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Huge hangover as Czech beer sector's revenues drop €179m amid pandemic

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By Will Tizard
A beer production line at the Budejovicky Budvar brewery in Ceske Budejovice, Czech Republic.
A beer production line at the Budejovicky Budvar brewery in Ceske Budejovice, Czech Republic.   -   Copyright  AP ¨Photos

The Czech beer industry weathered communism and Nazi occupation with scarcely a dent during the last century – but it may prove less bulletproof in the wake of COVID 19 impacts, according to brewers.

During the lockdown from March to May, the Czech beer sector's revenues were down 4.7 billion koruny (€179m) amid a 55 per cent drop in beer sales.

With some 72.8 million litres unsold beer, many launched window and delivery service but losses remained devastating, especially to pubs reliant on the food side of their business.

Despite a surge in buying of bottled beer, brewers lost some 1.1 billion koruny (€42m), according to Martina Ferencová, executive director of the Czech Association of Breweries and Malthouses.

“Most pubs reopened in June, but it will be up to the coming weeks to decide whether they survive,” Ferencová said. “The most critical situation is in Prague, Karlovy Vary and other localities dependent on tourism.”

With inbound travel numbers looking dire this year and the usual booming summer tourism business down to a trickle, pub owners are expressing worry.

Dan Hojdar of Vinohradský Pivovar, a recent success story in the competitive Prague beer market, says the company managed to get through the crisis without having to resort to staff layoffs as many other pubs did. But, he added, the shutdown of walk-in traffic was a major blow for a business that has put as much into its cuisine offerings as its beer.

He said a more diverse business will be a hedge for future disruptions.

Fortuitously, the company has launched a new line of canned craft beer, which is winning praise from beer critics, and adding several new products — from American pale ale to Bavarian-style Weiss beer — to its range. Sold in retail outlets, which Czech authorities have allowed to operate throughout the pandemic, the latest packaged beer line should help cushion the losses from the pub side of the business.

Vinohradský Pivovar had help with the expense of launching the new brews thanks to a state guarantee, which helped with commercial bank funding, said Hojdar.

“Not everybody was that lucky,” he points out, adding that if the Czech Republic is hit by a second wave of COVID-19, the business’s restaurant side will have to “fully rely on” state help.

But packaged beer is not immune to the effects of COVID 19, as Pivovar Matuška, has learned. The indie company, a rising star on the Czech craft beer scene specializing in outsize bottled lagers and pale ales, saw an 80 per cent drop in sales at the start of the outbreak.

“We knew we had to do something so we started our own home delivery of bottled beer and thanks to our loyal customers we were able to survive,” said managing director Matěj Šůcha.

Matuška bottles by hand, Šůcha said, so logistics get complicated, but the company’s loyal customer base has ridden to the rescue during the crisis.

Now sales have returned to normal, he said, “but the uncertainty of what is going to happen if the situation worsens is keeping everyone quite nervous. Nevertheless, we are all hoping for the best for the sake of the whole country”.

With more traditional pubs, the threat remains serious, as the study by the Center for Economic and Market Analysis (CETA) points out. Breweries have been hit hard by the closure of restaurants, where beer is an essential complement to meals, causing a “significant decrease” in distribution.

If the centuries-old institution of the corner pub is to survive, state help will be crucial, according to Ferencová.

“It will be crucial for the government to continue to support the most affected sectors, including the hospitality industry, and at the same time not burden them with new administrative and regulatory measures,” she said.

Complicating the equation is the loss to state coffers during the three months pubs and restaurants were closed. State budget revenues are down 1.3 billion koruny (€50m), with VAT revenue from beer sales down by 951 million koruny (€36m), according to the CETA report.

With many epidemiologists predicting a second wave of virus outbreaks in the autumn, the beer industry has reason to be concerned over small companies who have historically formed the backbone of Bohemian brewing.

“Although the pubs and restaurants are open, we definitely have not won,” said Luboš Kastner, co-founder of the Hospodská restaurant group. “Demand is still subdued in many places, while costs are returning to their original levels. Especially in tourist locations, restaurants need help as well as hotels and spas.”

What’s needed now is “a clear agenda and action plan,” he added.