Stanislav Bernard26:14
Thank you. The idea came simply. In early 1992, I met a German brewer named Roland Demleitner at a marketing seminar. He explained that in Germany, small independent breweries had a reduced excise tax, which is why there are over 1,000 microbreweries there. I realized that was the only way to preserve a diverse beer market here. So I founded the Small Independent Brewers Association, which initially had about 25 breweries. Then I tried lobbying ministries: the antimonopoly office rejected it, the agriculture minister said he'd help but did nothing, but the finance minister (a colleague of Klaus) surprisingly said in the media he could imagine it, but then faced huge backlash. So I turned to a former classmate who was an MP. He arranged a meeting with a few coalition MPs. I explained the logic, and they agreed it made sense. But a formal parliamentary bill from the coalition would be blocked. So they found an opposition MP – an economist from the left – who submitted the bill. Then we made a computer game on floppy disks for all MPs. After they played the first level, they had to watch a presentation explaining why they should vote for our bill before they could continue playing. The bill passed in December 1994 because the whole opposition voted for it, along with about five coalition MPs who convinced others. I'm proud that no one was bribed. Then President Havel, under pressure from big breweries, challenged the law at the Constitutional Court, claiming it violated the charter of fundamental rights. The argument was nonsense – tax systems are inherently unequal. The Court upheld the law in early 1995. It took effect on July 1, 1995, and is still in place. Today we have almost 300 microbreweries. So it worked.
Fine. I think we'll skip the investment slides. There are some pictures...
Or jump in there. I'll just skim through it. I won't comment on this, please, and don't read it. Throughout this time, we've only been repairing and investing. So here are the photos: old brewhouse, new brewhouse, boiler room, inside brewhouse, fermentation cellar. That no longer exists at this location. The vault you see in the upper picture is now replaced by a new section of pressure tanks for lager beer. Here you see construction of the barrel filling area, and above is a staff room. We are building a new lager tank section. This is a note: we claim we brew beer traditionally, and one principle is separate primary fermentation and lagering in tanks. It's not just saying it, but realizing it. This right part shows inserting a lager tank with a crane. That was the only time we argued with the Belgians. For half a year they couldn't understand why when most breweries are removing lager sections, we are building them. My idea was simple: if we want to make the best possible beer, we cannot simplify the production process. After half a year, the Belgians came and Michel Morgad, co-owner, said 'Sando, Hedviga, the production director, won't be convinced.' They respected my decision since I know the market. So we went ahead. That investment cost 50 million CZK. This year we opened another section, so now we have invested about 110-120 million CZK in lager tanks. I say this because it's not enough to just say something; you must also realize and respect it, even if it costs a lot of money.
This main building looks different now because there is an ongoing extension of another floor for more space and an expanded lab. Here you see construction where the vault was — those open tanks in the fermentation cellar. We sank the whole thing into the ground about 14 meters deep. From above, you see how we inserted pressure tanks. This is an aerial view, and from below everything is sunk into the ground. We are in the city center, so the building is low, but on this tiny space we can realize almost anything. Here is the next phase of expanding lager cellars, already completed. This is how it looked last year when it was being assembled. Those two yellow arrows indicate that about a month from now, two giant fermentation tanks will arrive — cylindrical-conical tanks, each with a volume of 2,400 hectoliters. I just hope we can transport them because I hear they are very large and we are having trouble planning the route. These tanks will be used exclusively for our new beer, Ail, a top-fermented ale you might know from billboards. Here you see a visualization: the view from above, on the right is the boiler room, and above you see the tall building — the former cooling towers where beer was cooled in open vats by air. I'll skip this — here is a visualization of the visitor center. Half of the boiler room will be cut, there will be an entrance passage, then a tube for elevator and stairs, and at the top where the cooling towers were, a visitor center with a beautiful view of Humpolec and the surrounding Vysočina. Here is a visualization of the interior of the visitor center, and another view from below.
