Growth-hungry Sleeman basks in low-carb beer glow
Reuters, 03.12.04, 11:04 AM ET

By Rachelle Younglai

TORONTO (Reuters) - Canada's Sleeman Breweries Ltd. , basking in the success of its new low-carb beer, hopes for an acquisition in the next six months as the family owned company tries to carve a niche in a cut-throat industry.

John W. Sleeman, the fourth generation of the Sleemans family to head the company, expects a busy year as the brewer seeks an acquisition in Canada, announces a British partner to sell its Canadian beers, makes further inroads into the United States and possibly adds another import to its portfolio.

He says those are attainable goals for a company that doubled profits and grew core volumes by 9 percent, when the industry was essentially flat at only 0.3 percent growth in the latest fourth quarter.

Sleeman's core volumes grew partly because of its new low-carbohydrate beer, Clear, launched in Canada last August as the first low-carb beer on the domestic market.

Speaking to Reuters in a recent interview, Sleeman, 50, said sales of Clear are exceeding expectations without cannibalizing the company's other beers, Honey Brown and Cream Ale.

He worries whether his great, great grandfather, John H. Sleeman, who established the company in 1834, is "turning in his grave seeing what we are doing to his recipes," but says new times call for new measures to pander to different tastes.

Sleeman said Clear is on its way to capturing 1 percent of the Canadian market, and he expects it to become one of the Guelph, Ontario-based brewery's leading products.

"I don't think consumers will give up on mass worrying about their waistlines. It's something that is here to stay," said Sleeman.

The success of the beer reflects new diet habits for North Americans, who are in love with Dr. Robert Atkins' gospel of a low-carb, high-protein diet and are incorporating the lifestyle even when they hit the bar.

"Low carbs are so fashionable these days," said William Chisholm, an analyst with Dundee Securities Corp. in Toronto.

Chisholm expects Sleeman's Clear to lose some fizz as other brands like Labatt's Sterling and Molson's Ultra get a grip in the market. But he expects the beer to be a major product for the company this year.

The new brand, the stellar profits and a healthy outlook have prompted Chisholm and other analysts to raise the company's target price. This helped propel the brewer's stock to nearly a two-year high at C$11.59 per share Friday.

"We believe Sleeman can continue to increase market share at the expense of its major rivals, Molson and Labatt," First Associates analyst David Hartley wrote in a March research note.

Raymond Lai, an analyst with Raymond James Ltd. called Sleeman an attractive business with strong defensive attributes and solid organic volume growth.

The brewer aims to capture 10 percent of the Canadian market, but Sleeman said it has no desire to be as big as domestic competitors Molson Inc. and Labatt, a unit of Belgium's Interbrew , which together have a 90 percent Canadian market share.

Sleeman, Canada's third largest brewer, currently has 6 percent of the Canadian market.

Sleeman said the company is happy in third spot although he worries that one day some other brewer might want to gobble it up. "I wouldn't be surprised if someone takes a run at us," he said. "But I hope that they won't for a while, we have a lot of things we want to accomplish."

($1= $1.32 Canadian)



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