Sleeman considering sell-off - InBev interested

[GregClow]

Sleeman Breweries stock up 15% and halted on speculation of possible sale

TORONTO (CP) - Sleeman Breweries Ltd. (TSX:ALE) revealed Friday it is reviewing its "strategic options," following reports the struggling beer-maker was considering putting itself up for sale.

Sleeman's shares jumped 15 per cent Friday before being halted, closing up $1.75 to $13.40 on the Toronto Stock Exchange.

Earlier in the day, speculation swirled that brewer InBev SA - the maker of Stella Artois, Labatt and Beck's beers - may be eyeing the company as a possible takeover target.

(see http://www.cbc.ca/cp/business/060512/b051294.html for full story)

Even the suggestion that InBev may end up being the parent company of Unibroue is very, very frightening...

[Belgian]

Sleeman Breweries stock up 15% and halted on speculation of possible sale

TORONTO (CP) - Sleeman Breweries Ltd. (TSX:ALE) revealed Friday it is reviewing its "strategic options," following reports the struggling beer-maker was considering putting itself up for sale....

Even the suggestion that InBev may end up being the parent company of Unibroue is very, very frightening...

Well THAT sucks.

All the integrity of Maudite, Trois Pistoles, you name it... it all lies in the agreement between JS and his brewmasters at UniBroue to 'leave it alone' and you have to give J Sleeman props, he has not affected these beers under his ownersip.

Wow, can you imagine this amazing, under-appreciated brewery effectively disappearing? It is really unfortunate the parent company, Sleeman, is too weak/non-descript to carry itself anymore, let alone the Unibroue interests. All we will do THEN is belly-ache for our favorite U-Broue beers we never bought enough of "when they were still good..."

The sick upshot wouldl be a) skyrocketing RateBeer esteem for these products, and b) extremely good trading potential for desirable out-of-production items. Cynical but true I guess. Might as well buy everything you'll need to cellar away, soon. Another dream may be crashing down.

Ah well, lots of potential still in Québec, it is a beer paradise. We'll see who fills the big shoes, maybe even the same brewmasters will get involved. Too soon for a R.I.P eulogy but let's be realistic.

[Rob Creighton]

Without taking this as a dead lock yet, I did have two different bar owners tell me that Sleeman was discontinuing the Upper Canada line this week.

First I thought maybe it was a local issue with one brand but considering I'm in the Guelph market, I thought this could be significant. They paid handsomely for UC and have gotten very little from it {in this market}. The on-going series of experiments - UC Red, Pale, etc... have gained very little marketshare and have been expensive failures.

The UC Wheat was the only version locally that had any staying power and has been discontinued here [according to local managers]. The drastic reduction in profit momentum may be feeding a reduction in the 1400 brands their reps are trying to sell in the bars. This summer promises to be interesting in the Guelph market and maybe beyond.

[Mother G]

I can say with absolute certainty that all of the Upper Canada brands are not being discontinued.

Upper Canada Pale Ale has been discontinued because production exceeded demand. In other words, the keg version had an 8 week shelf life. The net result was a lot of it was dumped before it could be sold. Too bad, I had hoped that it would be a step in the right direction.

Upper Canada Wheat has been discontinued as well. It sold quite well seasonly. The problem was that it came at the expense of the two full year brands (Dark Ale , Lager ). Licensees took one of the two full year brands off for the seasonal offering.

The decision was made to focus on three brands (Dark, Lager and Red) and make sure that fresh product was always available and that resources were pooled on three brands instead of five.

Upper Canada remains a focus for Sleeman. There is no intention of discontinuing the trademark.

Mother G

[pootz]

This may sound cruel but personally, they could close the Guelph plant tomorrow and I may mourn the loss of Sleeman steam and porter for about 3 days then get over it......I fear for the Sleeman assets: Unibroue and Okanagan Springs who I believe make some of Canada's best craft beers.

They say all options are on the table so possibly these assets may be on the table as separate buy options.....at any rate the recent fiscal problems at Sleeman are not good news for those who would like to see the long term survival of Unibroue and OSB.

