BUSINESS/ECONOMY

A heady new beer fad

PATRICIA CHISHOLM July 4 1988
BUSINESS/ECONOMY

A heady new beer fad

PATRICIA CHISHOLM July 4 1988

A heady new beer fad

BUSINESS/ECONOMY

While a blanket of heat smothered Toronto one evening last week, five young men in the Rotterdam pub decided to quench their thirst with something different. Their opportunities were ample: besides 27 varieties of draught beer, they could also choose from a stunning selection of 348 bottled beers. Almost 300 are imported. For their first round, the five picked La Bière du Démon, a hoppy, dry brew from Switzerland that wields a demonic jolt—an alcoholic content of 12 per cent, or seven percentage points higher than standard Canadian beer. Then they turned to Braunfelser, a German beer featuring a bottle with a reusable stopper. Next came a Dutch beer— $21.95 for 26.4 ounces. The five drinkers are not alone in their preference for distinctive-tasting imported beers. Last year, sales of imports grew by a startling 30 per cent, while overall beer consumption increased by only 1.8 per cent.

But according to one of the group, many men drink high-priced imports _

to impress women. The ploy often works, said John Kantelberg, 24, a professional bartender. “Price is no problem,” he declared, “if the guys end up getting what they want.” Kantelberg and his friends are among a booming number of Canadians who choose highpriced imported beer over cheaper, domestically brewed brands. And with Canada’s major breweries all but unable to expand the total beer market in Canada, the imported-beer sector has become an important and rapidly growing market. Sales of imported beer jumped to 9.8 million gallons from 7.4 million gallons in Canada last year. Such brands as the Mexicanbrewed Corona are so wildly popular that provincial liquor commissions are unable to keep them in stock. Clearly, more consumers are switching from domestic brews to more appealing— and more expensive—imports. Said Anthony von Mandl, president of Vancouver-based beer importer V. Mark Anthony Group, Inc.: “There are opportunities for exponential increase in the import-beer market.”

Because of apparent boredom with

some domestic brands and a desire to experiment, there is no sign that the trend to more distinctive international beers is likely to abate. Joanne Sleeman, managing director of The Imported Beer Co. in Mississauga, Ont., reports that her sales have increased by 15 per cent every year for the past 10 years. Said Sleeman: “Imports were a fad a decade ago. Now they are an accepted part of our culture.”

But barkeepers across the country also acknowledge that the craze for unusual beers, especially those from Europe and Asia, owes as much to fashion as to taste. Paolo Carino, beverage manager for Vancouver restaurant chain Fogg n’ Suds, stocks about 200 brands of imported beer. Said Carino: “It has become popular to sit down with a designer beer—it shows sophistication of taste.” He added, “The word ‘import’ means that it is special because it comes from somewhere else and it is brewed differently than our product in Canada.” And in Atlantic Canada, where imported beers are just beginning to gain greater popularity, the same factors seem to apply. Melvin

Chisholm, bar manager at Pepe’s Café and Grill in Halifax, says that the shift to imports began only a few years ago. Some import-beer drinkers are attracted by distinctive flavors, but for others, status is still the main draw. For them, Chisholm says, “the sight of the bottle is enough.”

Still, the big three—Labatt Brewing Co. Ltd., Molson Breweries of Canada Ltd. and Carling O’Keefe Breweries of Canada Ltd.—have a vicelike grip on domestic sales. Canadians drank 455 million gallons of beer in 1987. Only about two per cent was imported. Of that amount, the majority—56 per cent—is American.

Higher costs and availability are the

main reasons that import-beer sales have not increased even more rapidly. So-called premium beers, including the Dutch-brewed Heineken, and Beck’s from Germany, are too constrained by provincial pricing and distribution practices to compete on an even footing with domestic beers, says Torontobased analyst Neil Wickham of Canarim Investment Corp. Beer imported into Ontario is subject to a price markup of 82 per cent. And it is sold only in provincial liquor stores, usually separate from the Brewers Retail outlets where most Ontario consumers buy beer for home consumption. Added Wickham: “Ontario brewers are not worried about foreign imports because of the distribution system here.”

But domestically brewed beers, including those made in Canada under licence from American companies, receive an Ontario markup of only 23.2 per cent. Significant differentials apply in several other provinces, providing a protective cloak to the brewing industry, which is forced to brew beer in the province where it is sold. That restriction, brewers say, makes Canadian beer more expensive to produce because production facilities cannot be centralized.

Those restrictions are one reason that beer has been exempted from the free trade agreement with the United States. American brewers could easily gain 30 to 40 per cent of an open Canadian market because of their more centralized, cost-efficient breweries, said Molson senior vice-president Barry Joslin. He says, however, that the Canadian beer market will be opened to American and European imports, perhaps in as little as five years. Said Joslin: “The free trade agreement only got us a reprieve.”

And yet, even with the daunting trade walls that keep full competition from imported beers at bay, the enormous power of the U.S. industry has already made itself felt in Canada. Despite higher markups, some American-brewed beers sold in British Columbia are cheaper than domestic brands. Rainier, made by Wisconsin-based G. Heileman Brewing Co., is currently sold only in British Columbia, Alberta and the Yukon but it is the 5 largest-selling import g in Canada. It sells for ^ $4.50 for six, compared x to about $6.60 for most I domestic beers. And in Alberta, cheap Ameri-

can imports hold an unprecedented 9.3 per cent of the entire provincial market. Indeed, Alberta sales account for more than 35 per cent of all import beer sold in Canada, raising allegations against exporters of dumping of American beer.

But some local retailers dispute the allegation and say that beer drinkers are more concerned about variety. Stuart Allan owns Bottlescrew Bill’s Old English Pub, a Calgary bar that offers 55 bottled imports and eight imported draughts. It also offers Buzzard Breath Ale, a draught supplied by local independent brewery Big Rock Brewery Ltd. According to Allan, domestic brewers should stop brewing American brands under licence and begin catering to sophisticated consumers with their own local beers. Added Allan: “They are missing the boat marketing American beer. They should be marketing Canadian beer to Canadians.”

Still, officials of the largest domestic brewers say that they are keenly aware of the rage for imports. And they are taking steps to cash in on the appeal of foreign beers by selling their own products abroad. Labatt’s enjoyed a 16-per-cent increase in U.S. sales last year and has recently begun to sell a version of its biggest domestic seller, Labatt’s Blue, in Britain. Molson is the third-largestselling imported beer in the United States.

Molson also profits from the success of other popular North American imports. The brewing giant owns 50 per cent of Santa Fé Beverage Co., which imports Corona into Canada, in a joint venture with the V. Mark Anthony Group. So far this year, Corona has outsold every other import in Ontario, part of a sustained popularity wave which Corona has been riding for about two years. Molson also brews the Japanese beer Kirin at its breweries in Vancouver and Montreal for sale in the United States, but not in Canada.

Still, the majority of beer drinkers are likely to remain loyal to familiar domestic brands. Said Michael Palmer, analyst with Toronto-based Deacon Morgan McEwen Easson Ltd.: “Imports are basically for trendies—they don’t understand that beer in a green bottle is likely to be stale.” But that consideration did not seem to trouble the men ranged around the Rotterdam’s generously proportioned bar. With three down and 290 brands to go, they seemed prepared to make a long night of it.

PATRICIA CHISHOLM

BRIAN BURTON

VALERIE MANSOUR

DEBORRA SCHUG