And just a few photos from Rajhrad nearby. So this is what the settling tank looks like. Humna, new wastewater treatment, new silos. That's it for the investments. I wouldn't go further unless you have any questions. Any question on this topic? I think we can move on. I know you are interested in marketing and advertising. But let me ask: are you interested in the third section — the company's mission and corporate values and culture? Interest? Yes? Then I'll briefly pause on that. Sorry. The mission — very briefly. Both the mission and corporate values were defined by our people. We didn't invent them in the office. I would underline that three times and then have five minutes of silence for it to sink in. In most corporations, culture is created from the top. It's invented at headquarters or by a small group, then hung in offices. The problem is that if people don't invent it themselves, they only perceive it but it's not theirs. So we said, let's go from the other side: our people will invent it. The mission: 'Our own path to honest Czech beer.' This was specifically invented by the women in the lab and sounds simple. 'Our own path' is our slogan; we've been publishing a magazine called 'Vlastní cestou' for 10 years. 'To honest Czech beer' sounds simple — honest everything. But Czech beer belongs among the best in the world, and we said if we make it honestly, our beer will be among the best. So we accepted it. And since then, awards from around the world have confirmed it. We have many awards from competitions worldwide — Australia, America, Europe, Canada, all over the world.
Now about the values. The whole process: I recently gave a lecture to a multinational company and the entire lecture was only on this topic. You can spend a lot of time on it, but I know some of you don't want that, so I'll be brief. For the values, we approached people and said, 'Come, give us proposals.' It was voluntary. Anyone who wanted could submit. We received about 130 words. Management only did one thing: we eliminated synonyms and very similar words, leaving one representative. Then we returned it to the people and said, 'Now choose, maybe each of you pick one word.' I don't remember exactly — this was about seven or eight years ago. We said you can each give one value, one word. Then we tallied the votes and selected the corporate values that people wanted. What was interesting was the process itself. We gave them enough time because we respected that it was summer season or economic audit. We never pushed. In the end, it took a year and a half including the mission. At that time, it was unimaginable for me because we used to make decisions on the fly. But what was fascinating was that during the time people were thinking and discussing, I could feel the atmosphere in the company clearing. Until then, we were a company like any other with various relationships. Suddenly, I felt a better energy. Just the fact that people discussed it and felt they had the opportunity to choose made it start working. Another thing I discovered: generally, people chose the value that was most lacking in their workplace. They were calling for it, and by giving them the opportunity, they could express it.
In the end, these five words emerged: Openness, Trust, Cooperation, Responsibility, Positivity. Notice they form a pentagram and the arrows are not random. Each value is interconnected with every other. If you start to undermine one, the whole structure crumbles. It is a powerful tool — or perhaps not a tool, because it works to clear relationships and improve energy. People suddenly knew what the foundation of the company was. It has many benefits to this day. When we hire new people, besides references, education, and experience, we never pick someone who clearly does not resonate with some of these values. You can hire the greatest expert, but if they don't fit humanly, they will disrupt the atmosphere. This is not only true for a company but for any sports club, group of friends, etc. It's a general life principle. The consequences: our fluctuation decreased significantly, sickness decreased significantly. But I don't consider those as key as the fact that today one feels good in the company. That is important even for me. When I started, I thought if we ever succeed and become rich, we would also be happy. That's nonsense. Today we are rich and happy, but not because of the money. I say this with full seriousness. Sometimes I walk through the company just observing, and it's beautiful to feel that the people, with the trust they have been given, also feel responsibility. On the other end of trust is responsibility. When you have complete freedom, you know you can decide, but if you decide badly, it can cost something. Great trust or freedom generates greater natural responsibility. When I walk through the company, I don't need to stand behind people. I have completely stopped dealing with day-to-day management. There are capable people in key positions, and that is the foundation. Once you find a capable person and can delegate to them — meaning you have inner certainty that they know what it's about and are compatible with the values — then it's better to give them freedom than to interfere. Without trust, you drive the most capable people out of the company. If you ever find yourself in a company where you don't feel good because of the culture or values, my advice is: move on. Let them wallow in it themselves. You only have one life. So, regarding this topic, I could talk another hour, but I don't want to stretch it. I would conclude that this was probably our most important investment in the 25 years. For comparison, last year we invested about 120-130 million CZK in technology alone, plus tens of millions in packaging and other things. But the soft part — corporate culture, values, mission, if done well and people feel it's genuine, not just superficial — that was the best investment we ever made. That's all for this. If you have any questions, I'm happy to answer. No questions? Then we can move on to marketing.
