In writing about our beer wars last week, I was reminded by an ardent reader that Ontario/Halifax brewer Sleeman Breweries is no longer Canadian owned.

This past October, it was sold to the Japanese firm Sapporo Holdings Ltd. owners of Sapporo Breweries. Sapporo’s businesses generate close to $4 billion U.S. a year in sales so they’re not little guys.

With this information, I decided to dig a little deeper into the beer industry.

InBev, the Belgian amalgam of Interbrew and Brazilian brewer AmBev together with John Labatt Ltd. is the largest brewer in the world with more than 200 brands world-wide. Anheuser Busch, owners of the Labatt-brewed Budweiser brand is number two in the world.

Coors-Molson is the world’s fifth largest brewery. Three weeks ago, InBev announced that Labatt had entered into an agreement to purchase Ontario brewer Lakeport.

Hamilton’s Lakeport Brewing produces nine proprietary beer brands, two of which, Lakeport Honey Lager and Lakeport Pilsner, are among the top selling brands in the Province of Ontario.

I don’t know what market share Lakeport has but this purchase will likely make Labatt, Canada’s largest brewer. They certainly don’t need government protection in the form of tariff shields nor does Japanese owned Sleeman Breweries need such protection.

Now here’s the twist.

I’m told by another reader that Molson has been granted tariff-free entry to the Nova Scotia market if they ship product directly from their Montreal plant to Nova Scotia. The $1.32 per case tariff would only be levied against products shipped to Nova Scotia from Molson’s Moncton plant. Wow, that’s heavy, if it’s true.

Last week, I wondered why Molson would spend $35 million to build a relatively small brewery in Moncton (capacity 250,000 hectolitres) to gain “local brewer status in three small provinces.

Population growth has stalled in this region. The beer market is shrinking as the population gets older and more health-conscious, cuts down on its beer-drinking and turns to alternative drinks like wine, bottled water and fruit drinks.

Add the fact that the world’s beer industry is consolidating, not decentralizing. Ten companies own close to 50% of the global beer market. In Western Europe and North America, demand for beer is flat or declining as lifestyle trends encourage a shift away from beer and stricter drink-driving laws reduce consumption out of home.

Growth is most prominent in developing countries, especially in China which has overtaken the United States as the largest beer market in the world.

In North America, value sales are growing faster than volume sales, primarily due to the market success of premium and imported specialty beers at the expense of traditional products. Labatt spokesman Jean Lepine has been quoted as saying there is a lot more brewing capacity in the Maritimes than there is consumer demand. It doesn’t sound like a growth or an opportunity market to me.

Molson was granted local brewer status in New Brunswick at the time of its Moncton plant announcement in 2004 and before the plant was constructed. That grant saves them $2.64 a case and is worth an estimated $2.5 million a year. Two and a half years later, its Moncton plant is still not operational and its opening could be delayed until September.

Local brewer status in Nova Scotia would save Molson $1.32 a case and be worth about $1 million a year. It would appear that combined savings in the two provinces would pay back the plant investment in about ten years.

However, if Nova Scotia insists on charging the $1.32 handling fee on Molson products, payback of the plant investment could be delayed by another five years. That’s a long time in today’s beer business.

I’ve been racking my brain trying to figure out what’s really going on in the minds of Nova
Scotia’s politicians. Some have suggested that it is payback time for the Province because it didn’t win the bidding war for Molson’s Maritime production facility. Premier MacDonald says it’s about the need to protect his micro breweries.

The Canadian Beer Index lists five microbreweries in Nova Scotia (one has closed) including the Maritime Beer Company (Japanese owned Sleeman) and Oland Breweries (odd given the fact it is owned by Labatt). We have two independent micro-breweries in New Brunswick, one in Moncton, the Pumphouse Brewery.

Halifax’s Propeller Microbrewery distributes products through 85 licensed outlets in Nova Scotia and has limited distribution of its popular India Pale Ale in New Brunswick. One might assume it would like to have “local brewer” status in this Province. One might also assume that Moncton’s Pumphouse Brewery has its eyes on the Nova Scotia market.

It is my understanding that Sleeman was granted "local brewer" status in 2002 but newspaper reports suggest the brewery waved that status because it required construction of a distribution warehouse in New Brunswick.

As a result of its waiver, New Brunswick is charging Sleeman a $2.64 “distribution fee” as distinct from the $2.64 import fee charged to outside brewers. Molson does not pay that fee on products it brings into New Brunswick from Montreal.

I suspect that Nova Scotia is using Molson’s circumstance to leverage exemption for Sleeman in New Brunswick - good bargaining ploy.If you put on our Canadiana hat, you might argue that the three multi-national breweries (Labatt, Sleeman and Molson) should pay distribution fees in both provinces.

However, in a free trade environment, that doesn’t make sense.

In my opinion, there should be no trade barriers on beer trade within the Maritimes and there should be no trade barriers in Canada for Canadian owned breweries.

A free trade zone in the Maritimes for multi-nationals Labatt, Molson and Sleeman should translate to unfettered access to the Ontario market for Moosehead and the region’s microbreweries.

W.E. (Bill) Belliveau is a Shediac resident and Moncton business consultant. He can be contacted at bill.bellstrategic@nb.aibn.com Atlantic Insight is a published Blog inventory of opinion articles published weekly in New Brunswick's print media as written by W.E. (Bill) Belliveau, who is a resident of Shediac, New Brunswick, and small business owner, operating his Moncton-based marketing consultancy, Bell Strategic. He can be reached by e-mail at bill.bellstrategic@nb.aibn.com