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Mother G wrote:I guess it was my reflex to some of the opinions offered that although prescient in content could sometimes be harsh in tone. My baggage I guess.
Certainly the 'beer purist' in all of us wants to react very defensively on behalf of the better-made beers, and to speak loudly for the basic principle for making beer that is 'real' and has high intrinsic quality. We HATE quality shortcuts and all the pretentious advertisements used to make up for them.
Nobody wants to see Creemore products go the way of Rickard's Red, or for that matter our beloved UniBroue being made into another Leffe/Hoegaarden/Artois. Some beer can't just be put into hyper-drive for the sake of an accountant's ledger sheet, and doing this effectively makes a beer behind a label cease to exist, which is kind of an outrage of deceit & a subject of concern on BarTowel.
So that will often read as 'harshness', but there's an underlying passion and belief in unwavering principle. Such principle has built the greatest craft-beer successes in North America, such as Dogfish Head and Rogue. The examples are undeniable.
"Rather that push the high profit margin Unibroue brands throughout Canada, Sleeman chose instead to simply add them to the portfolios of their existing salespeople and allowed their cachet to wither. For the same reason that DaimlerChrysler doesn't sell Dodge trucks beside their Mercedes, Sleeman should have realized that their "luxury brands" deserve different treatment than their bread-and-butter labels."
A good observation from worldofbeer.com In the US market especially I expect Unibroue has more potential at the high end than does Sleeman's slate of beers.
Belgian wrote:I wonder, incidentally... why would InBev buy a product line that's lost its market?
I can't fathom why Inbev would want to look at Sleemans other than to keep it out of the hands of competitors and that seems unlikely to me. The recent changes in Labatt as the Brazilians swept to power were based on becoming mean and lean and they did this ruthlessly. The last thing they want is a bunch of marginal and complicated brandlines.
I think the change has brought them some kind of mindset that they must have the entire market. I had a conversation with a VP at Oland/Labatt here in Halifax the day Sleeman purchased Unibroue. I asked if it was big news, and his response was that it basically didn't even show up on their radar. A few weeks ago, a former classmate of mine who currently works at Labatt was outraged when I ordered a Propeller while everyone else at the table was drinking Bud Light. I suggested that Propeller doesn't really mean anything to them so what difference would it make to him. His response was that everyone matters.
Based on this, it seems to me the Brazilians have brought the mindset that every last human being on earth needs to be drinking an InBev product or they have failed. Seems like a dismal strategy to me, though - like swatting at flies as you're about to be run over by a steamroller.
Bobbyok wrote:A few weeks ago, a former classmate of mine who currently works at Labatt was outraged when I ordered a Propeller while everyone else at the table was drinking Bud Light.
It is a little rude to order a beer when nobody else is having any
Hehe.
Bobbyok wrote:A few weeks ago, a former classmate of mine who currently works at Labatt was outraged when I ordered a Propeller while everyone else at the table was drinking Bud Light.
It is a little rude to order a beer when nobody else is having any
Hehe.
Bobbyok wrote:A few weeks ago, a former classmate of mine who currently works at Labatt was outraged when I ordered a Propeller while everyone else at the table was drinking Bud Light.
It is a little rude to order a beer when nobody else is having any
Hehe.
Nice one!
It's pretty funny that your friend would have that kind of a mentality. Does he only buy the products that his friends help to make? Or if he doesn't know someone that makes product X, does he only buy Canadian made product X? Somehow I doubt it. I hope you put him in his place. Attitudes like that make me hate the macro brewers even more. Never would've thought that was possible.
Bobbyok wrote: A few weeks ago, a former classmate of mine who currently works at Labatt was outraged when I ordered a Propeller while everyone else at the table was drinking Bud Light.
I'm offended he doesn't work for Propeller. So mad I could punch him and scream at him.
BTW - even though I like to repeat myslef, the real problem here is not mastering the forum's posting tools.
