Sleeman Breweries Ltd.

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Sleeman Breweries Ltd.

551 Clair Road West
Guelph, Ontario N1L 1E9
Canada
Telephone: (519) 822-1834
Fax: (519) 822-0430
Web site: http://www.sleeman.com

Public Company
Incorporated: 1984 as Antebi Enterprises Inc.
Employees: 900
Sales: $177.1 million (2004)
Stock Exchanges: Toronto
Ticker Symbol: ALE
NAIC: 312120 Breweries

Based in the small town of Guelph, Ontario, Sleeman Breweries, Ltd. is Canada's leading brewer and distributor of premium beer and the third largest brewing company overall—albeit a distant third behind Labatt Brewing Company Ltd. and Molson Companies Ltd. Drawing on vintage family recipes Sleeman makes a variety of special brews, such as its bestselling Sleeman's Cream Ale and Honey Brown Lager. Sleeman brews are available in the United States and the United Kingdom on a limited basis. The company produces a number of regional Canadian brands, including Okanagan Spring and Shaftebury in British Columbia and Alberta, Unibroue in Quebec and Ontario, and Maclays in Atlantic Canada. Sleeman Breweries also distributes a variety of international premium beers throughout Canada, including Samuel Adams, Grolsch, and Pilsner Urquell; Guinness in British Columbia and Quebec; and provides contract production for Japan's Sapporo beer. In addition to its position on the high end of the market, Sleeman Breweries is involved in the value-price category through the acquisition of the Stroh portfolio of brands in Canada, which include Stroh, Old Milwaukee, Colt 45, Pabst, and Schlitz. The company operates five breweries in Canada as well as one in LaCrosse, Wisconsin. Sleeman Breweries is a public company listed on the Toronto Stock Exchange.

Founder: 1960s High School Dropout

Sleeman Breweries founder, chief executive officer, and chairman, John W. Sleeman, was born in Toronto in 1953, the son of a Bell Canada executive who did not drink. At the age of 16 he dropped out of school, determined to become a millionaire by the age of 30. His business education was limited to management training at McDonald's and the practical experience of being a McDonald's manager at such a young age. When he was 19 Sleeman moved to England and fell in love with the pub culture, so much so that when he returned to Canada a few years later, in 1977, he started his own pub called Monahan's in the Toronto suburb of Oakville. To supply his pub with the kind of beer he had enjoyed in England he began importing British beers and was soon supplying other establishments. This sideline proved so successful that in 1977 he sold the pub and cofounded Imported Beer Co. to distribute imported beers such as Guinness, Double Diamond, and Heineken to bars throughout Canada. Well before his 30th birthday Sleeman met his goal of becoming a millionaire.

Sleeman might have spent the rest of his business career as an import distributor had it not been for a visit paid to his home one day in 1984 by his father's sister, Florian. She brought with her a small leather-bound notebook and an antique clear bottle that had been kept in a trunk for the past half-century. Sleeman told Profit in a 1996 interview that his aunt told him, " 'It's time you found out about your heritage.' She showed me a recipe book for a brewery, and said, 'Did you know your family was in the beer business?' I said, 'No, that's a strange coincidence.' She says, 'Well, here's a recipe book. Would you think about restarting it?' " Sleeman was reluctant at first to give up his successful distribution business to become a brewer, but he was fascinated with the family history about which his father had never spoken.

The Sleeman family's connection to Canadian beer brewing dated back to 1834 when a young brewmaster named John H. Sleeman emigrated from Cornwall, England, and settled near Guelph, a small Canadian town that apparently loved its beer. According to a history of Guelph, by 1843 the community had a population of 700 and nine breweries. One of the earliest operations was established in 1827 by James Hodgert. Sleeman became the manager but soon moved to St. David's to open his own brewery, the Stamford Spring Brewery. He sold the business in 1845 and moved back to Guelph and worked at Hodgerts Brewery until opening the Silver Creek Brewery in 1851. His son, George, became his partner in 1862 and the sole owner five years later when the elder Sleeman retired. George's son, George A. Sleeman, became involved in the business in 1886. It was in 1898 that George Sleeman created the recipe for Sleeman Cream Ale, which he wrote down in the personal notebook Aunt Florian gave John W. Sleeman nearly 90 years later.

