Lakeport's proposed sale may mark end of brewery price wars in Ontario for now
dap("&PG=CAEMH3&AP=1089",300,250);February 04, 2007
TORONTO (CP) - Brewing giant Labatt's proposed $201.4-million takeover of Lakeport Brewing Income Fund could create a hole in the Ontario discount beer market that may be filled by rival companies elsewhere in the country.
But it may also mark the end of the price war that drove down the price of beer to $1 per bottle - at least for now.
The discount beer market in Ontario has been a tough one to crack in recent years, with about 34 brands vying for the same buyer - the frugal drinker who forgoes premium brands for cheaper alternatives.
Manjt Minhas, co-owner of the Mountain Crest and Minhas Creek families of discount brands in Alberta and Manitoba, is eyeing a move to the Ontario market this year. She thinks the Lakeport sale - slated for the spring - leaves the discount market wide open.
"When I found out about the (Lakeport proposed) sale the other day, I was pleasantly surprised," said Minhas.
"The only person that I deemed to be my competition when I enter Ontario... was Lakeport Brewing Company - because they have a lot of the tactics that we do."
Minhas expects Labatt to phase out the Lakeport discount brands, because it doesn't suit their interests.
"If they were going to continue that strategy, why would they have bought it?" said Minhas.
Labatt hasn't said whether it will raise its discount label prices as part of the planned integration, but said last week that it planned to keep working in the value-prices market.
Stephen Beaumont, a Toronto writer and beer aficionado, agrees that it is doubtful Labatt will want to continue a price war.
He expects Labatt to lower the profile of the Lakeport label, rather than phasing out the buck-a-beer brands entirely.
"They are not going to do anything to Lakeport brand," said Beaumont. "But they aren't going to step up the advertising.
"If they can win buying consumer dollars back from those brands to their mainstream brands, they are making more money."
"It would be a case of (Lakeport) continuing to cannibalize their mainstream brands," said Greg Clow, editor of the online beer news site Bar Towel, of Labatt's disinterest in seeing the Lakeport label continue to succeed.
"I don't think they'll ever make (Labatt) Blue a discount brand."
"Maybe they are just buying it to kill it off," Clow said. "I don't think Molson and Labatt's, and Sleeman to a lesser extent - I don't think they've ever been happy that Lakeport ended up with two of the top ten beers at The Beer Store."
Minhas acknowledges that although Labatt's may not have a lot of interest in fighting for the bottom dollar drinker, it is still a tough market to win.
"Everybody is fighting for (Lakeport's) market share," she said. "I would imagine that anyone who knows anything about what Lakeport did would try to."
Beaumont thinks the Lakeport market isn't a very loyal one, as it depends on people who are buying beer for different purposes - some are everyday bargain beer buyers while others buy it occasionally in order to host social events on the cheap.
He said the days are over where beer drinkers are exclusively loyal to one particular brand, whether a bargain brand or not. "The old beer advertising credo was 'beer is a badge,"' said Beaumont. "If you were a Blue drinker, you wore Blue as a badge of identity."
"People don't do that any more," he added. "That's passed."
Lakeport's (TSX:TFR.UN) board of trustees is urging shareholders to accept Labatt's deal, which is worth $28 per unit.
- Stock quote: Lakeport Brewing Income Fund (external - login to view)