I think I got the dosage wrong, I'll check back after a few more pints.
There are articles in both the Star and the Globe today. I have the articles directly, but not the links.
COVER STORY / SLEEMAN
Report on Business: Canadian A FEW TOO MANY; John Sleeman restarted a family brewing tradition. After a shaky start, profits grew and it decided to expand. Then things went wrong. ANDY HOFFMAN reports
ANDY HOFFMAN
FOOD AND BEVERAGE REPORTER
2413 words
20 May 2006
The Globe and Mail
B4
English
All material copyright Bell Globemedia Publishing Inc. or its licensors. All rights reserved.
John Sleeman just couldn't resist.
It was early 2003 and the public had declared war on carbohydrates. Dr. Atkins' pager was buzzing non-stop. Bacon and steak were in. Bread and beer were out.
Sleeman Breweries Ltd., a company founded on a handcrafted ale made from a nineteenth-century recipe, decided to act fast. It rushed “Sleeman Clear” into production, becoming the first Canadian brewer to market with a low-carb beer.
“Did I think in 1988 when I started the company that we'd have a low-carb beer? Absolutely not,” Mr. Sleeman said this week.
“Would I have been smart to sit here and do nothing about a 24-month craze in the marketplace and watch other people take market share? That would be stupid too.”
This was not the first time Sleeman Breweries veered away from its roots as a premium craft beer maker, nor would it be the last.
John Sleeman will be spending this long weekend — one of the most important of the year in the industry — thinking about selling the company that bears his family name. Declining volumes, a 56-per-cent drop in profit last year and pressures from Bay Street have proven too much. The company has asked its investment bankers to find a buyer.
How did it come to this? The Sleeman tale is filled with unbridled ambition, an insatiable thirst for acquisitions and a lack of focus. At times, the company grew too quickly, trying to swallow more than it could handle. Some of the breweries it bought were inefficient, and Sleeman has been slow to cut costs. Even Mr. Sleeman admits there are too many brands, and he has been unwilling to cull poor performers. All the while, the cachet of its core product — premium Sleeman beer — has been put at risk. Now in a world where discount and import beers are kings, the mid-size premium brewer is struggling to survive.
But for Mr. Sleeman, crunching the numbers and staying lean has never had much appeal. “I believe in and get excited by entrepreneurial ideas and growth,” the 53-year-old said. “The idea of sitting back being a caretaker is not for me.”
It wasn't always so. Sleeman's bold entrance and subsequent success in the beer game is the stuff of legend. Armed with his grandfather's recipe for Sleeman Cream Ale, he leveraged family heritage and a nifty clear beer bottle into an unparalleled success story in modern-day Canadian beer making. Mr. Sleeman's great-great-grandfather, also named John, began brewing beer in Ontario in 1834. But Mr. Sleeman didn't find out about it until he was in his 20s.
He was adopted and raised in an Ottawa suburb after spending the first year of his life in a foster home. After dropping out of high school, he got married and moved to England. But he was drawn back to Canada where he ended up owning a bar and starting a successful beer import business. One day an aunt showed him his ancestor's beer recipe. Not long after, he turned his sights to Guelph, Ont., and the dormant Sleeman family business of beer making.
Set to begin production in 1988, Sleeman almost didn't get off the ground. He found backing from U.S. beer maker Stroh Brewing Co. for much of the $3-million needed to get up and running. He added about half a million of his own money, but with beer fermenting in the tanks, Canadian bankers pulled their financing. Mr. Sleeman managed to broker a last-minute deal with a bank in Detroit.
The first few years were extremely lean. The company was in deep debt to nearly all of its suppliers. Yet Sleeman Cream Ale won over Ontario beer drinkers. The clear bottle and cool factor of a fancy heritage brew helped Sleeman turn its first profit in 1991. From $750,000 that year, Sleeman saw profit grow to $14.4-million by 2004 on revenue of $211-million.