[GregClow]

Upper Canada Pale Ale has been discontinued because production exceeded demand. In other words, the keg version had an 8 week shelf life. The net result was a lot of it was dumped before it could be sold. Too bad, I had hoped that it would be a step in the right direction.

With all due respect, perhaps this beer would have been more successful if it had been a better example of the style.

I tried it on a couple of occassions, and found it to lack the body and flavour profile that I expect from a Pale. I was especially disappointed because I enjoyed the Sleeman Presents IPA, so I expected the UC Pale might have some similar characteristics, but it really struck me as an attempt to grab some of the Keith's market rather than a crack at a true Pale Ale.

On the other hand - I liked the UC Red when I tried it soon after its launch. I half-expected a Rickards knock-off, but I found it to be quite fresh and flavourful.

The decision was made to focus on three brands (Dark, Lager and Red) and make sure that fresh product was always available and that resources were pooled on three brands instead of five.

I notice that you didn't mention Rebellion Lager, Maple Brown, Light Lager or Point Nine. Are they all dead as well?

[Mother G]

Greg,

I think your assessment of UC Pale Ale is dead on. That is as far as I can go in my commentary. But you're a bright guy and nailed it!

As far as UC Red ... well again you nailed it. Rickards believe it or not had a 2004 volume of 200 K hls in Ontario! That is massive. The thought was "what if there was a more pure Premium ( all natural , decent "Craft" badge) offering to that style of beer"? Now remember, this was not an attempt to brew the worlds most dynamic Red Beer but one that was definitely a step above Rickard's. 10% of Rickard's Red volume is 20 K hls. A nice chunk of business indeed. So far the strategy appears to be working.

As far as the other UC brands (Maple Brown , Rebellion etc...), yes they are discontinued as well.

[Rob Creighton]

It does not surprise me that Rickards has 200k HL in Ontario but it is certainly a misleading number. Molson has chronically been under-represented in the premium/dark beer category and has been absolutely pounded by Labatt/Inbev with their Stella/Keiths/Hoegardden/Bass/Tennents, etc, etc lineup. Molson needs something to fill up taps in their bought and paid for chain accounts (ie: Boston Pizza/Applebees, etc) and the Rickards line, as lame as it has been, has filled the bill.

I really wonder how much of the existing Rickards business is stand alone and how much has been paid for to exist in the pub or restaurant (>90%?). As far as I know, Sleeman does not have a large number of corporate accounts where they dominate the tap lineup - as in greater than 8 taps. I can see your angle on this but as an original employee of UC, I damn near gagged when I first saw the Red. What we don't need is another Molson clone of a marginal product.

[swall]

I am watching this tread and noticing some support for Sleemans, where historically this site has bashed JS and his attempts. I’ve always had a fondness for this brewery and what it did for the Ontario and now Canadian beer market. It has introduced a line of premium products and positioned itself as a craft brewer. It is true that Sleeman beers are not as complex as others, but should they be? I’ve always thought of them as a “gateway” beer. A regular MolBatt drinker might try one, have interest, and continue his pursuit of even better beers. Imagine the palette shock going from a MolBatt offering to a Wellington, Churchkey, etc…. Sleeman provides that step needed to shift tastes.

Having said this, I am nervous about the purchaser of Sleemans. If it’s Molson/Coors, they will close Guelph, Maritimes, Vernon and possibly Chambly (God forbid). If it’s Miller/SAB, there’s hope – they will need these locations for distribution and tax laws.

[Beer Geek]

It is true that Sleeman beers are not as complex as others, but should they be? I’ve always thought of them as a “gateway” beer. A regular MolBatt drinker might try one, have interest, and continue his pursuit of even better beers.

I agree, as Sleeman was a gateway to better beers for me back in University. But the success of the Honey Brown has shot them in the foot. So many people jumped on this bandwagon and thought it was a great beer but a little expensive. Then Lakeport came out with their Honey beer at $1 a bottle and this is what is killing Sleeman. Obviously Sleeman’s is a much better honey beer, but for the people who want cheap and what they think is exotic beer, Lakeport is servicing that need. There was a post on Bartowel a few months ago with a link to an article that compared how Lakeport’s and Sleeman's 4th quarter where going in opposite directions. I don't know if Sleeman could have avoided this, but they sure did miss the boat somewhere.

