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Northern boss betters brewery's job forecast: seeking loans from government, Sharpe promises dozens of additional jobs, for a total of 320 in the two cities.

Sault Ste. Marie, Greater Sudbury- Northern Breweries is staking a new claim to recapture the Northern Ontario beer market.

After years of almost driving consumers away, the 129-year-old regional brewer launched a new look and product line in June with a massive advertising blitz and the promise of more than 300 jobs next year.

Featuring a reformulated line-up of premium lager products, the company, with plants in Sault Ste. Marie and Sudbury, is taking aim at wrestling their share of the competitive Ontario beer market away from the two national brands, Molson and Labatt's.

Under the slogan, 'Our Beer is Back,' new president and CEO Bill Sharpe unveiled the new logo--a stylized compass rose--at press conferences in the Sault and Sudbury, while updating reporters and politicians on the progress of the near-dormant company that he officially took over Dec. 1.

Northern has begun an extensive advertising campaign with radio spots, TV promos and print ads across the North and as far south as Barrie.

University and college students have been recruited to conduct in-store sampling events in Liquor Control Board of Ontario (LCBO), stores across the region this summer.

"We intend to take this company and grow it back to its proud heritage that it was many years ago," says Sharpe. He boasts a healthy track record of reviving shuttered breweries and putting them back into production, including Hamilton's Lakeport Brewery.

But Sharpe admits Northern Breweries was in sadder financial shape than he first believed. That has set back his schedule to gut and modernize the aging Sudbury plant by about eight weeks.

It will push back the resumption of beer production in the Nickel City by three to four months to either late March or April 2006.

Sharpe says the $20 million in upgrades are necessary to compete with the national brewers in their costings.

"If you're going to compete against the big breweries, you've got to put your product into the package and have it ready to go, equal to their pricing."

He told reporters in Sudbury the almost-bankrupt company was practically a virtual start-up with $5 million to $6 million in monies owed that had to be paid off or written off with the help of municipal governments in the Sault and Sudbury.

320 jobs between two cities

Despite the delays, he is promising more jobs than originally proposed, thanks in large part to potential international co-packing and licensing agreements.

As a condition of tax relief, Sharpe guaranteed the City of Greater Sudbury 80 full-time jobs. But after talking to off-shore beverage makers and brewers who are "keenly interested" in co-packing and licensing their production for North American distribution, Sharpe has jumped that figure to 320 jobs for both plants, including more than 200 in Sudbury.

Sharpe remains slightly miffed that the Ontario government is giving $5 million to the province's smallest microbreweries to help them compete against the country's two biggest brewers, and gives millions more to promote the Niagara Wine Council, but has offered nothing to help his brewery.

Last December, Sharpe said his company would not pursue any government funding assistance, but he now says securing government loans is critical, and is asking for a combined $6 million in repayable loans from Queen's Park and Ottawa.

Sharpe says the brewery will generate millions in tax dollars with the kind of volumes they have planned, especially if they can bring offshore brewers into Sudbury.

"We're not asking for a hand-out of free money ... we're asking for approvals to get our loans in place to put in the (production) machinery. We're prepared to pay these monies back over a period of time at a reasonable interest rate."

Keeping Northern northern

Sharpe says Northern has $10 million in private investment from an international banking facility in southern Ontario plus an additional $5 million they hope to raise from a "strongly committed" group of silent investors from the North.

Still, they need to find more investors in the North. Sharpe says the company has been offered U.S. investment but they "prefer to keep it Canadian."

He is convinced Northern can be competitive at startup and doesn't think it's unreasonable for them to capture five percent of the Northern Ontario market, or produce roughly a half million bottles annually.

Plans to shift beer production to the Sault plant for the balance of the year while an antiquated Sudbury production line is pulled out remain in place.

The Sault operation will eventually become an exporting plant for the U.S., while Sudbury, with its larger capacity, will look after the Ontario market and possibly Manitoba, Saskatchewan and Alberta. Sharpe has made inquiries with liquor boards in those provinces and is getting encouragement to move brands further west.

A new packaging and high-speed bottle line will be installed in Sudbury capable of cranking out 800 bottles a minute, replacing the current 125-bottle-a-minute line. A new 1,200-a-minute can line will replace the existing 400-a-minute equipment.

"Twelve hundred a minute is a blur. You can't read the labels going by," says Sharpe.

The company is prepared to place equipment purchase orders with suppliers in Germany, Italy, the U.S., Quebec and Ontario.

The equipment should take six to eight months to build before being shipped to Canada for arrival in late fall 2006.

Sharpe says they will try to use as many local contractors as possible to help with the installation.

The brewery is also promising a better tasting, more consistent product.

They are introducing new categories of premium lager, a cream ale, a four-percent premium light and a low-carb Extra Light. A sweeter Red Maple brew made with St. Joseph's Island syrup was unveiled June 10 along with a bitter 5.9 percent Wolfgang German-style beer.

The company has hired Dr. Adam Foye, one of Canada's senior brew masters, and is buying more expensive malt, barley and hops to produce a more enhanced premium product.

Northern's marketing director, Jean Thomas, says unlike Lakeport Brewing, they have no intention of becoming a discount 'buck-a-beer' brewer.

"That is a level we're convinced that breweries cannot make a profit at over time."

In marketing presentations across the North, Sharpe says they have been welcomed back with open arms.

Their main distributor, the LCBO, has thrown its full support behind Northern's strategy of "stack it high and let it fly," with mass displays of product at all their Northern Ontario outlets.

"The co-operation has been overwhelming," says Sharpe.

Northern will have some limited distribution in Ontario's Beer Store outlets, but only in their self-serve stores.

With Molson and Labatt's having majority ownership in the stores, Thomas says that remains a real obstacle to growth.

"I think it's the only regime in the free world where your competitors get to control your distribution and how your product is merchandised."

She says Northern would like to see a change in Beer Store ownership, preferably allowing the LCBO to set up a system that's fair to all brewers without a heavy emphasis on products by the national brewers.

www.northernbreweries.com

By IAN ROSS

Northern Ontario Business
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Title Annotation:NEWS; Northern Breweries Limited
Author:Ross, Ian
Publication:Northern Ontario Business
Geographic Code:1CONT
Date:Jul 1, 2005
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