E-Malt.com News article: Canada: Sleeman Breweries intends to increase marketing of its lower-priced beer brands

Sleeman Breweries intends to increase marketing of its lower-priced beer brands while continuing to focus on premium brands after disappointing quarterly results, The Canadian Press posted on October 31.

Chairman and CEO of Sleeman Breweries John Sleeman, who has long promoted the Guelph, Ont., brewer on the basis of high-quality products, told analysts Friday he recognizes consumers' expectations have been changed by low-priced "value" brands. "My goal ... is to realize the fact that, in Ontario particularly, that the beer market has changed. Value pricing is here to stay," Sleeman told analysts after the company released its latest financial report.

Sleeman said its third-quarter profit slipped to $3.5 million from a year-earlier $4.5 million. Revenue declined to $59 million from $60.7 million amid stiff price competition. Earnings for the quarter ended Oct. 1 amounted to 20 cents a share, diluted, compared with 27 cents per share a year ago, the Guelph-based company reported Friday.

Analysts' consensus forecast was for diluted earnings of 26 cents a share, before one-time items, according to Thomson Financial.

On the Toronto Stock Exchange, Sleeman shares were up 34 cents to $11.34 on low volume Friday afternoon. On Monday, Sleeman had reduced its full-year outlook to a range of 81 to 85 cents per share, while analysts had been forecasting 93 cents.

John Sleeman told analysts his company will have to "come to terms" with changing consumer buying habits and become a lower-cost producer. "If the consumer is moving to brands in that price category, we're not going to ignore it. We want to participate in it," he said.

Competitive pressure increased in the third quarter, which covered the summer and early-fall months, hitting Sleemans' premium brands in the Ontario and Quebec markets and its value brands in Western Canada.

Despite the competitive pressures, and the company's inability to meet its growth targets, Sleeman said he was "pleased" with what the company achieved in the third-quarter.

Sales of its premium products increased by 30 per cent from the same period last year and lowered production and distribution costs by an average of $4 per hectolitre sold.

"Sleeman remains committed to growing premium volumes, revenues and earnings and I'm convinced that over the longer term we will continue to increase shareholder value," Sleeman said.

The company still wants over 50 per cent of its sales coming from premium brands but will recognize value-pricing is here to stay, he added.

"And if it's not going to go away, how do we make money at it? Well, we do it by primarily reducing our costs and also having a tiered structure for our pricing," Sleeman said.

For example, its Old Milwaukee beer will command higher prices than Pabst Blue Ribbon - both part of Sleeman's portfolio of cheaper brands. "We're stratifying the value pricing because Old Milwaukee has, believe it or not, very good brand equity with a very large group of consumers in that category. There's no need to have Old Milwaukee at the same price as Pabst Blue Ribbon."

The company will spend more marketing dollars, particularly in Ontario, to increase awareness of its less expensive brands, in addition to its core premium brands.

"We are hoping that we can increase our allocation toward marketing by doing some reductions in other parts of our plant operations, freight savings and things like that," Sleeman said. "I think during this (third quarter) we can get costs out of the system and we're not done yet. There's a lot more left on the table."

Sleeman reduced its workforce earlier this year and has no plans for more job cuts, but the chairman noted that Quebec-based subsidiary Unibroue has high sales and administration costs that could be reduced.

Aside from Sleeman brands, the firm owns Okanagan Spring and Shaftebury in British Columbia and Alberta, Upper Canada in Ontario, Unibroue and Seigneuriale in Quebec and Maritime Beer in Atlantic Canada.

Sleeman entered the value-price category in 1999 by acquiring the Stroh portfolio of brands in Canada. The company also markets and/or distributes imported products such as Guinness, Grolsch, Samuel Adams, Scottish & Newcastle - including Bulmers Strongbow English Cider - Sapporo and Pilsner Urquell, and provides contract production for Japan's Sapporo Breweries products.


01 November, 2005