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Czech Republic: Brewer Uses Lithuania As First Step In Expansion

By Kate Connolly

Prague, 19 December 1996 (RFE/RL) -- The biggest Czech beer brewery, Plzensky Prazdroj (Pilsner Urquell-PP) has become the main shareholder of the fourth largest Lithuanian brewery in an initial bid to expand the licensed production of Pilsner Urquell abroad.

The $2.8 million deal was struck at the start of this month, and announced via the media on December 11. It gives PP more than a 50 percent share in the Ragutis company.

According to PP spokesman, Jaroslav Pomp, the goal of the investment is "to establish the licensed production of Pilsner beer in what is interesting and new territory for our Czech brewery."

The Lithuanian brewery is the company's first outside the Czech Republic and from January 1997 production should already start, with PP employing a staff of 200 people in Lithuania, including three Czechs and a Czech director whose name will be announced in January.

"It was almost impossible to sell beer to Lithuania before now, due to legal complications, and trouble with laws, government policy and privatization, but now that we are the main shareholder this problem disappears," said Pomp.

The Lithuanian Brewery house, Ragutis, in Kaunas, already has an 11 percent share in the Lithuanian market. On an annual basis Plzensky Prazdroj plans to produce 120,000 hectolitres of the Plzensky label, Gambrinus. In the Czech Republic PP currently produces four million hectolitres of beer a year, its main competitors being Radegast and Prague Breweries. But, said Pomp, the Czech market is now saturated and PP must now reach for foreign parts if it wants to expand.

"We cannot expand the market in the Czech Republic anymore because the Czechs already drink a lot of beer. So this deal was important for us at a time when competition is very hard, and we have made the first step in our new policy to find new markets abroad."

PP cannot hope to compete with the big international breweries like Miller, Heineken and AB (Budweiser), Pomp explained.

This year it established Pilsner Urquell International to enable it to sell licensed beer abroad. "Our next plans are to expand into other Eastern European countries and into Southeast Asia and South America," Pomp said.

Up till now it has not been decided what to call the beer that will be marketed in Lithuania because the name Gambrius is not well-known there, although the name Beer Gambrius will appear in the title. The beer hops and malt necessary for production will be exported from the Czech Republic to Lithuania.

"We are keen to keep up the quality of our product and the only way to do this is to export the raw materials," said Pomp.

But how does the company hope to keep up the production standards of one of the Czechs' favorite beers once it starts to expand abroad? Pomp added: "Of course we will be brewing our beer under license and as in this country, we will have a resident brewmaster in Lithuania, and in every new brewery that we open we will make sure that we have our man."