Sleeman's success was due in part to fortuitous timing. For decades, Canadians had consumed products brewed almost exclusively by three companies, Molson, Labatt and Carling O'Keefe. Mainstream beer was the only beer, and the big brewers held a virtual lock on the industry.
In the 1980s, however, microbreweries started making inroads. They promised consumers a taste beyond the generic, with beer brewed in small batches using top-quality ingredients. The stuff also cost more than regular beer, meaning if production expenses were reasonable, premium could be a very profitable endeavour.
Frank Heaps, was in the vanguard — as one of the founders of Upper Canada Brewing Co. Ltd., which launched in 1984. He remembers persuading the industry to try craft beer wasn't easy.
“You would walk into a bar and say ‘Boy do I have a great microbeer for you,' “ he said.
“They'd look around to see where you'd parked the spaceship.”
By the time Mr. Heaps walked away from the business, Upper Canada was brewing 75,000 hectolitres of beer a year. (A hectolitre is 100 litres.) Mr. Sleeman saw opportunity in the Upper Canada brands, but his vision for the asset never really worked out.
Sleeman bought the company in early 1998 for $28-million. Mr. Sleeman concedes it did not go as well as he had hoped.
“Where we dropped the ball, quite frankly, was integrating the employees and continuing to put marketing and sales focus behind the brands,” Mr. Sleeman said.
“It was our first acquisition. We were inexperienced and we could have done a better job.”
Sleeman had to close the company's brewery in Toronto and found that many of the brands were competing directly with its own namesake products. Upper Canada is now a minor part of the crowded Sleeman portfolio, which includes some 40 labels in Ontario alone.
Mr. Heaps, 65, is now an investor in another company, Steam Whistle Brewing of Toronto. The premium beer maker is run by his son Cam, and a group of former Upper Canada staffers. It sells just one product, a pilsner that it never puts on sale.
“Price conveys a quality message,” he said.
Mr. Sleeman wasn't deterred and he kept on buying regional breweries. But in many cases, he failed to derive substantial synergies or cost savings.
A reverse takeover in 1996 of Vancouver-based Allied Strategies Inc. gave Sleeman a public listing and a merger with Okanagan Spring, the largest craft brewer in British Columbia.
“At the time, I was convinced by Bay Street brokerage firms that being public was a great way to raise capital,” Mr. Sleeman said.
Ironically, Sleeman didn't use much of its stock to buy other brewers. The majority of acquisitions were funded with debt. Mr. Sleeman said he was mindful of diluting shareholdings, including his own. (His current stake is slightly less than 5 per cent, down from an original 20 per cent. Half of that went to his first wife in a divorce settlement.) In 2000, Sleeman bought Maritime Beer Co., located in Dartmouth, N.S. The deal added a few brands, 80,000 hectolitres of capacity and a physical presence in the Atlantic Canada market.
Sleeman had planned to become a major presence in value-priced beer in the region. But the strategy has so far proven elusive.
Unibroue Inc., Quebec's largest craft brewer, whose premium, high-alcohol-content brands include Maudite (Damned), Eau Bénite (Holy Water) and La Fin du Monde (End of the World), was purchased in 2004 for $31-million.
The Quebec labels are marquee super-premium-priced brands, but the facility is not particularly efficient. The heavy-alcohol beer has much longer fermenting times than traditional brews. Having an infrastructure spread so thin across the country has cost Sleeman plenty in overhead. Sleeman has recently cut a shift at the Quebec plant and laid off workers, but the deal has contributed to the company's rising sales, expenses and marketing costs, which increased by more than $5-million in 2005 from the year before and by $4-million in the first quarter alone this year compared to last.
“I think he overpaid for all of them to tell you the truth,” said Michael Palmer, a long-time beer industry analyst and president of Veritas Investment Research in Toronto.
Mr. Sleeman disagrees with the analyst's notion of worth.
