May 16, 2006 -- The big beer news in Canada this past weekend is that Guelph, Ontario-based Sleeman Breweries may be up for sale. (This is significant not only because Sleeman is the country's third largest brewing company and the only national brewer which is 100% Canadian owned, but also because the company owns several prominent regional divisions, including Okanagan Brewing, Upper Canada and Unibroue.) The analysis continued in my morning paper with the following comment from Globe and Mail business columnist Derek DeCloet:

"Anyone will tell you that Sleeman's biggest problem is not that different from Labatt's or Molson's biggest problem. It sells mostly expensive beers at a time when discount brands are capturing market share."

Well, yes and no. Certainly the discount brands, which DeCloet notes now own "about 30 per cent" of the Ontario market, Canada's biggest for beer, are providing Sleeman, Molson and Labatt with their fair share of headaches. But in the case of Sleeman, I believe there's more involved in the company’s sagging fortunes.

The key factor DeCloet ignores is that the market is being squeezed on not just one, but two sides: By the discount brands on the lower end and premium domestic and imported craft brewed beers at the top end. (Just yesterday, in fact, the Ontario Craft Brewers Association triumphantly announced that sales of the brands produced by its membership were up 10% from 2004 to 2005 and now account for 5% of the Ontario beer market, up from 4% in 2004.) Part of Sleeman's failing was an inability to find a position within this changing dynamic.

For example, within the context of the polarizing marketplace, Sleeman chose not to position their flagship brands closer to the top end, but to actually drag them down through the introduction of such mainstream-oriented brews as the low-carb Clear and the too-late-to-the-party Original Draught. This when they had the opportunity to improve the public perception of the entire range of their "clear bottle" line-up through the underpromoted John Sleeman Presents brands, India Pale Ale and Fine Porter.

Another example: Rather than push the high profit margin Unibroue brands throughout Canada, Sleeman chose instead to simply add them to the portfolios of their existing salespeople and allowed their cachet to wither. For the same reason that DaimlerChrysler doesn't sell Dodge trucks beside their Mercedes, Sleeman should have realized that their "luxury brands" deserve different treatment than their bread-and-butter labels.

The upshot was that the company was left selling a range of own-label beers at up to 25% more than Molson's and Labatt's mainstream brands, while those beers were increasingly perceived by the beer-buying public as part of that self-same mainstream. And for a company founded on the premise of producing premium quality, hand crafted ales and lagers, that's simply no place to be.

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