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Czech spirits freeze hits makers' sales, reputations

Source: Thomson Reuters Foundation - Fri, 21 Sep 2012 10:37 GMT
Author: Reuters
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* Czechs widen alcohol freeze to exports

* Suspected poisoned moonshine killed 23, left others blind

* Spirit makers say measures do little to hit black market

By Jason Hovet and Robert Muller

PRAGUE, Sept 21 (Reuters) - Czech spirit makers slammed a government decision to freeze all sales and exports of hard alcohol following a health scare, saying on Friday it would unfairly damage their reputations and cost millions in sales.

A number of leading brands told Reuters on Friday they were suspending production and said smaller firms could face severe cash-flow problems and even bankruptcy.

The EU country temporarily banned the sale of spirits in shops and pubs last Friday - a dramatic move in one of the world's heaviest-drinking nations - after 23 people died and others went blind drinking bootleg alcohol laced with methanol.

The restriction was extended to exports on Thursday evening, under pressure from the European Union. Prime Minister Petr Necas said he had heard the bloc was preparing to impose its own ban and decided to make a preemptive move.

The government has vowed to get the drinks back on bar and supermarket shelves as early as next week, as soon as it can impose new safety measures, but has given no firm date.

Spirit companies said the ban and other planned measures like new tax stamps or certificates of origin would have little impact on bootleg makers who operate outside the law.

The freeze would also damage the brands of reputable companies by bundling them in with bootleggers, they added.

"It is a scar on the reputation of quality Czech goods for exports," said Zdenek Chromy, deputy chairman of the country's top fruit brandy maker Rudolf Jelinek.

"Orders from Germany and Austria have already been cancelled. We have a shipment to the U.S., where we don't know how things will end up."

He said Rudolf Jelinek would stop production on Monday.

A third of the company's 350 million crowns (${esc.dollar}18.19 million)in sales last year were from exports. Slovakia and Poland, which take about 50 percent of the ${esc.dollar}80 million in annual Czech liquor exports, had already imposed their own freeze.

Jan Becher - Karlovarska Becherovka, the country's second largest drinks seller and part of France's Pernod Ricard , said it was extending a halt on its 60-80,000 bottle-a-day production that started on Thursday.

"This is our biggest worry. Our brand is not only alcohol but is a symbol of the Czech Republic," said Vladimir Darebnik, operations director at the company which makes the 205-year-old Becherovka liquor.

The ban - which covers all alcohol with over 20 percent alcohol content but not the country's well known beers - was costing the company several million crowns a day, he added.

STILL NO SOURCE

Police have charged 30 people with crimes related to bootleg alcohol, but have not yet found the origin of the deadly spirits.

Investigators suspect methanol was mixed into bootleg drinks made from industrial alcohol and sold under fake labels as vodka, rum or fruit distillates.

The illegal drinks market has roughly doubled since 2010 when an excise tax hike was put in place to plug budget holes. Analysts estimate black market sales make up between 15-25 percent of the 55 million litre-a-year Czech market.

Fruko-Schulz, which makes absinthe, vodka and one of many brands of the Czech rum often copied by bootleggers, is losing 3 million crowns a day in revenue, said sales director Ladislav Kremlicka.

"The government should act quickly. We have raised the problem of illegal alcohol before, and are sorry that nothing came out of it, only now when there is such an affair and people are dying," he said.

The company might need to lay off some of its 90 staff after it halted production on Wednesday, he added. (${esc.dollar}1 = 19.2371 Czech crowns) (Editing by Andrew Heavens)

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