In 2016, Budweiser Budvar produced a historically record volume of beer - a total of 1.615 million hectolitres, which represents a 0.8% year-on-year increase. Last year's beer sales could have been even higher, but the brewery had already reached the upper limit of its production and logistics capacity in 2015. Therefore, a lot of customer demands had to be turned down in many cases. Last year's increase in sales was enabled by a set of internal organizational measures and maximum effort of all employees. A further increase in beer sales will be possible after the completion of extensive investments of the anticipated value of CZK 2,000 million by 2020. The expected development of the brewery, however, can be completely brought to a standstill by the Contract Register Act. Budweiser Budvar is therefore seeking an exemption.
In 2016, Budweiser Budvar Brewery produced the most beer in its history, the overall volume reaching 1.615 million hectolitres, which is 0.8% more than in 2015 (1.602 million hectolitres). The increase in production has had a long-term trend: in 2006 the brewery’s production was 1.151 million hectolitres, and thus since then the volume has risen by 40%. Despite the increase in the production volume, maintaining high quality beer remains the brewery’s priority.
“The results could have been even better; nonetheless, the brewery has been at the upper limit of its production and logistics capacity since 2015. Regrettably, we even had to reject our customers’ orders in many cases, especially in the peak season,” says Budweiser Budvar’s managing director Petr Žáček. The increase in sales was enabled by the implementation of a set of organizational measures, which was instrumental in finding small reserves. It also required the best efforts of all employees. “If we want to produce and sell more beer, we must complete the planned investment into the expansion of the logistics and subsequently also into the production capacity as fast as possible,” adds Petr Žáček.
The economic director Petr Žáček managed the brewery on behalf of the managing director of the corporation from June 1, 2016. As of January 1, 2017 he was entrusted by the Minister of Agriculture to be in charge of the brewery as its managing director.
Last year we launched an extensive development investment of approximately CZK 2,000 million aimed at an increase of the logistics and subsequently production capacity, so that the brewery could reach a 2-million hectolitre limit. New pressure tanks for beer before bottling of a nominal volume of 10,000 hectolitres belong among the projects already completed. Currently, the upgrade of the central information system (ERP) and the construction of an automated warehouse, a technological bridge and a road bridge construction are taking place. A project preparation for the next stages of the development is being finalised, namely for the expansion of fermentation facilities, the construction of a third bottle-filling line and the brewing house capacity expansion.
“In this regard, we have serious concerns that the expected development of the corporation will be affected by the negative impact of the Contract Register Act. If we fail to get an exception, we will lose our competitiveness, which will of course bring down the profitability of the corporation resulting from lower revenues and increased costs. This will result in worsening the economic results and in extreme cases even in falling into the accounting loss,” concludes Petr Žáček.
The main risks that the Contract Register Act is going to bring to Budweiser Budvar:
1. The loss of trading partners.
2. The disclosure of commercially strategic information that does not belong to a business secret.
3. Although it is possible to blacken out the “business secret”, should the information be considered a business secret, it must meet all of the characteristics listed in the legal definition. The problem thus lies in the applicability in practice, when there are various factors that need to be taken into account. In the event of a dispute, the cases are ruled upon by courts that could consider the matter differently than it is seen by the person who is obliged to make the information public.
4. Fundamental limitations of doing business abroad (last year Budweiser Budvar exported more than 60% of its production).
5. The Act ordains a written form of the contract which is unthinkable for a corporation trading with FMCG (Fast Moving Consumer Goods), as a lot of business is realized through phone orders.
6. The purchase of ingredients, materials and services will become more expensive, which will result from the fact that despite the disagreement of our trading partners we will begin to publish their contracts with their know-how.
7. Through the documents obligatorily being made public, the competitors would be able to indirectly get the data for free, which would imperil the intellectual property of the corporation (especially its trademarks).
8. The Contract Register Act goes against Budvar and its fundamental right to equal business conditions, which the corporation is guaranteed as an entrepreneur by the Charter of Fundamental Rights and Freedoms.
9. Making Budvar’s contracts public will have no benefit in relation to public scrutiny, as the general public is unable to realistically assess whether the conditions in a particular contract have been well-balanced; the existing control mechanisms (Supervisory Board, founder) serve for that purpose and its personnel is managed by the government. However, the competition is well acquainted with contracts and is of course able to use the information gathered in its favour.
10. The statutory representative of the corporation must act as a proper economist, as it is imposed by legally binding regulations, and therefore cannot logically allow opening the corporation to the competition.