No. 3 brewer opens taps to B.C. market
Sleeman Breweries leases 45,000 square feet on Annacis Island for new distribution and retail centre
Jill Schmelke

Sleeman Breweries Ltd. has leased a 45,000-square-foot distribution and retail centre on Annacis Island, adding to the Ontario-based beermaker's push into the West Coast market.

Sleeman, which already owns upscale B.C. brewers Okanagan Spring and Shaftebury, plans on going after the average suds drinker with B.C. distribution of Stroh's brand beers including Old Milwaukee, Colt 45 and Rainier.

The new facility, which is triple the size of the company's previous local warehouse and distribution centre, will service retail and wholesale customers in the Lower Mainland.
The location will also have a small retail operation. The warehouse will operate under the Okanagan Spring name because it is the best-known brand to B.C. customers, says Sleeman marketing manager Steve Pelkey.

The Sleeman strategy follows what Pelkey called "the book-end approach."
Sleeman beer is positioned as a "premium beer," selling at $9.95 for a six-bottle case. Shaftebury and Okanagan Spring, which retail for $9.25 for six bottles, compete with microbrew beers. The Stroh family of beers make up Sleeman's "value-priced" category. In its annual report, Sleeman said the segments flank the "regular" beer category.
Sleeman's B.C. strategy caused one industry analyst to comment that Canada's two biggest brewers should be paying attention to the country's No. 3 brewer in the $842-million domestic beer market in B.C.

"The challenge with Molson and Labatt are that their high-volume consumers are aging and not drinking as much. If I was Molson and Labatt, I'd consider Sleeman the competitor to watch," said Michael Brodie, a former 23-year Molson executive who is now a management consultant specializing in consumer products with Arthur Andersen Consultants.

Brodie said Sleeman is building a customer base that will be brand loyal by appealing to "young, affluent consumers." Brodie added that 80 per cent of the beer industry's business comes from 20 per cent of the drinkers. And the tastes of heavy beer drinkers are not fickle, noted Brodie.

But Pelkey said Molson and Labatt are not direct competitors, even though they sell brands that fall into the same categories covered by Sleeman. Rickards Red, produced under the Capilano Brewery name, is a Molson product created to appeal to the microbrew customers.

Kootenay Mountain Ale, brewed in Creston, B.C., is Labatt's specialty beer. It is "styled" as an ale to compete with microbrews, says Labatt public relations manager Tanya Oliva.

Domestic beer sales in B.C. reflect an increasingly fragmented market. Commercial brewery sales have leveled off in B.C. in the last five years. In fact, sales dropped from $807 million in 1998 to $802 million in 1999. Flat commercial beer sales may be partly due to the rise in cottage breweries and brew pubs. Beer sales in both categories have grown steadily since 1995, although they account for only four per cent of the B.C. market.

Sleeman plans to distribute the Stroh's brands within the next two months in B.C.
Eventually all the beers, with the exception of the Guelph-based
Sleeman brand, will be brewed in Sleeman's Vernon brewing facility, said Pelkey.
Pelkey would not share Sleeman's B.C. market share information, but said sales are growing by "triple digits" here.

Nationwide, Sleeman increased revenues by 26 per cent in 1999 to $96 million. Sleeman bought the Stroh family of beers late in 1999. The acquisition will provide benefits such as enhanced national distribution, improved purchasing power and economies of scale, stated the brewery's annual report. Sleeman acquired Okanagan Spring in 1996 and Shaftebury in early 1999.

Shaftebury's former brewing facility in Vancouver was dismantled and the equipment sold off. The purchase agreement between Sleeman and Shaftebury stated that the site could no longer be operated as a brewery.