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Anheuser-Busch, Czech Brewer Strike Deal

AP
Tuesday, 9 Jan 2007 | 3:06 AM ET

Beer causes fights. Beer kindles friendships. In the case of Anheuser-Busch and its longtime Czech rival, beer is making both things happen at once.

Anheuser-Busch announced a deal Monday to distribute a beer brewed by Budejovicky Budvar. Both companies stand to benefit from the deal. But they also say it won't end their century-old legal fight over the Budweiser trademark.

The companies both claim exclusive rights to use the Budweiser name, and their trademark dispute has tied up courts throughout Europe.

But even as the lawyers battle it out, the two brewers will share common ground in pushing Budvar's Czechvar Premium Czech Lager to nationwide distribution in the United States.

"Working with them in a positive matter can only help," said Dave Peacock, vice president of business operations at Anheuser-Busch.

The nation's biggest brewer is making nice with Budvar as part of its plan to add more high-end imported beers to its portfolio. The maker of brands like Budweiser, Michelob and Bud Light has seen sales flag as consumers turn to craft beers and foreign beers.

For the Czech brewer, the deal means access to Anheuser-Busch's unrivaled network of 600 wholesale distributors nationwide. Its Czechvar lager is already sold in 30 states.

"After years of differences, this is a meaningful step for two great brewers to form a relationship that is good for both of our businesses," August Busch IV, chief executive officer of Anheuser-Busch, said in a statement.

"For Anheuser-Busch, it also represents an opportunity to enhance our import portfolio with a super-premium Czech import," Busch said.

Over the last year alone, Anheuser-Busch has formed partnerships to distribute brands like Grolsch, Kirin and Stella Artois.

Slowing Sales

While domestic U.S. beer sales grew less than 2% over the last year, import beer sales surged 12.5 percent in 10 months of 2006 that have been tallied, according to industry newsletter Beer Marketers' Insights.

It's too early to tell how successful Anheuser-Busch's import strategy will be, said Benj Steinman, publisher of Beer Marketer's Insights.

Czechvar is such a small-selling import it likely won't have a big affect on Anheuser-Busch's sales, Steinman said. The deal is more significant in signaling the two companies might be finding common ground to end their larger dispute, he said.

Anheuser-Busch's stock remained virtually unchanged after news of the deal Monday, dropping 2 cents to close at $48.78 on the New York Stock Exchange.

Both Anheuser-Busch and Budvar agreed that their U.S. distribution deal, which became effective Friday, will have no affect on their ongoing legal dispute.

The brewers "have agreed the partnership cannot be used to support either side in any trademark cases," according to a statement.

"At the same time, the agreement represents a historical turning point between our companies," Budvar Chief Executive Jiri Bocek, said in the statement. "We have managed to move away from discussions between lawyers and toward a practical dialogue, which is going to be beneficial to both sides."

The legal fight is being played out in several countries over use of the famous Budweiser brand, which both companies claim a historical right to use.

The Czech brewery was founded in 1895 in a town called "Budweis" by the German immigrants who founded it -- a beer brewed there would have been known as a Budweiser. Anheuser-Busch launched its own U.S. Budweiser brand in 1876, picking the name because it evoked German brewers but was still easy for U.S. consumers to pronounce.

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