Sapporo's takeover of Sleeman leaves little in local hands

Mon, 11 Sep 2006 22:11:27 +0000

Trouble is brewing for Canadian beer makers as the trend towards foreign ownership continues unabated. Sleeman Breweries has accepted a buyout offer of $17.50 per share from Sapporo Breweries of Japan, valuing the deal at nearly $400 million.

The last of Canada's three large breweries to accept foreign ownership, Sleeman is strongly advising shareholders to approve the agreement. Analysts believe approval to be highly likely as the offer represents a 50 per cent premium over the price of Sleeman shares on May 11, the day before Sleeman announced it was seeking a buyer. Both companies expect the deal to close by mid-October.

Controlling seven per cent of the domestic beer market, Sleeman's buyout will reduce the market share of Canadian-owned breweries to roughly five per cent. This is all "part of a pattern in Canada," notes Robb Steward of Dow Jones Newswires, one that saw corporate beer giants Molson and Labatt effectively cede control over the past several years to the Colorado-based Coors, and Belgium's InBev, respectfully.

In a bid to reduce costs and drive up profits, Sleeman has cut about one-fifth of its labour force over the past year, including 40 jobs only days before the announcement of the purchase agreement. When asked by reporters if the change in ownership would mean further job cuts, Sleeman CEO John Sleeman was non-committal. "I don't think it's fair to paint Sapporo into a corner and say that everyone is going to keep their job," Sleeman told the Toronto Star.

According to industry sources, Molson Coors, Labatt and Dutch brewer Grolsch were also interested in the acquisition. However, Sleeman already brews and distributes Sapporo's beer in Canada, and there is speculation that Sapporo was eager to purchase Sleeman in order to prevent their existing arrangement from being annulled by a new owner.

The Battle of our Beers

Thu, 26 Jan 2006 22:45:52 +0000

Multinationals crush craft ales in Canada's suds industry

photo credit: Rob Maguire

On your way home from work you decide to pick up a few beers. You bypass that 'Canadian classic' Labatt Blue, and consider Keith's, which hits closer to your Maritime roots. Or maybe you're in the mood for something a little classier, so you consider a posh Stella Artois. In the end you decide to go with Löwenbräu, an old-fashioned German brew.

It looks like you have a lot of choice, but the shelves are misleading: InBev, the world's largest brewing company, owns all of these brands.

Headquartered in Belgium, InBev was formed in 2004 when market leaders Interbrew and AmBev merged, creating a beverage behemoth possessing over 200 brands and selling 202 million hectoliters (hl) of beer -- enough to fill over 8,000 Olympic swimming pools -- and 31.5 million hl of soft drinks a year.

InBev is one of two multinationals that share control of 90 percent of the Canadian beer market. The second player is Molson Coors, the result of a 2004 merger between historic Montreal brewery Molson and the Colorado-based Coors. Molson Coors is the fifth largest brewer in the industry worldwide, sporting a portfolio of over 40 brands.

These two companies own Canada's four most popular beers, Budweiser, Molson Canadian, Labatt Blue and Coors Light. They also own a number of regional breweries that consumers do not tend to associate with multinationals, such as InBev's Keith's and Kokanee or Molson Coors' Creemore Springs.

Over half of the remaining ten percent of the Canadian market is controlled by Sleeman Breweries, based in Guelph, Ontario. In recent years Sleeman has increased its market share by swallowing several regional breweries, including Quebec's Unibroue, Upper Canada Brewing of Ontario, British Columbia's Shaftebury and Okanagan Spring breweries, and the Maritime Beer Company. Sleeman also has distribution agreements for several international brands, including Guinness, Kilkenny, Harp and Grolsch.

After Canada's big three corporate brewers take their share, only four percent of the market remains for independent microbreweries. As a result of this market concentration, Molson Coors and InBev are able to throw around a lot of weight in the marketplace through their Canadian subsidiaries, Molson and Labatt.

The struggle between independent and multinational brewers has been particularly evident in Quebec. The Quebec Association of Microbrewers charged Molson and Labatt with engaging in "anticompetitive acts," including demanding exclusivity contracts with bars and imposing restrictions on advertising, measures that prevent independent brewers from promoting and selling their products.

The case went to the Competition Bureau of Canada, which dismissed it after an investigation in 2003, citing growth in certain Quebec microbrews and a lack of explicitly predatory pricing. Rather than disproving the claims, however, the Bureau's report appears to have confirmed many of them.

"Molson and Labatt had entered into agreements with several of their clients that included clauses restricting their competitors," stated the Competition Board in its ruling. "The analysis showed that such contracting practices were becoming increasingly widespread and were covering an increasing volume of beer in Quebec."

A more recent inquiry completed this past December by the Competition Bureau found that Labatt sales representatives in Sherbrooke, Quebec had engaged in anti-competitive practices by offering free beer and money to some store owners to ensure they kept beer prices high during a particularly competitive period. These practices continued even after the Bureau began its investigation. Labatt pled guilty to the charges and received a $250,000 fine. The salespersons involved in the illegal activities have retained their jobs at Labatt.

Both Molson Coors and InBev's Labatt have also become involved in politics, spending profits on supporting a conservative political agenda. The Coors family, founders of the Coors Corporation and major shareholders of Molson Coors, founded the Heritage Foundation, a right-wing pro-Republican think-tank, and have a long history of supporting conservative groups and promoting laissez-faire economic policies and Christian fundamentalism. Pete Coors used brewing profits to launch his unsuccessful candidacy to the US Senate on a Republican platform, and Labatt, for its part, was a major contributor to the Conservative Party of Canada in 2004.

Although it has since cleaned up its corporate practices, Coors was also the target of a twenty-year boycott by gay-and-lesbian and ethnic-minority groups in the United States for their homophobic and racist practices in the workplace.

Despite the strength of their hold on the Canadian market, the savvy consumer can still avoid the Molson-Labatt duopoly. Over 100 microbreweries exist in Canada, at least one in each province or territory. Unclear labeling, however, will mean a consumer has to do her own research if she wants to support local alternatives to these multinational corporations.

Elizabeth Falcon discovers that 90% of the beers sold in Canada are owned by two foreign multinational corporations.

The Dominion - beer

Sapporo's takeover of Sleeman leaves little in local hands

The Battle of our Beers