Thursday, February 09

Hands off Budvar!

 

There are important and reasonable questions to ask about Budějovický Budvar. Should a brewery be owned by the State? If not, how, and to whom should it be sold? And while it remains in State hands, how should the performance of the CEO and its employees be evaluated? These are questions for all of us, because Budvar belongs to us.

In a civilised democracy, politicians would indeed address these questions. As our servants, they would lay out the various options for us to consider, and ultimately to vote on. While that process takes place, they would show due respect to the existing CEO and employees of the company, unless there is serious evidence that this respect should be withdrawn.

Unfortunately the Agriculture Minister, Petr Bendl, is not apparently aware of such standards of behaviour. He has instead demanded - without prior warning - that the CEO be removed and has installed two new members to the supervisory board. He has not declared whether it is government policy to change the status of Budvar. He has simply pronounced a series of slurs, designed to suggest to citizens that the management of Budvar is somehow incompetent. Even from a distance, I would be appalled at Mr Bendl's treatment of Mr Bocek and his colleagues. However since Mr Bendl has chosen to focus on marketing expenditure, and it happens that Budvar is one of my clients, I feel compelled to speak up and urge you all to be aware of the facts.

Mr Bendl claims that Budvar "has spent Kč 1 billion on marketing over the past three years...without having to worry about the law on public tenders." This claim is packed with innuendo, designed to suggest to the unsuspecting public that huge amounts of money are being paid to advertising agencies, and that some of it may ‘disappear', as was the case at Dopravni podnik. In fact, it is a distortion of the truth.

Most of you reading this column will know that the law on public tenders is worse than useless when applied to tenders for marketing agencies. The law allows for any of the thousands of so-called advertising agencies in the country to participate, when in reality only about 20 have the expertise to assist Budvar or its competitors. The law does not in any way refer to the specific criteria to be applied when selecting an agency. That is why public tenders are savagely criticised and boycotted by agencies. But Budvar indeed holds tenders. How do we know? Because Registr reklamnich agentur has several times assisted Budvar with such tenders, going back to 2003. We have also assisted Prazdroj, Staropramen and Heineken. Budvar's tender processes have been just as robust as those of their competitors; and since its advertising is widely admired in the community we might conclude that their tenders have yielded the best long-term results.

But 1 billion in three years? That's a lot, isn't it? Yes. If it is true. However today I obtained from a media agency the monitored advertising spend figures for 2011. Adjusted to achieve ‘net' figures (i.e the amount spent, not ratecard) the figures for the major breweries are:
Prazdroj 175mCZK
Heineken 110mCZK
Staropramen 51mCZK
Budvar 29m CZK

If anything this suggests Budvar is underspending on marketing; overall these figures are entirely in line with their position as 4th in the market. So where was the other 970mCZK spent in the last three years? There are other marketing costs for a brewer; Budvar is the only one of the four which exports, and it also has some restaurants, which might be (erroneously) included. But having seen the figures above, do you now believe "1 billion"? I will be submitting a Freedom of Information law request to the Ministry to obtain a detailed breakdown of the figure.

Finally let us consider the treatment of the CEO. Mr Bendl presumably supposes that he is Mr Bocek's boss, as he feels able to publicly criticise him and discuss the idea that he should be replaced. The CEO's of the private breweries can also be replaced. However they will, before they start the job, be given a set of targets that they have to meet; hard figures and other ‘soft' but measured targets. Mr Bendl is simply our representative before Mr Bocek. Should he wish to evaluate Mr Bocek he should set out the targets (KPI's) which he believes Mr Bocek should achieve. Assuming he can accept them, Mr Bocek should be given at least two years to achieve them. That is the way business is done in the real world, and Budvar is competing in the real world.

I urge all of you who work in marketing to look carefully at the facts, and ask yourselves how you would expect to be treated if you too worked for Budvar. You may possibly come to the conclusion as I have, that the person who needs to be placed under evaluative scrutiny is not Mr Bocek, but Mr Bendl. I will discuss this thought in more detail in a future blogpost. In the meantime, if you sympathise with my view you may like this Facebook page.

 

 

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