“If you're talking to some guy on Bay Street with a calculator . . . I probably overpaid for stuff,” he said.
“If you look at buying brand loyalty, if you look at buying facilities, if you look at distribution systems, I don't think we overpaid.”
Mr. Sleeman might have remained a little brewer in Guelph, Ont., carrying on a family tradition of making good beer for a select few, but he couldn't.
“I can't live that way. I'm not the kind of person who can just sit there and milk things and put money in the bank,” he said. Last year Sleeman and its board rejected the idea of becoming an income trust, a vehicle originally designed for companies with mature but steady cash flows.
Doug Berchtold, who spent 12 years at Sleeman as chief financial officer and later as company president, said growth is in Mr. Sleeman's DNA.
“John has very bold ideas and certainly he wanted to grow very quickly,” said Mr. Berchtold who is now the president of rival Brick Brewing Co. Ltd.
Sleeman's boldest move may have been paying almost $40-million in cash to Stroh Brewing Co. for its portfolio of discount U.S. beer brands in 1999. Some observers point to the purchase as a key diversion from Sleeman's strategy of selling premium beer.
“He would buy companies just for size and brands,” said an analyst who is prohibited from being identified in the press.
“Things just caught up with them.”
Mr. Sleeman said the deal was key to filling capacity and wringing efficiencies out of the plant in Guelph. As the market for discount beer has increased, cheap beer now accounts for over half of Sleeman's volumes.
“At least we're there,” Mr. Sleeman said. “Buying the Stroh business doubled our volumes, made our plants more efficient and helped reduce our cost of goods sold. It was a great strategic decision.”
And so now, Mr. Sleeman just wants more time. He believes the impatient demands of money managers and financial analysts have forced his hand.
“I have tried to march to the beat of my own drummer, which is premium beer, family heritage,” Mr. Sleeman said. “Had we not become a public company in 1996, there would have been significantly different pressures . . . We could have said ‘To hell with you we're going to make Sleeman Cream Ale and if you don't like it, too bad.' ” But he didn't. John Sleeman decided to get big.
“He promised growth and just kept adding brands,” Veritas's Mr. Palmer said. “He kept buying things and he lost his focus.”
A growing stable of brands
SleemanThe recipe, which is said to contain Irish moss, was formulated in 1898 by George Sleeman. An aunt gave John Sleeman his grandfather's notebook in 1984. It contained the original recipe used for the first Sleeman Cream Ale brewed in 1988, which was sold in a clear bottle. Last year, Sleeman began a program of limited-time offers that cut the price of Cream Ale and other premium brands in Ontario and Quebec, from time to time. Over the years, the Sleeman brand has grown to include nine separate offerings including Honey Brown, Steam and Original Draft.
Okanagan: Okanagan's portfolio of premium brands was combined with Sleeman in 1996 as part of a reverse takeover. Labels include Extra Special Pale Ale, Premium Lager and Bavarian Lager. The company's Vernon, B.C., facility makes the products that adhere to the Bavarian Purity Law of 1516. The deal helped Sleeman establish a national distribution system and begin selling its own beer in Western Canada. Today, Sleeman brands have achieved roughly 10 per cent of the market share in B.C.
Upper Canada Sleeman acquired Upper Canada's stable of brands in 1998 for $28-million. Labels include Dark, Lager and Rebellion. Once a major force in the Ontario premium beer market, Upper Canada's sales have skidded, according to Sleeman, because of a lack of advertising and sales support from Sleeman.
ShafteburySleeman scooped up another B.C. brewer in 1999, buying Shaftebury Brewing of Delta for an undisclosed price. The acquisition added 30,000 hectolitres of capacity and brands including Shaftebury Cream Ale, Shaftebury Honey Pale Ale. The company recently launched a beer called Four Twenty Brilliant Lager.
Stroh: Sleeman purchased the Stroh Brewing Co. portfolio of discount beers in 1999 for $39-million. With brands including Old Milwaukee, Pabst Blue Ribbon, the deal helped Sleeman double the company's volumes but in a category with lower margins than premium beer.
