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Bosnian, Serbian Breweries Attract International Interest

February 22, 2004


( Research Service)- BanjaLucka Pivara, the biggest brewery in Bosnia & Herzegovina, is getting serious attention from international investors in a privatization tender open until 10 March.

Reuters reported on 18 February that 8 multinationals, including Europe’s largest brewers, are seeking a majority stake (53.81 percent) in the Republika Srpska entity. According to manager Predrag Radic, the biggest bidders are Holland’s Heineken, Belgium’s Interbrew, Carlsberg from Denmark, and the smaller Pivovarna Lasko from Slovenia. In addition, London giant SABMiller Plc has also expressed interest, as have 2 unnamed Austrian brewers and “…an individual representing a group of investors.”In previous unsuccessful privatization bids, the government sought 43 million Bosnian marka ($28.3 million). In 2001, Interbrew pulled out of a nearly completed deal with BanjaLucka, after feuding with the management on how the brewery should operate after privatization. However, the world’s third-largest brewer kept up its interest in the enterprise, and solidified its holdings in the region. In 2003 it acquired breweries in Croatia, Montenegro and Bosnia, as well as the Balkan’s largest, Serbia’s Apatinska Pivara.

For the economically depressed Republika Srpska, sister component of a Bosnian state often described as “failing,” the deal could be a big step. Already, the brewery is one of the country’s biggest successes, last year recording a turnover of 72 million marka, and a net profit of 7 million marka.

The fact that international brewing companies have taken such a strong interest in the Balkans over the last couple years shows that there is good development for growth and modernization- and perhaps, evens a wider export base.

In recent years, BanjaLucka Pivara has invested approximately 50 million marka. On Tuesday, it signed a 20 million marka loan with Hypo Alpe-Adria Bank to expand production capacity to one million hectoliters of beer.

Meanwhile, on 7 February the Serbian government announced that it’s seeking a financial advisor to lead the privatization of 3 breweries: Beogradska Industrija Piva of Belgrade, Vrsacka Pivara from Vrsac, and Jagodinska Pivara of Jagodina. The government has won a co-financing grant from the Swedish government, which will partially go towards this process. The deadline for filing letters of intent is 26 February.

The Serbian breweries up for tender are among the most ancient in the Balkans. Beogradska was established in 1839, Jagodinska in 1852, and Vrsacka all the way back in 1742.

Beogradska employees almost 2,000 and owns 4 production lines, in the capital, Sremska Mitrovica, Cacak and Leskovac. In addition to beer, it also produces malt, mineral water, fruit juices and vinegar.

Beogradska’s strategy has centered on modernization, last year acquiring a modern bottling production line from German’s Krones. The launch of a new brand, Beogradska Pivo in early September 2003 “has made an immediate impact and contributed to the increase of BIP`s share in the Belgrade market,” according to the government. While in fiscal 2002 the company’s sales revenues stood at Ђ28 million, it also recorded a net loss of Ђ7 million. Now, the state is looking to unload its entire 51.31 percent share in Beogradska.

While a smaller brewery, Vojvodina’s Vrsacka is also one of the oldest in the Balkans has won “over 35 gold, silver and bronze medals for quality” in the past 25 years, according to the government. Its 2002 sales revenues stood at Ђ5.1 million EUR, though profits were nil. The Serbian government currently controls 91.1 percent of Vrsacka, but is ready to relinquish all.

The third brewery, Jagodinska, has had less success, posting a 2002 net loss of Ђ6.8 million from sales revenues of Ђ7.6 million. The state hopes to sell its entire 51 percent share.

Serbia’s brewing industry has already received strong attention from internationals. In August 2003, Turkish Efes announced it would take over 63 percent of Pancevo Pivara, investing Ђ6.5 million and, as it turned out, opening the floodgates for other foreign investors. In October, Denmark’s Carlsberg announced it would pay Ђ26 million for 49 percent of Pivara Celarevo. A day later, Interbrew responded with the purchase of 50.1 percent of Serbia’s biggest brewery, Apatin. The Belgian giant committed to pay a total of Ђ326.9 million, according to Reuters. Simultaneously, the company made a bid for the remaining 49.9 percent, offering Ђ167.64 per share. The offer will close soon, on 31 March.

The deal meant that Interbrew will control “…a third of the market in the countries of the former Yugoslavia,” in countries such as Croatia, Montenegro and Bosnia, where it has a share in Ozujsko.

The big question, economics aside, is what effect this ever-increasing phenomenon of global mergers and acquisitions will have on beer quality. As one critic put it,

“…The big brewers all now see their market as being the world. They will continue to present their international-style beers as super-premiums, somehow superior to national or local brews, but how can this be? A beer that sells to everyone must offend no one, and therefore can hardly delight anyone. International beers can sell only if they appeal to the lowest common denominator of taste. They are the beer world’s answer to McDonald’s”

As with Central Europe, the Balkans has always prided itself on having a variety of local brews, with the exception being limited Macedonia. Hopefully this diversity will manage to survive the scavenging of the multinationals.

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