Here is a graph, deliberately included because many people think we are already a big brewery. Our market share is barely 2%. The truth is that our brand is somewhere completely different. It not only exceeds the sales volume but surpasses it many times over. I do this intuitively and feel it should be so. This is just a reminder that we are still a small brewery. Here are some photos: our branded store directly opposite the brewery. That is a marketing concept — not just selling beer. We now have eight such stores across the country. We'll see how they develop. Possibly we'll cover the country, but it's not certain. The idea was to have an alternative sales channel to supermarkets, under our control, so we don't depend on annual negotiations. Dealing with supermarkets is fun. These stores share common interior elements. Then there is another thing: the franchise concept Bernard Pub. Currently, three pubs are operating, all in Prague. We are not rushing with the concept. We want it to have natural potential. The first one, about three years old, has been very successful. For perspective: an average pub sells about 60 hectoliters of beer per year; these pubs sell about 600 hectoliters per year — ten times more. The concept doesn't have hard targets; the key is finding quality partners who will resonate with our corporate values. One bad partner could damage our reputation. Currently there are three pubs, two more are being built in Prague, one in Chomutov, and an agreement in České Budějovice. You'll ask about Brno — when we find a serious, quality partner there, we'll have one in Brno. Currently about 30 interested parties from the country and Slovakia are applying. So it's interesting. We are not about quantity but natural development, and I believe the concept is very successful. Here are some examples of places where we tap: Dancing House, Cafe Louvre in Prague, and on Praděd mountain. It is important and nice that in recent times, owners of these exclusive places are contacting us themselves. In the current climate, pub owners are constantly offered huge sums — half a million CZK for a 200-300 hectoliter pub a year. We don't give pub owners that money, yet some are coming to us from such places. That pleases me even more.
Here you see how the bottle evolved from the original to the current shape and label design. These bottles have a patent cap. We are the only brewery that sells them fully. The decision to go ahead was interesting because we had no money at the time and the investment cost about 8 million CZK. We had to redo the bottling line, buy bottles from Germany, and I came up with wooden crates made in Turnov. That was the only time I negotiated with supermarket chains myself, and for the first time I didn't discuss price — I just told them the price. They wanted it, and I said this is the price. When we put it on the market, demand was so high that the Germans couldn't deliver bottles fast enough, and Turnov couldn't make crates fast enough. We even went to Turnov to motivate the workers to work weekends. Another interesting detail: the bottle was a risk because the deposit for a bottle is usually 3 CZK. We set the deposit at 15 CZK then (now 7). The purchase price from Germany was 10 CZK, so on each unreturned bottle we made 5 CZK. Per hectoliter, that was 1000 CZK — about five times the profit on beer. So it was a big risk, but it turned out to be a good risk. Gradually the market saturated and that benefit stopped working. Now, with a 7 CZK deposit, we lose on each unreturned bottle. But at the time it was great and helped us a lot.
We have our own series of glasses designed by glass designer and architect Rony Plešl. A logo redesign in 2011 — subtle changes. Here you see the evolution of the patent cap bottle: far left is the first German one, then bottles made in Kyjov, Moravia, with embossed 'Bernard' and the year 1597. You can also see the changing shape and redesign of labels. Here is our overall portfolio. An interesting decision last year: all our beers will be available in both filtered and unfiltered (with yeast) versions. So you can buy any of our beers either classically filtered or with yeast. Filtered beer is clear, unfiltered is hazy. The yeast remains inside, giving a fuller, more interesting taste with more vitamins. That's the main difference. We also made a similar decision related to marketing: when we say 'ten' (10°), 90% of breweries today sell a 9° beer under the name 'ten'. We decided that every one of our beers labeled as 10° will actually have 10° Plato (not alcohol; alcohol is about 4%). We always deliver beers with higher gravity than declared.