Unibroue: Sleeman bought the super premium beer maker based in Chambly, Que., in the spring of 2004. The brands, including Maudite and La Fin du Monde, were once sold exclusively in Quebec but have proven strong sellers in English Canada and internationally. Sleeman has struggled to improve the efficiencies of the plant.
Grolsch: Sleeman purchased the right to distributed the Netherlands-based Grolsch brand in Canada for more than $8-million in 2002. Over the years, Sleeman has brewed and/or distributed a series of import brands in Canada, including Guinness from Ireland, Sapporo from Japan and Sam Adams from the U.S. In 2006, Sleeman struck an agreement with FEMSA to sell Sol, Dos Equis and other brands in Canada.
Maritime: In September, 2000, Sleeman acquired a small bankrupt brewery in Dartmouth, N.S. The facility brewed brands including Atlantic Storm, Black Pearl and Frosted Frog. With 80,000 hectolitres of capacity, the facility had annual sales of $2-million when Sleeman bought the assets. Sleeman said the deal added a much-needed increase in production capability and a distribution centre for the region. The brewery also makes the Maclays brand.
Business Upscale Sleeman feels competitive pressure
Matt Walcoff
The Record
1218 words
20 May 2006
The Toronto Star
ONT
D01
English
Copyright (c) 2006 The Toronto Star
Everyone seems certain Sleeman Breweries Ltd. is for sale except for John Sleeman, the founder and CEO.
Since May 12, when the top executive of Belgian mega-brewer InBev NV told a conference call that Sleeman Breweries had hired an advisory firm to find a buyer, John Sleeman's email has been filled with inquiries from would-be buyers from around the world.
"I got back in the office after lunch ... and my BlackBerry's going off saying, 'You're for sale,' and I'm asking 'What's going on?'" he says from his office in Guelph.
But Sleeman did, in fact, put out a press release saying the company had retained BMO Nesbitt Burns to help explore ways to enhance shareholder value, including the possible sale of shares or assets or a business combination.
Reporters and analysts have spent the past week like football geeks on draft day, trying to predict which company will buy Sleeman Breweries. The Guelph institution has a 95 per cent chance of being swallowed up by one of the multinational beer giants in the next several months, wrote TD Newcrest analyst Michael Van Aelst in a research note this week.
But all of the hubbub is based on a misunderstanding, John Sleeman insists. The company looks at strategic options, including a sale of the company, every year.
Sleeman says he and company president Rick Knudson spent the past week travelling to the company's breweries across Canada to explain to workers that nothing has changed.
Yet, while Sleeman Breweries may consider putting itself up for sale every year, analysts have good reason to suspect it might follow through this time.
After years of heady profits and a rising stock price, Sleeman Breweries has gone flat. Shrinking profits, stagnant sales and declining shares have led some industry watchers to say it cannot survive on its own.
"We truly believe that as 2006 progresses, Sleeman will be hard pressed to meet financial targets," Karim Salamatian, a BMO Nesbitt Burns analyst, said in a research note. "It should be in the best interests of John Sleeman and the board to pursue strategic alternatives sooner rather than later."
Until recently, Sleeman was one of Canada's greatest entrepreneurship stories.
John Sleeman's ancestors brewed beer in Ontario from 1847 to 1933. The government shut the operation down when George Sleeman - John's grandfather - wouldn't pay taxes on beer he had illegally exported to the United States during American prohibition.
More than 50 years later, John Sleeman, a bar owner and beer importer, inherited his grandfather's diary. He decided to reopen the family's defunct brewing business using the beer recipes he found in the journal.
He launched Sleeman Breweries in 1988 with 35 employees. For 15 years, the business grew dramatically through acquisitions, expansions and a licensing agreement with Pabst Brewing Co. of the U.S.
