UDEJOVICKY Budvar, the Czech brewer, will have to start forging a new identity for itself after the recent breakdown of a 20 year effort to resolve a dispute over the Budweiser name with Anheuser Busch, the world's largest brewer.
The US brewer recently aborted the talks, encouraged by its growing success and by court victories giving it a clear right to the Budweiser name it failed to gain at the negotiating table. It has had nine wins ill European countries five in the past year - and has 27 cases under way.
With the legal tide running strongly against it, Budvar, based in Ceske Budejovice, the Czech town known as Budwejs in the Austro Hungarian era, will have to stop using the name Budweiser on its bottles, several of its international competitors believe.
"The advantages of an agreement have fallen away," said Mr Jack Purnell, chairman of Anheuser Busch International, the US brewer's overseas arm.
"We have achieved undisputed access to Europe for Budweiser and Bud," its two main brand names. It will sell about 30 million cases, roughly 2.2 million hectolitres of the beer in Europe this year, up 25 per cent from last year and about five times greater than Budvar's total exports.
Ireland is the second biggest market for Budweiser in Europe after the UK, with sales volumes of 550 million hectolitres, and is, the fifth biggest market in the world after the US, Canada, the UK and Japan.
But meeting across a court room rather around a negotiating table will present both parties with commercial risks and costs, fellow brewers believe.
Anheuser Busch, for example, recently pulled out of a $145 million Vietnamese brewing joint venture because Budvar registered the Budweiser name there in 1960. The US company said it was confident the country's trademark authorities would cancel Budvar's registration.
For Budvar, global legal proceedings could dampen investor interest when it is privatised. The brewer is almost the only Czech enterprise still locked in the arms of the state.
The privatisation "doesn't depend on (the trademark) discussion", says Mr Josef Lux, Czech agriculture minister. Anheuser Busch is not excluded from the sell off, he adds, although it is unlikely to be considered while its threat of court action in Europe hangs in the air.
Anheuser Busch was hampered in its efforts to persuade Budvar to settle by its sheer size and by a conviction among Czechs that the giant wanted to "wipe (Budvar) off the face of the earth", as the brewery's general director, Mr Jiri Bocek, claimed recently.
A 1911 agreement signed with Anheuser Busch gave the Czech brewery rights to the Budweiser name in continental Europe, with the US company taking the rest of the world. Over recent decades, however, the agreement has failed to accommodate the two companies' aspirations.
Budvar gave increasing prominence to the name Budweiser on its labels, arguing it guaranteed consumers a place of origin and quality much like France's appellation controllee system. Anheuser Busch believed Budvar was just cashing in on the international brand name it had created.
Anheuser-Busch at first linked a trademark settlement to its taking a stake in Budvar. But it became clear that such an agreement was unacceptable, both politically - to the government - and commercially, to Budvar, which insisted it did not need a foreign partner to help it market beer overseas.
The US brewery dropped that tactic two years ago and at the same time began piecemeal court action in various countries. The Czech brewer adopted a more professional and hardnosed approach to the trademark talks, hiring financial advisers to sketch its future and draw up privatisation plans.
Last September, both sides met in St Louis, Missouri, headquarters of Anheuser Busch, to try to break the deadlock. But that attempt foundered on their differing estimates of the value of a settlement. The US company is understood to have offered Budvar $200 million for a new trademark agreement and a separate deal on the purchase of Czech hops.
Budvar and the agriculture ministry, which led the talks on the Czech side, are believed to have put a value on the settlement of $1 billion.
Budvar also welcomed the end of the trademark talks, saying it had shown its ability in the past five years to build up its own export sales. It has a strong position in the German market for imported beers and also sells in the UK, alongside US Budweiser.
"At 450,000 litres of exports, the Budvar brand is only worth about £50 million and the brewery itself another £25 million, says a competing international brewer. So successfully has Anheuser Busch pushed the Budweiser name globally that "whoever buys Budvar has got to start afresh to build a new identity separate from the American Budweiser".
