2007-04-02

Beer Price Promise

By Laura Bobak
The Canadian Press
TORONTO (Apr 2, 2007)
Labatt Brewing Company Ltd. has ruled out price hikes on Lakeport beer, at least in the near future, after buying the Hamilton-based discount brewer from unitholders for about $200 million.

"We didn't buy up the brand to kill them," Neil Sweeney, vice-president of corporate affairs for Labatt, said Friday. "At this point, we have no plans to do anything like that."

Sweeney denied predictions that Labatt will increase prices at Lakeport, which pioneered the "buck a beer" strategy, in an attempt to narrow the $10 gap between mainstream cases of beer, which retail for about $35, and the discount brews.

"The discount market is growing, not shrinking, and we want to grow along with it," Sweeney said. But two Canadian brewers said Friday they doubted prices will stay flat for long with less competition and rising production costs for energy and commodity prices and transportation.

But Doug Berchtold, president and CEO of Brick Brewing Company Ltd. said he doubted Labatt would hold off on price increases in the long term.

Noting Sweeney's assurance that there's no plan to raise prices, Berchtold said, "the issue is how long that will be a valid statement."

Meanwhile, Steven Poirier, president of New Brunswick's privately held Moosehead Breweries Ltd., said prices will go up across the sector, as prices have spiked in commodities such as corn, expected to rise 29 per cent this year as ethanol demand increases.

Malt has gone up 20 per cent; glass costs have increased up to 17 per cent; cartons are up 10 per cent; aluminum has skyrocketed and freight has also gone up, Poirier said.

"There's tremendous pressure on pricing," Poirier said. "I would project there will be a gradual increase in beer pricing for all segments in the coming year due to the significant upward cost pressure everyone will be facing."

Labatt, the Canadian unit of Belgium-based global beer titan InBev, which produces Stella Artois, Alexander Keith's and Beck's, acquired Lakeport days after the federal Competition Tribunal declined to block the deal and struck down restrictions that would have forced Labatt to hold Lakeport as an arm's-length entity.

Lakeport unitholders tendered 91.4 per cent of their trust units to the offer by the deadline on Thursday. The same day Teresa Cascioli, who has stepped down as Lakeport's CEO, was hit by a $50-million lawsuit by her former business partner, Allen Fracassi.

The suit alleges Cascioli withheld important confidential information from Fracassi that seriously affected the fair market value of the shares that he sold to her on Dec. 30, 2004 for $9.3 million. Sweeney would not comment on the pending lawsuit.

Used with permission from The Hamilton Spectator, www.thespec.com Copyright The Hamilton Spectator. All rights reserved.