These articles were published in the Spectacular Slovakia travel guide, published annually by The Slovak Spectator since 1996. The latest editions can be obtained from our online shop.

Slovak Beer: Quality Amid Consolidation

    Šariš brewery
 Šariš brewery
 Courtesy: Miller SAB

Slovakia has long been and remains an important producer of barley, the main ingredient in beer.

Yet the seeming variety hides another reality: the Slovak beer industry is in an advanced phase of rapid consolidation, part of a global trend that's transforming the beer trade worldwide.

"In soft drinks, the two biggest makers - Coke and Pepsi - control 80 percent of the global market," says Ján Čerkala, production manager of Šariš brewery in Eastern Slovakia. "In the [global] beer industry, the five biggest players own just 20 percent of the market. There will be a lot of consolidation in the world beer market in the years ahead.

And Slovakia provides a classic case study in how the big players grab share in a small country with established brands. Rather than introduce foreign products - which would incur massive marketing and export costs - the global players are snapping up local brands and their facilities, doing their best to maintain the old style, and then investing heavily to make the production process as efficient as possible.

Mr. Čerkala has seen the process firsthand. He has worked at Šariš since 1980, when it was a state-owned beer maker mostly serving eastern Slovakia. In 1997, Šariš was bought by South African Breweries - which in turn merged with U.S.-based Miller Brewing in 2000 to create Miller SAB. The combined entity is the second-largest beer maker in the world, after U.S.-based Anheuser-Busch.

Miller SAB has invested heavily in modernising the facility since taking it over. Improvements include the replacement of traditional copper fermentation tanks with more-efficient stainless-steel ones and advanced filtration systems for both beer and the water that goes into it.

As a result, the Šariš factory is a monstrously efficient beer-production machine. With just 150 workers on the production floor, the plant churns out 1.25 million hectolitres of beer annually - 26 percent of the beer consumed in the Slovak market. If the rest of the Slovak beer-production capacity reached that level of efficiency, the beer needs of the entire nation of 5.5 million would be served by fewer than 600 workers.

Yet despite its huge chunk of the Slovak market, Miller SAB counts only as the second biggest player in the country. The first is Holland-based Heineken, the world's fourth-biggest beer maker. Heineken Slovensko's flagship Slovak product is Zlatý Bažant, which it produces in the southwestern town of Hurbanovo, as well as in the west-central town of Nitra. Those two plants combined produce about 2 million hectolitres of beer annually - 42 percent of the nation's annual consumption.

The Zlatý Bažant story is similar to Šariš'. It started in 1968, in Hurbanovo, as a state-owned enterprise to supply beer to Western Slovakia. Heineken snapped it up in 1995 in the first investment by a major brewing concern after the fall of Communism.

And the two foreign giants make a lot more than just their flagship products, Šariš and Zlatý Bažant. Heineken also produces the Kelt, Corgoň, Gemer, and Martiner brands; in addition, it makes the Dutch brand Amstel, following a recipe from the home country. Šariš, for its part, makes the Smädný Mních and Gambrinus lines.

That leaves seven major independent brands of beer - Topvar, Steiger, Tatran, Stein, Urpín, Popper, and Hordan. That's an impressive number, on the surface. Strip away the relatively tiny microbrewery movement, and the U.S., a country of more than 250 million, has only a few gigantic beer makers. Yet the number of breweries has shrunk dramatically since the fall of Communism, and will continue to do so, Čerkala says.

Consider the fate of individual breweries - actual beer-making plants, not brands as discussed above. "The big players are dominating the market, and small, locally owned breweries are disappearing," Čerkala says. According to Čerkala, before the fall of Communism there were 70 breweries in Slovakia; today there are fewer than 15.

Čerkala fully expects that number to continue shrinking. "I think most or all of the quality breweries have already been bought. We're not looking at acquisitions," he says. He expects breweries will fold under the forces of brutal competition from big players.

Small players can't match the investment levels of the global giants, meaning that their cost bases will likely remain much higher. Then there's marketing, which in Slovakia means getting the product, along with signs and other materials, into pubs and restaurants. In western Slovakia, visitors will note that the great bulk of small pubs and restaurants push Zlatý Bažant products, while in the east, the Šariš sign outside of pubs is nearly ubiquitous. The reason is simple: the big players can afford to give the pubs a better deal.

But the small fry have one thing going for them: the rigid habits of Slovak consumers. "We tend not to be adventurous consumers, we generally don't like to try new things," Čerkala says. That means that Šariš and Zlatý Bažant, flush with marketing cash from Miller SAB and Heineken, can spend all they want on advertising, but they aren't likely to convince a villager in Central Slovakia to stop drinking his Steiger.

It also makes it difficult to roll out new products. Heineken Slovensko, for example, tried to create a market for Heineken Beer, its mother company's flagship product. Slovaks rejected it. The company's latest attempt at in innovation in the local market, Kelt beer, hasn't really taken off. While it sells reasonably well in Bratislava, outside of the capital it has little presence in pubs or grocery-store shelves.

Because of the strong emphasis on habit, a small beer maker like Steiger looks set to die slowly rather than quickly: it will maintain its old fans, while a new generation of beer drinkers gets lured over to the more heavily marketed big brands. And it will have increasing difficulty raising the capital to renovate its facilities, which means its cost basis will rise as that of its larger competitors falls.

The bottom line for consumers: forget the notion of quaint small breweries gracing each town as you ramble across Slovakia. In Germany, more than 700 breweries flourish, many of them small and locally owned; the Czech Republic, which faces consolidation forces similar to those in Slovakia, still houses 70 breweries. In Slovakia however half of the 13 that still exist could close in the next decade.

All of that said, as the accompanying article shows, quality remains quite high. Slovak beers are mostly lagers made in the Bohemian tradition. Beer can be broadly divided into two groups: lager and ale. Lager is made with bottom-fermenting yeast, and delivers crisp, lighter-styled beers. Think Germany and the Czech Republic - or, down the scale in quality, the mass-produced U.S. beers. Ales, made with top-fermenting yeast, tend to be heavier, with more complex flavor profiles. Britain and Belgium are the most famous ale producers.

And in general, those low prices bring good and sometimes excellent quality. Unlike mass-market U.S. beer makers, which stretch out their barley with the addition of cheaper corn, Slovak producers use 100 percent barley, most of it grown and processed in Slovakia. This makes nearly any Slovak-made beer richer, with more body and depth of flavor, than any of the mass-market U.S. brand-name beers.

Another difference lies in the hops - the pinecone-flavored herb that gives beer its aftertaste. While U.S. beers tend to be lightly hopped - a cost-cutting measure that consumers have come to embrace - Slovak beers have the crisp, slightly bitter finish granted by a generous dose of hops.

Finally, there's the price. Slovak beers go for between Sk10 and Sk15 crowns (€0.30 and €0.40) per half-liter, while the few Czech beers on offer go for about Sk20 (€0.60), with a bottle deposit of a few crowns more.

These articles and related information were published in Spectacular Slovakia 2003.

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