[Mother G]

Beer Geek,

Things certainly have changed that is for sure!

I am not so sure that Sleeman shot itself in the foot as much as the marketplace changed. Sleeman Honey Brown was a big seller at Sleeman for a number of years.

Industry speak that you hear hourly is "Consumer Reference Point". The price or value that consumers place upon the product that they think about buying.

The industry got ahead of itself for over a decade and made significant profits through price increases.

Perhaps the elasticity reached the breaking point and Teresa at Lakeport was there to fill the need.

I guess I think that it had less to do with Sleeman Honey Brown being a "Bad" beer ( and I know that is not what you are saying) but that consumers said "if beer is just beer to me, would I consider this beer for a whole lot less money"? The answer was a resounding "Yes"!

It certainly has made things tough for anyone working in the Canadian beer business. I am taking a Darwinian approach to the whole thing. "The strong will survive".

I am optimistic that consumers will again demand richer, fuller flavoured beer just like they are doing with coffee and wine and food for that matter. I think the beer industry people (bigger brewers that is) just need to get back to basics and deliver a better product at a decent price.

Just my two cents people. I certainly don't have all of the answers.

Mother G

[Belgian]

I had the impression Sleeman-branded products have come to suffer an identity crisis in an increasingly (widely) fragmented marketplace. Their brands are not 'trendy' now - neither for being very cheap OR particulary premium in quality. So to ask a fair question, what IS Sleeman Beer to people these days? "Canada's Premium Beer" is just a tired radio slogan; Molson-owned Creemore brands deserve the title far more.

This isn't bashing the shortcomings of Sleeman-branded products, they can be alright. They just haven't come to terms with competition from extra-premium OR extra-value products springing up in the last decade. Buyers of Sleeman products have been allowed to drift into Mill Street- or Lakeport-oriented trends. Look at who's gaining market share, that's where the Sleeman bucks must have gone.

Guess it means a few of those 'drifting' people are getting more 'craft-beer' in their tastes as well, which is a really positive thing, if sad for Sleeman.

I wonder, incidentally... why would InBev buy a product line that's lost its market? And would UniBroue be a separate asset, do you think? It would be great if McAuslan or somebody bought it, just dreaming here... I'd hate to be in that business!

[Tapsucker]

I've had the same impression. Where is Sleeman's defining characteristic? The clear bottle is tired (and never that good an idea for a UV sensitive product). The beer and the price are both mainstream; two stronger and similar competitors. Where is the value proposition?
The telling sign was when they started buying other brands. I understand Okanagon for the distribution, but UC and Unibrue looked to be more for the reputation. Why did Sleeman, with their supposedly 'craft' reputation need to buy them?

I can appreciate them building a business and taking on the big boys. They did a great job of it, and the product isn't bad after all. I guess one can argue the micro business is a crowded market too, yet new players keep trying. Every competitor in a given market is welcome to us looking for choice.

Sleeman's situation could be seen in two ways. They could be conceding defeat to the big boys, or they could be cashing in after years of hard work building a valuable business. In either case, though, they were not outstanding enough to a beer lover to be missed.

[Mother G]

You know ... there was a time when I thought that a lot of you fellows were snobby beer purists who really did not have the foggiest notion about the "beer business". 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.

Please allow me to doff my cap and say a humble "I was wrong".

All of the above analysis has been fair and well thought out.

Again. Just my point of view but I think that you have read the situation very well.

In the final analysis we all love beer. Some beers more than others but we are all beer lovers.

Hey Guys ... let's try and crack that World Peace thing!

Mother G

[Rob Creighton]

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.

Molson/Coors could certainly benefit from some more interesting beers for their top end and maybe the Creemore experiment will drive them into it but it feels like a fundemental mistake.

I'm still betting on SABMiller looking for both a Canadian production facility for MGD and also a national distribution system. It seems a natural and John has old ties to SAB (he's already the distributor for Pilsner Urquell).
The reality of this might be that they have zero interest in maintaining many of the existing Sleeman/UC/Okanogan brands in favour of their own existing brands. All in all, it promises to be interesting.