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Canada: John Sleeman says he's looking forward to ducking it out with a merged Molson-Coors rival. "It will be good for Sleeman," the chief executive of Sleeman Breweries Ltd. said on July 22. "In a David-and-Goliath situation, Canadians have very often come to the aid of the David, and that's us." With a market share of about 7 % in Canada, Sleeman Breweries ranks a distant third, behind Labatt Brewing Co. and Molson Inc., which each account for about 42 % of total beer sales in the country, The Star wrote on July 23.

The proposed merger with Denver-based Adolph Coors Co. would double the size of Molson and vault the combined entity to the Number 5 spot globally. Labatt is owned by Belgium beer giant Interbrew SA, the world's fourth largest brewer. Although Sleeman is small in comparison, the Guelph-based firm now can boast of being the only Canadian-owned brewer among the top three. Sleeman hopes patriotism will persuade Canadian beer drinkers to assess their loyalties.

Anecdotal evidence gleaned this week from bars and radio call-in shows suggests some beer drinkers resent international companies taking over Canada's beer industry, Sleeman said. "That is not fair because Molson is every bit a Canadian-focused company, but I think this is an opportunity for companies like Sleeman."

Pre-merger Molson certainly thought so and rolled out its I-am-Canadian advertising rant. Investors seem to be betting Sleeman will benefit, sending its share price up 4 per cent since the merger rumour started on Monday.

Some investors may believe Sleeman will take advantage of the patriotism factor, but they'll likely be disappointed, said Bill Chisholm, an analyst with Dundee Securities Corp. "I don't think that will have much staying power." As evidence, he notes that the two fastest growing beer brands in Canada are Coors Light and Budweiser. "We talk about commitment to Canadian brands but the ones growing are foreign," Chisholm said.

Mike Palmer, a beer industry analyst with Veritas Investment Research Corp., believes a merged Molson will have little effect on Sleeman, or even the entire beer market. "Everyone asks that question, but why should it have an impact on Sleeman?" Palmer asked. "Remember, Labatt was taken out by Interbrew about 10 years ago, and I don't think it had a major impact on Sleeman or anyone else."

Sleeman could benefit from increased opportunities to market and distribute international brands, the brewery chief said. "I wouldn't be surprised if some of the international companies who have their brand over at Molson start looking for alternatives," he said. "They might feel they won't get as much attention in a bigger company."

Molson is busy trying to fix its problems in Brazil, while Coors is actively seeking to grow its sales in the United States, Sleeman said. Sleeman's stable of international beer brands already includes Japan's Sapporo, Britain's Guinness and the Czech Republic's Pilsner Urquell.

Heineken and Corona, which Molson's distributes under licence in Canada, is an important source of profits, Palmer said, adding that Corona's contract is up from grabs in about a year. However, Labatt may have the inside track because Anheuser-Busch Cos. Inc., which owns half of Corona, already has a deal with Interbrew for the Budweiser brand in Canada. "Who the hell knows who is going to do what to who," said Palmer. "The beer industry is getting increasingly incestuous."

Molson does own the rights to the Miller brand in Canada, and parent SABMiller PLC may end that relationship now that U.S. rival Coors is part of the equation, said Dundee's Chisholm.



28 July, 2004