle for achieving our business goals and leads to worsening of normal business relations," Bocek said.

After winning several rounds in a legal tussle that dates to 1906, Budvar recently began exporting its beer to South Korea and is currently analyzing the fast-growing but tough to penetrate Chinese market, Bocek said.

"We certainly plan to get there," he said.

Gandalovic, the agriculture minister, said the trademark battle would not influence Budvar's transformation, though he acknowledged that settling the dispute "is in the interest of all involved parties."

And Budvar and Anheuser-Busch have made nice before.

In an unprecedented compromise reached last year, the two brewers agreed to settle their trademark dispute in Cyprus, giving Budvar the right to continue selling its beer there as "Budejovicky Budvar" and to use the trade name "Budweiser Budvar."

"It just depends of the willingness of both sides to do it," Bocek said.

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Author`s name Angela Antonova