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Labatt president forecasts tough competition in Canada.

John Labatt Ltd.'s president warned that the company's profit for the rest of this fiscal year won't match the strong earnings growth seen in the first quarter.

George Taylor, Labatt's president and chief executive, said after the company's annual meeting that expected increased competition from U.S. brewers, following the resolution of the U.S./Canada trade dispute, will keep a lid on profits this year.

Taylor said "it would be very difficult to maintain the rate of change" seen in the company's profit in the fiscal first quarter, when net income from continuing operations rose 21% on a fully diluted basis. "We're definitely looking at more competition" from U.S. brewers, he said.

Taylor noted that Labatt's "ongoing base businesses are performing extremely well," but cautioned that cross-border trade with the U.S. is likely to have an impact on the company's bottom line for the remainder of this fiscal year, which ends April 30, 1994.

Taylor said the resolution of the trade dispute with the U.S. created for the first time a popular-price beer segment in Canada competitor, Molson Ontario market.

Some far, he said the segment consists of recent entries by Labatt and its main Canadian competitor, Molson Breweries. But he cautioned that the future of the popular price segment is uncertain because it isn't known how many U.S. brewers will begin exporting to Canada.

"The only thing clear is the [Canadian] beer market will be competitive. The domestic industry is not going to abandon the [popular-price] segment to foreign brewer," Taylor asserted.

Meanwhile, Labatt expects to continue its recent trend of lowering costs in its brewing operations. Hugo Powell, president of the brewing division, said initiatives already in place should reduce the company's inflation-adjusted cost base by more than C$50 million this year, equal to about 5% of total brewing costs. He said these measures include previously announced plant closures, reduced marketing expenditures and the recent move to a standard industry beer bottle.

Labatt has already cut C$50 million from its brewing expenses over the past two years through other cost-cutting measures, including some plant closures.
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Title Annotation:John Labatt Ltd. President and CEO George Taylor; Canada's brewing industry
Publication:Modern Brewery Age
Date:Sep 20, 1993
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