Czech brewers tout hometown lagers, giant goats as they look east

NACHOD, Czech Republic - In this 700-year-old Czech town on the Polish border, Primator Brewery kegs wait to be loaded on containers bound for Kazakhstan while export manager Lenka Krausova fields queries from as far away as Vietnam.

Five years after the municipality sold Primator to privately held Liberec Investment Fund, the beer maker is trying to make up for stagnant domestic sales by going beyond traditional European markets to build on export sales that have already quadrupled in the past decade.

"There's been enormous interest from markets we've previously never heard from," said Krausova. "We see a huge potential in those new countries."

As the summer season begins to sizzle, Czech brewers like SABMiller's Plzensky Prazdroj, the maker of Pilsner Urquell, Primator, Budejovicky Budvar and Molson Coors Brewing Co.'s Pivovary Staropramen, are lining up against other international brands to win over drinkers in former Soviet republics to the east and Asia.

Czech beermakers are betting they have an edge with campaign ads that tout European Union-protected Czech Beer and props such as 49-foot-tall wooden goats made by the maker of Pilsner Urquell that resemble Trojan horses.

The success in finding a foothold in more-exotic destinations will depend on how well they address unfamiliar regulations, different drinking habits and low incomes among new consumers, said Amin Alkhatib, a London-based analyst at Euromonitor.

"Lots of producers of traditional brews, like Pilseners or wheat beers in Europe, have been looking at stagnating domestic markets for quite a while, so to move beyond to Asia or even Latin America is a natural opportunity," Alkhatib said. "It will take some time to assess whether they really manage to establish themselves there."

In 2013, Czech beer export volumes rose 9 percent from a year ago to 3.4 million hectoliters, according to the Czech Beer and Malt Association. Exports to the EU rose 4 percent, while the volume of beer shipped to new markets, including Moldova, South Korea, Israel and Belarus, jumped a record 35 percent last year, the group said.

Though Czech annual per capita consumption is still the highest in the world, it stagnated at 144 liters in 2013 from the year before and is down from 159.3 liters in 2009.

Czech beers have a chance to reach sustainable growth in Asia, the Pacific region and South America by using the "Czech Beer" geographical indication label approved by the EU in 2008 as an advertising advantage, said Vladimir Balach, the head of the Czech Beer and Malt Association. Geographical indications protect product labels such as Champagne, feta and Parma ham from being used by producers outside the indicated region.

Carrying the Czech Beer label requires the use of specific types of Czech-grown barley and hops that give the domestic brew its characteristic bitterness, aroma and drinkability, Balach said.

"It's the quality and distinctive flavor that rules global markets now and the traditional Czech lagers have them both," Prazdroj marketing director Grant McKenzie said in an interview in Prague.

Prazdroj, the largest Czech beer maker, recorded its fastest growth in Georgia, Kazakhstan, Belarus, Moldova and Russia last year, according to McKenzie.

In town squares from Moldova to Georgia, the Pilsen, Czech Republic-based Prazdroj is using towering wooden goats to advertise its second label, Kozel, which means goat in Czech. At the foot of the structures are outdoor bars to dole out half-liters of the golden liquid.

The overall volume of all Czech beer sold in these countries may double in the next five to seven years, McKenzie said.

Prazdroj Thursday reported pretax profit of 3.6 billion koruna ($180 million) for twelve months ended March 31, up 5 percent from a year earlier, it said on its website.

State-owned Budejovicky Budvar, the maker of the Czech version of Budweiser, exported 763,000 hectoliters (20.1 million gallons) abroad in 2013, a record in its 118-year history, and added seven new countries including Turkmenistan, Peru and Singapore to its 65 markets, spokesman Petr Samec said.

At Primator, founded in 1872 in Nachod, Krausova is touting the company as a small- time producer that avoids mass-production techniques. The brewer won the top prize at the World's Best Beers Awards in 2013 with its Weizen beer.

Though Poland remains the company's largest export market, Krausova is swamped with email from China, Israel, Chile, Indonesia, South Korea and Kazakhstan.

The company sold 27,715 hectoliters, or 22 percent of its total output, for 1.6 million euros ($2.2 million) abroad and wants build on that, Krausova said.

"People like us because they want authentic Czech lager that isn't produced on a mass scale," Krausova said. "We may not be able to go to Germany and Austria. But we can handle exports to Turkey or China."