Today, the company is the third-largest brewer in Canada with about 6 per cent of the market, behind only Labatt and Molson. It employs 715 people - down from 800 a couple of years ago - at breweries in Ontario, British Columbia, Nova Scotia, Quebec and Wisconsin.
But the momentum has slowed. Last year, sales failed to increase significantly for the first time since Sleeman Breweries went public in 1996. This year has been worse so far, with the company reporting its first quarterly loss in 10 years.
Sleeman's positioning of most of its offerings as finely crafted brews worth a higher price has left it vulnerable to changing market conditions, says analyst Peter Holden of Veritas Investment Research.
Meanwhile, discount brewers like Waterloo's Brick Brewing Co. and Hamilton's Lakeport Brewing have been gobbling up more of the market at the other end of the spectrum.
"The beer industry, in general, took the prices up too far, too fast, thereby creating room for people to come in below them," says Holden. "The growth segments are the imports - the cool beers, if you will - and the value beers."
While some breweries have slashed prices over the past few years, Sleeman has stuck to its strategy and refused to join in the price war. The company has used only temporary price reductions around some long weekends, says Sleeman.
He says he is confident that if the company stays independent, it will turn a greater year-end profit this year than it did last year.
"Certainly, maintaining the status quo is an option if Bay Street will be patient for us," he says, adding that shareholders have not been pushing for a sale.
But analysts say the only way Sleeman can reverse the slowdown and generate value for stockholders is to sell to a bigger company, which could use its sales and marketing power to better promote Sleeman beers.
The three names regularly floated as potential suitors are Molson Coors Brewing Co. of Montreal; InBev, which bought Labatt in 2004; and British company SABMiller.
Of the three, SABMiller is likely the best fit, analyst Michael Van Aelst wrote. The company's Miller brands have failed to make notable inroads in Canada under a distribution agreement with Molson, so SABMiller could use Sleeman's sales network to extend its reach here.
SABMiller might also be attractive to John Sleeman as the buyer least likely to cut Sleeman workers. "Molson and Labatt would have a much lower level of interest in maintaining our people," Sleeman says.
Van Aelst said in his research report two factors that could derail a takeover would be a failure by SABMiller to get out of its relationship with Molson, or objections from the federal Competition Bureau to an acquisition by Molson or InBev.
Van Aelst doesn't think the government would intervene in a takeover bid, but Veritas's Holden says Molson and InBev would be likely to run into difficulties with the bureau.
As for SABMiller, the multinational giant is unlikely to be too enthused about Sleeman's modestly sized but high-cost operations, Holden says.
"If SABMiller wanted to come into Canada, they'd want to come in in a big way," he says. "If they just want to find a new distributor for their products that are currently handled by Molson, they could do that for a lot less than $360 million," a likely purchase price for Sleeman.
John Sleeman would not say which companies have inquired about purchasing Sleeman Breweries. But he says most have been overseas companies without a significant presence in Canada.
InBev, the company whose chief executive officer started the sale rumours, has not called, Sleeman says.
"Until we have an offer our board and shareholders would approve, which I don't have in front of me at the moment, it's business as usual," he says. "I'm not going to stand in the way of creating shareholder value if someone wants to take over the company, but they're not going to get it for free."
585103-406762.jpg | dave carter tns Sleeman's brewery in Guelph, launched in 1988 by John Sleeman using his grandfather George Sleeman's recipe.Mathew McCarthy the record John Sleeman says talk that his brewery is up for sale is a misunderstanding and that the firm reviews its options every year. | ;
I am convinced that some of these random, optimistic Acquisitions are doomed to merely kill off the brand.
Not that Upper Canada was always that great, but it's probably history as a brand - I mean the market won't really miss it right?
Sounds like Unibroue might be too expensive to carry its own, so that looks uncertain too. The market WILL miss an authentic belgian-style ale producer, so will some brewers fill that gap you think?
So mad I could punch him and scream at him.