Sleeman Brothers Caught Smuggling in the 1930s

With the start of the new century the family business was incorporated as The Sleeman Brewing and Malting Co. Ltd. By this time the brewery was using the clear bottles that became a family trademark, one of which was stored in a trunk along with the recipe book. But the enterprise fell on hard times in 1916 when the Canada Temperance Act went into effect and the company was limited to selling malt and ginger ale. George Sleeman died in 1926, leaving the brewery business in the hands of his sons, George A. and Henry O. Sleeman. In the meantime, across the Detroit River in the United States, Prohibition also had gone into effect in 1919, although Americans' thirst for alcohol did not slacken. Rather, it increased, providing the Sleeman brothers with an opportunity to meet that demand. They smuggled beer across the border in farm wagons, buried under fresh vegetables bound for the U.S. market. The Ontario police grew wise to the trick, however, and caught the brothers red-handed in 1933, just a few months before Prohibition was repealed. The Canadian authorities were less concerned about selling alcohol into the United States than they were about being cut out of the action, telling the Sleeman brothers that even though they were making beer illegally they could have an export permit, sell wherever they wanted to, but they would have to pay taxes. Still, the Sleemans refused to cooperate. In the end, they were forced to sell the brewery to pay the tax bill. The family's involvement with smuggling became a matter of shame, explaining why John W. Sleeman was 31 years old before he learned about the colorful past of his forebears.

Sleeman was in no hurry to revive the family brewery despite his aunt's encouragement. "I was already financially successful, and I didn't really want to gamble all that on a new venture," he told Profit. "So I thought about it for a couple of years. She kept asking how things were going and I kept stalling. Finally she used guilt—that always works—and she said, 'I'm getting old and I could die soon. I'd like you to start the brewery. It would mean a lot to me.' " Nevertheless, Sleeman remained hesitant. "I contacted Standard Brands . . . and I said, 'You're the last registered owners of my granfather's company. Would you be interested in letting me have the company back?' I expected a 'yes, for a million dollars' type of answer, and they, to my surprise, came back and said, 'It's a wonderful idea. Pay us $1 and you can use the company.' " Next, Sleeman decided to check out the trademark rights to the logo on the bottle his aunt gave him. Using a beaver and a maple leaf, they closely resembled the Canadian Pacific logo. He wrote to Canadian Pacific to learn if they had any objection to his using the design, and again to his surprise (or perhaps disappointment) he was told he was free to do as he pleased. "So I was running out of reasons why I shouldn't start the brewery," Sleeman said.

In October 1985 Sleeman reincorporated The Sleeman Brewing and Malting Co. Ltd. To finance the building of a small brewery Sleeman turned to banks, as he had done with his previous ventures, receiving a $3 million loan. He also sold a stake in the business to Detroit-based Stroh Brewing Co. It was on the advice of Stroh that Sleeman held back on opening the facility because the quality of the beer was not yet good enough and the brewery risked losing credibility with beer drinkers that it might never regain. Sleeman's Canadian bank, however, grew concerned about the delay and the project going over budget, lost faith in the business, and called in the loan, giving Sleeman just 30 days to pay them back. Other Canadian banks refused to loan the money, and it was only the intervention of Stroh that kept the project alive, introducing Sleeman to the National Bank of Detroit. Sleeman lost his house paying back the Canadian bank, but the package the Detroit bank put together was enough to pay off the rest of the earlier loan and still leave the brewery with some working capital.

The first pints of Sleeman Cream Ale were first poured in August 1988, and the first bottles filled in October. A few months later, in February 1989, Silver Creek Lager, another family recipe, was reintroduced to the Ontario market, followed in May by the introduction of Toronto Light Lager. Also in 1989 Sleeman began to brew and distribute Stroh's and Stroh's Light brands in the Ontario market. Within two years the company had attained a 1 percent market share in Ontario, Canada's most populous province and largest beer market, and the brewery had doubled its capacity to 200,000 hectolitres. In conjunction with Stroh, the company began marketing Sleeman Cream Ale in Detroit, but it proved a tough sale even with Stroh's marketing efforts behind it. As a result, Sleeman decided to concentrate on the Canadian market, with its goal to become the dominant premium beer brewer in the country before looking elsewhere. Neither did Sleeman have any interest in going toeto-toe with Labatt or Molson or even badmouthing the giants as did the other microbrewers. In fact, Sleeman relied on Labatt and Molson to sell them their used equipment.

Company Perspectives:

Today, Sleeman is one of the fastest growing premium brewers in North America. Throughout our lineage, brewing the highest quality beer has been an unwavering passion for the Sleeman family.

Successful Mid-1990s Entry into the Quebec Market

During the early 1990s Sleeman concentrated on adding new products and entering new Canadian markets. In 1992 the company introduced Sleeman Premium Light, a low-calorie lager. A year later the brewery returned to the family recipe book, unveiling Sleeman Original Dark, an all-natural, all-malt ale. Also in 1993 Sleeman began selling Sleeman Cream Ale and Sleeman Silver Creek Lager in British Columbia. A number of territories followed in 1994: Alberta, Manitoba, and Quebec. French-speaking Quebec offered a particular challenge, however. The province marched to its own drummer, preferring ales over lagers, unlike the rest of the country. It also was not especially open to an Anglophone brand like Sleeman, but John Sleeman won over many of the residents by his willingness to serve as the brewery's spokesperson, despite his halting French. Sleeman claimed that when he first visited the recording studio it was with the understanding that someone else was going to do the commercials, but it was just a trick. The company could not afford an announcer anyway, so Sleeman stepped in. What he lacked in delivery and fluency he made up for in sincerity and a willingness to try. The result was tremendous growth in the sale of Sleeman products in Quebec over the next few years.

