E-Malt.com News article: Hungary: Pecsi Brewery to achieve profitability in 2007

Pecs Brewery, the Hungarian subsidiary of Austrian beer manufacturer Ottakringer, is set to break even in 2007, Managing Director Andras Csengo told at the sidelines of a press conference of the Hungarian Association of Breweries, Interfax released July 21.

"Although this year Pecsi Brewery will not be profitable, we are on the right track to record numbers in the black in 2007," Csengo said. "If it was not for the weak forint, we could have reached breakeven in 2006." Pecsi Brewery, the smallest of the four players that dominate the Hungarian beer market, has seen significant improvement in its figures for the last two years, with a more favorable outlook for 2006 and 2007. "2004 was the rock bottom for the Pecsi Brewery - we produced only 325,000 hectoliters [of beer], although our total capacity was about 600,000 hectoliters," Csengo explained. "Last year we proceeded to a better direction. We could sell about 425,000 hectoliters, while we plan about a 15-20% increase (on the year) in sales volumes in 2006."

Despite growing revenues, the firm will be unable to become profitable in 2006, mainly due to the significant weakening of the foring. Csengo said the firm could not offset the fallout stemming from volatile forint rates, as it does not have significant export activity.

"The forint has weakened significantly, and we purchase the majority of raw materials in euro, which caused a HUF 100-120 mln fallout [in 2006]," he said. "If this had not happened, I am sure we would have been able to record a profit in 2006. "However, I trust that soon we will stand faster on exports as well as domestic sales," he added.

Csengo said that the Pecs Brewery is planning to increase export volumes mainly to eastern countries such as Russia, as well as southern Europe's Italy, also mentioning Africa as a possible destination for the firm's alcohol-free products.

In 2006 Pecsi Brewery's parent Ottakringer invested altogether EUR 5 mln in production, in part on boosting annual capacity to 750,000 hectoliters. Another EUR 3 mln was spent on installing new technologies and equipment, allowing all Pecsi beer products to be sold in cans. The project, which started in April, was recently implemented, and is expected to play a major role in achieving company plans, Csengo said. "First we needed to build a strong base for this firm," Csengo explained, "so that it could take a position to compete in the Hungarian market."

In terms of market share, Pecsi Brewery has also recorded significant growth, especially in the retail sector. "In 2005 [Pecsi's] market share in the retail segment was about 4.5%, while now it is 9%, and we are planning serious new projects and products," Csengo said. "However, in the [bar and restaurant] segment the competition is very tough, we are retaining our existing stake."

"We have to work totally differently from big breweries, which concentrate on large international brands and one Hungarian brand. We have to focus more aggressively on beer specialties," Csengo commented.



26 July, 2006