Czech beer market development. Vladimir Balach, General Secretary of CBMA

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1 Czech beer market development Vladimir Balach, General Secretary of CBMA

2 Czech Beer and Malt Association CBMA represents interests of breweries, malt houses and other suppliers and partners in beer sector One of the oldest beer associations in Europe Former Society for beer industry in Czech Kingdom was established in 1873 CMBA Ethical code and self-regulation process 2

3 Breweries in the Czech market Czech beer market is diversified represented by breweries of all sizes from large international brewers to small local breweries 6 large brewing companies (Pilsner Urquell, Staropramen Brewery, Heineken, Budweiser Budvar, Lobkowitz Brewery, Moravian-Silesian Brewery) 27 individual small to mid-size breweries Boom of mini and restaurant breweries in 2012 there were registered approximately 160 3

4 Current situation on beer domestic market The brewing industry, affected by the economic crisis, has faced an unprecedented decline in beer output following the excise tax increase After two years of significant decline in total production this trend stopped in 2011 In 2012 total beer production increased slightly by 2,75% Production for the domestic market increased only by 1,4 %, fueled mostly by beer mixes growth Malt production copies trend of beer kt Hops production est t 4

5 Structure of breweries in the Czech market Yearly production hl Production > hl and hl Production > hl and hl Production > hl Total number of breweries

6 Structure of breweries in the Czech market Breweries in the Czech Republic Yearly production hl (microbreweries) Yearly production > hl and hl Yearly production > hl and hl Total number of breweries (including microbreweries) Number of brewing companies Yearly production > hl Total number of brewing companies 6

7 Total beer production in the Czech Republic * * Beer production in thousands hl Number of active breweries 7

8 Beer production for domestic market 6,0% 3,8% 4,0% 2,0% 1,6% 2,6% 2,0% 1,1% 1,7% 1,4% 0,1% 0,0% -0,3% -2,0% -0,5% -4,0% -6,0% -5,9% -8,0% -10,0% -8,6%

9 Trends Czech malting industry (in kt) Production Export 9

10 Surface hop-field and hop production in the Czech republic Hop production (t) Surface hop-field (ha)

11 Market development, change in consumer demand The long tradition of drinking almost only lagers in the Czech Republic has changed. It was built on the traditions of the famous Czech brewing, dominated by the pilsner-type lager. In the last few years, consumer demand has evolved. One of the trends is a shift from the HORECA segment towards in-homeconsumption. The group of older consumers still prefers Czech lager as the dominant type of beer. The pub is the preferred style of socializing for them. Younger consumers prefer a variety of choices: variety in beverage choice, variety in packaging for different occasions and differentiated consumer experience. 11

12 Beer consumption per capita (in liters) , , ,1 157,9 158,8 156,

13 Consumption of beer across distribution channels 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 49% 57% 51% 43% 2009 On-trade 2012 Off-trade 13

14 Consumption by type of beer ,10% Tap beer 32,60% 2012 Lagers 7,06% Other 62,30% Tap beer Lagers 38,05% Other 54,89% 14

15 Consumption of Czech beer among tourists While Czechs drink at average one small beer a day (0,3l), tourists drink almost two large beers a day (0,9l) Tourists consumption of beer (L/person/day) Tourists consume in the Czech Republic in total 40 million large beers (20 mil. liters) 15

16 CZK 25bn Tax payments Overall impact of Czech brewing sector SUPPLIERS BREWERIES HORECA + RETAIL Farmers Utility Construction industry Chemical industry Logistics services Etc. Microbreweries Minibreweries Large breweries Malt producers Pubs Restaurants Cafes Retail Wholesale Chains 55,000 employees 16

17 Direct impact of Czech brewing sector 7,600 employees directly employed in the brewing sector * 90 95% of raw materials come from Czech Republic Support for Czech farmers barley, hops Czech beer brewed using Czech ingredients Beer for the czech market produced exclusively within Czech Republic *SOURCE 12: The Contribution made by Beer to the European Economy (Full Report Edition 2009) prepared by Ernst & Young (pp. 55, 57 and 59) 17

18 Indirect impact of Czech brewing sector 12,500 indirect employees* at SUPPLIERS 34,600 employees in HORECA and RETAIL* sectors CZK14bln payments go to suppliers from Czech brewing sector (91% of the amount stays in Czech republic*) The largest portion of revenue from sales in HORECA (25%) is from beer (hotels, restaurants, cafés) *SOURCE 12: The Contribution made by Beer to the European Economy (Full Report Edition 2009) prepared by Ernst & Young (p.55) 18

19 Contribution of Czech brewing sector CZK 10,8bn - to the State Budget Excise tax, VAT, legal entities tax, employees income tax, other* CZK 6,8bn - indirect tax-related revenues Through suppliers sector* *SOURCE 12: The Contribution made by Beer to the European Economy (Full Report Edition 2009) prepared by Ernst & Young (pp. 55, 57 and 59) 19

20 Czech Beer and Malt Association (CBMA) INITIATIVE 20

21 Protected geographical indication Czech beer PGI Czech beer registered in 2008 Used by 16 breweries for 77 beer trademarks Strict control of compliance with many requirements, e.g. 80 % of malt pouring per brewing is made of spring barley of recommended sorts 30 % of hops per brewing has to be hops from Žatec and its recommended clones etc. Main benefits: Quality guarantee for consumers Protection against bad competition Guarantee of stable demand for raw material suppliers Support of export and tourism 21

22 New research on composition of Czech beer from VÚPS Screening of selected health beneficial substances in Czech and foreign beers Compared representation of controlled substances in Czech and foreign lagers Czech beer contains elevated concentrations of: B vitamins oligosaccharides and higher dextrins polyphenolic substances bitter substances 22

23 Czech Beer &Malt Association (CBMA) Ethical Code CBMA Ethical Code More strict than national self-regulation code Self-regulation process Complaint is given by any brewery RBI give the recommendation to the Presidium of CBMA The decision should be done until 10 days If doubts the last arbiter is National self-regulatory body 23

24 As long as I drive, I drink non-alcoholic beer! Project scope Czech Beer and Malt Association (CBMA) signed Memorandum about cooperation with Czech Police Objective of cooperation is related to the traffic safety improvement, especially in the area of drinking and driving CBMA members together with police award responsible drivers 24

25 Czech beer market in a nutshell and treasure Beer is an important part of Czech Culture We take pride in it both at home and abroad More than 2/3 of all beers produced worldwide are of Czech, the Pils type Increased choices for consumers, but with constantly high quality and taste richness Development of beer domestic market is limited by the high consumption (expected gentle decline) Czech beer is one of the pillars of the Czech Republic brand 25

26 Czech Republic brand pillars Czech beer Ice-hockey Skoda 26

27 Thank you!