Sleeman bought back Stroh's interest in the company in 1994, and the production of Stroh brands returned to the United States. In that same year, Sleeman agreed to a reverse merger with Allied Strategies Inc., owner of Okanagan Spring Brewery of Vernon, British Columbia, one of the best known microbreweries in Western Canada, in a deal that would not be finalized in more than a year, resulting in a company with a new name: Sleeman Breweries Ltd. The merger was attractive to Sleeman on a number of levels. It gave the company national scope, elevating it above the crowd in the consolidating micro-brewery segment. Sleeman Breweries could then use economy of scale to save money by centralizing administrative functions and use its increased purchasing power to save money on such basic commodities as bottles, cartons, and caps. It also could command better terms on financing. In 1996, Sleeman Breweries changed banks after several fruitful years with National Bank of Detroit, which realized the company had outgrown it and actually advised Sleeman on how to approach national banks. This time, John Sleeman did not go cap in hand to lenders. Rather, they bid on his business, with The Bank of Nova Scotia winning out, and which was later joined by the Bank of Montreal. Moreover, the reverse merger with Allied Strategies, listed on the Vancouver Stock Exchange, provided Sleeman Breweries with access to the equity markets.

In 1996 the company made a public offering of stock, the proceeds of which were used to fund further acquisitions in the second half of the 1990s as Sleeman Breweries became a consolidation vehicle. The company's stock would now trade on the more prestigious Toronto Stock Exchange. In 1998 Sleeman Breweries completed a pair of significant acquisitions: Upper Canada Brewing Company and Brasserie Seigneuriale Inc. of Boucherville, Quebec. Also of note in 1998, Sleeman Breweries introduced Maple Brown Ale and its products became available in the United Kingdom. The company closed the decade by acquiring Shaftebury Brewing Company Ltd. of Vancouver, the third largest craft-brewer in British Columbia, and by signing a new deal with Stroh, this time a 15-year licensing agreement to the Stroh family of brands in Canada. In this way, Sleeman Breweries staked out a position in the popular price category to complement its premium craft business, both areas enjoying growth, unlike the middle sector dominated by Molson and Labatt. Once again, the company was looking to avoid competing against Canada's top two brewers, content to do business on either side of them, in both the top end and lower end of the price spectrum. In addition, by adding the Stroh brands to the mix, Sleeman Breweries was able to beef up its national distribution network, which in turn led to distribution agreements with foreign brewers such as Scotland's Scottish & Newcastle PLC and Boston Beer, maker of the popular Samuel Adams beer. These alliances then provided Sleeman Breweries with an opportunity to export its products through its new partners.

Sleeman Breweries began the new century where it left off in the old, acquiring another microbrewery, Maritime Beer Company, based in Nova Scotia. A year later Quebec's Northern Goose Beer Company was added. Then, in June 2004, Sleeman Breweries bought Quebec's largest microbrewery, Unibroue Inc. The company also forged new alliances in the early 2000s. It agreed to distribute South African Breweries' Pilsner Urquell and the Strongbow brand of premium packaged and draught cider for England's H.P. Bulmer Ltd. In 2002 it also signed an agreement with Japan's Sapporo Breweries Ltd. to provide contract production for Sapporo products in the United States. Moreover, Sleeman Breweries continued to launch new products into the market. The first Sleeman can in family history, a barrel-shaped design, was offered in 2002 and a low-carb beer, Sleeman Clear, was introduced in 2003. The company dipped into the family recipe book yet again in 2004, unveiling Fine Porter, a limited-edition brew, the first in what was known as the John Sleeman Presents series. In 2005 the company introduced Sleeman Original Draught, an unpasteurized lager.

Principal Subsidiaries

The Sleeman Brewing & Malting Co. Ltd.; Sleeman Unibroue Inc.

Key Dates:

1834:: Brewmaster John H. Sleeman emigrates to Canada.
1851:: Sleeman opens Silver Creek Brewery.
1933:: Sleeman's grandsons, George A. and Henry Sleeman, are forced out of the business after getting caught smuggling beer into the United States.
1988:: John W. Sleeman reopens the family brewery.
1996:: Sleeman Breweries is taken public in a reverse merger.
1998:: Upper Canada Brewing Company and Brasserie Seigneuriale Inc. are acquired.
1999:: A licensing agreement to distribute Stroh brands in Canada is signed.
2000:: The Maritime Beer Company is acquired.
2004:: Unibroue Inc. is acquired.