We introduced Černá lavina (Black Avalanche), a Guinness-type beer. Here is the wooden crate I mentioned earlier. Now, some highlights: at that time we were working with an advertising agency called Havas (formerly Euro RSCG), one of the largest in Europe. We chose them not because they are big, but because in the tender, most agency people came in suits and their main question was our annual media budget. When we told them, I felt their interest cool. Then Havas came. Their creative director was Dejan Steinberger, from Belgrade, a good guy. He didn't ask about money; he pulled out creative concepts and we discussed if we resonated. We did, so we went ahead. Before that, I had never imagined acting in an ad for our own product because I had a problem praising it like typical beer ads. Then Dejan came up with the character of a bald Bernard with pointed ears for our non-alcoholic beer, 'Bernard with a clear head.' At first I fired him, then I put it on billboards and labels. I realized the joke was strong and would work — making fun of myself is no problem. I didn't know then what would develop from that. You see various limited editions and concepts. Under marketing we include innovations. We started late with non-alcoholic beer (2006), but we were the first to open the fruit beer segment — plum and cherry. Thanks to those two innovations, we survived the crisis without a decline. The whole beer market fell about 18% during that time, but we didn't fall. Being ready for innovation in time is very good. If you're too early, it brings nothing because people don't understand you. For example, if we had introduced Ail (our current main new product) ten years ago, it would have been completely lost.
Further marketing initiatives: various packaging. I was concerned that Mr. Paroubek, who seemed dictatorial to me, might win the elections. I heard students would give him only about 6%. So I thought, let's invite people to vote. But how? Everyone would be done with graduation and go celebrate. So we offered beer. We said that any graduating class that sent a written declaration that at least 80% of them would go vote would get a keg. For college students, we gave a case of beer for a similar declaration. Initially we promised 250 kegs and about 1,000 cases. Immediately companies sponsored us — we gave away 100,000 CZK and so on. In the end, we gave 1,000 kegs of beer, so about 1,000 graduating classes went to vote. Of course, it's without control, but I believe when someone says yes, maybe it wasn't 85% but 75%. We gave almost 5,000 cases of beer. Mr. Paroubek did not become prime minister. That is long gone, but one can feel if someone is beneficial. Interesting: Czech media barely wrote about it, for several reasons. First, we advertise little in them, and don't be fooled about media independence; there are few independent media, and economic ties often influence coverage. Second, they were afraid. What delighted us was that the Herald Tribune and other world newspapers wrote about it with headlines like 'Can beer save Czech democracy?'
Under marketing we also put this moment: David vs Goliath. Pilsner Urquell or SAB put up billboards saying 'Birel surpasses others in taste.' That seemed very cheeky to me, so I wrote to the CEO of Plzeňský Prazdroj challenging them to a taste duel. They didn't take it. Then Mladá fronta DNES did a test and the result was they finished eighth, we came first. But I wouldn't overestimate that — each tasting can turn out differently. We also established the Anti-Corruption Foundation, which is not exactly marketing but we had to put it somewhere. If you really want to talk about marketing, I never studied it; I studied heavy-current electrical engineering in transportation. When every half year or so we are mentioned in marketing media, it's mostly critical. I don't know why, because for your perspective: I recently had our media costs calculated for the last 10 years, and the average is 1.9% of turnover. So truly minimal. But as I said, our brand is in the top 10 in surveys, and I believe we've moved up a few places recently. I don't feel the need to commission a survey because I feel it from sales and overall interest. In the last two years, the beer market is stagnating due to huge discounts and plastic bottles, but we grew 9% in 2021 and 14.5% in 2022. Zdeněk is showing me the results — I don't know if I can talk about it yet. We have the news: there is an annual journalist poll. This year about 300 journalists voted which beer brand they consider the best. Zdeněk showed the results — it will be in the media soon — we won it.
Thank you.