Privatising a famous drop

Wednesday, November 20, 1991

By Peter Annear
and Sally Low

PLZEN, West Bohemia — Most people know this Czechoslovakian town by its German name, Pilsen, famous as the producer of one of world's finest lagers: Pilsner Urquell. It was, in fact, already a thriving burgher town when, in 1295, the Bohemian King Wenceslas II granted it a charter to become a royal city — and a licence to brew beer.

From the 11th century, brewing had occurred in nearly every burgher house in the town. Later, Plzen draft brewers held out against the tide of Bavarian beer brewed in the bottle. Then came the "beer crisis" of 1838, when the authorities declared 38 barrels unfit for consumption and had them publicly emptied.

As a result, in 1842 there opened the new municipal brewery producing the famous drop. And in 1898, Urquell, German for underground spring, or in Czech, Prazdroj, became the trade name for beer produced at Pilsner, now the country's biggest brewery.

The ingredients of Pilsner Urquell are impeccable: natural spring water, low protein Bohemian barley, kiln-dried malt, the company's own yeast and first-class local hops. There are no artificial additives.

Each brew takes 12 hours, made one at a time. Fermentation takes 12 days, while maturation lasts two months. For secondary fermentation, much of the brew is stored in century-old oak casks sitting in a legendary lager cellar carved into the sandstone rock 10 metres underground; the corridors stretch for nine kilometres.

Pilsner also produces a special purpose "light" beer for workers at the nearby Skoda engineering and nuclear-power plant factory. Working in high temperatures, the Skoda workers need extra liquid and find Pilsner much to their satisfaction.

At the main gates today there is an air of activity as the plant goes through renovations for its 150th anniversary next year. For the past 40 years a state enterprise, it is now to be privatised, though when we visited the plant, privatisation plans were still under wraps. That day, we heard about a new tourist and marketing joint venture between Pilsner Urquell and DGL Ltd, a food and beverage supplier to the US army.

Pilsner Urquell management said that under the conditions of the open market the main problem for the enterprise has been funding new investment to improve its technology and competitiveness. Director Pavel Gregoric believes the company's position on the world market is improving. Now, he said, there was a need for outside forces to take advantage of new opportunities.

During modernisation and privatisation, the brewery plans to cut back on its female staff, which now makes up about 45% of its 520 employees. Male managers say seriously this is because women are not as capable as male workers.

The DGL joint venture is an undisguised Western-style marketing ll took over its own foreign trade from the state monopoly two years ago and began looking for partners, but apart from DGL "other companies did not correspond to our ideals", Gregoric said.

Around the country, enterprise managers are hurriedly stitching together deals and drafting plans to beat the government's October 31 "large privatisation" deadline. If nothing else were put in place, a brewery like this one would be a prime target for government sale, which could possibly explain the undignified haste to announce this joint venture.

The 50:50 joint venture will operate three theme parks under the title Euroworld at Marienbad, Carlsbad and Franzenbad, and will bottle and sell "Bohemia Spa" natural medicinal mineral water, mainly for the US market. The parks will reflect environmental concerns, said DGL directors, and involve the US environment department. The joint venture will be initiated with $10 million seed capital raised outside Czechoslovakia. DGL will hold no capital in Pilsner Urquell.

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