St. John's Wort Beery Musings And Amusing Beers

Discount Beer February – How We Got Where We Are

(Much of the background information for the following comes from Allen Winn Sneath’s excellent book Brewed in Canada. I borrowed Ken Woods’ copy, but you should probably buy your own.)

The DISCOUNT BEER CATEGORY at The Beer Store exists for two reasons:

1)      Canadians didn’t drink enough Amstel in the late 1980’s

2)      You really liked those President’s Choice Decadent Chocolate Chip Cookies as a kid.

Clearly, this is going to take some explaining.

Picture it: Canada in 1992!

Brian Mulroney and his chin share the role of Prime Minister. Kelly Gruber is a sex symbol. Much Music is playing actual videos and the CBC is starting to phase out Beachcombers re-runs. The fine, stalwart, slightly inebriated people of Ontario cry out for cheap beer and their call is heeded by two men: Bill Sharpe and Dave Nichol.

Bill Sharpe had worked for at Pacific Western Brewing in BC and had done pretty well by them. He thought that he could make a go of private label contract brewing and approached Loblaws to gauge their interest. In order to take advantage of the situation, he would need a brewery and he would need financing to purchase a brewery.

He approaches Cott, who already produce the President’s Choice soda brands. They agree to finance the purchase of a brewery located in Hamilton, which until recently had been owned by Heineken and was used to produce Amstel. It was an unprofitable venture unless it was running at the full capacity of 330,000 HL and they unloaded it in 1991. The brewery is christened the LAKEPORT BREWING COMPANY and is operative by June, 1992. It brews a brand called Around Ontario. By September, they have created Laker and Laker Light. On December 11th, they launch President’s Choice Premium Draft.

You have to understand that Dave Nichol was as much of a rock star as a bespectacled, middle aged man with a canine sidekick who’s hawking a line of private label dipping sauces with names like “Memories of Bangkok” can possibly be. Personally, I think it was the chocolate chip cookies that did it. That, or the chocolate fudge crackle ice cream. The thing was that President’s Choice did really well as a store brand. Still does. They have their own TV show.

In 1992, they expanded to beer. The first batch of President’s Choice Premium Draft sold out basically immediately. In a genius marketing move, Lakeport takes out a full page newspaper ad, putatively apologizing to Dave Nichol, but really, capturing the attention of the public. The public ate it up and by June, 1993, Lakeport had 3% of the Ontario Market.

Was the beer any good? In a sense it didn’t matter. Dave Nichol was behind it. Did it matter that Dave Nichol didn’t drink beer? No, because the beer was cheap. At launch, Around Ontario was $5.95 for a six pack. PC Premium Draft was $12.50 a case. That undercut Molson and Labatt by about a dollar a case.

A dollar in price difference, or about eight and a half cents a beer, and suddenly, there’s an entire new category. In the summer of 1993, Molson introduces their Carling brand as a competitor and Labatt brings in Wildcat. The category is now 15% of the total Ontario Beer Market because “Hey. Eight and a half cents, man.”

The next few years are a little like a shell game run by a paranoid schizophrenic.

In 1994, President’s Choice decides to change over to Labatt. Dave Nichol, wheeler dealer that he was, still owned the recipes to Premium Draft, so they start brewing that at Lakeport under the name Dave Nichol. Essentially, there are now two identical beers competing against each other with no real differentiation in price.

In 1995, Cott sells the marketing rights to the Dave Nichol brand to Molson, meaning that Molson is now marketing a beer identical to the one Labatt is marketing. In the same year it sells Molson the rights to the Laker brands. Since Lakeport no longer has any brands to speak of, they launch a range simply called Lakeport, which uses the same recipes that Laker had used.

In 1996, Molson, possibly because they realized how bizarrely incestuous this was getting and decided that discretion was the better part of valour, sold the Laker brands to Brick, acquiring a small percentage of the ownership of that brewery in the process. Since Molson is fighting a battle to consolidate the ownership of their own company, using Brick as a cat’s paw to force Labatt to continue competing in a market segment is sheer Machiavellian genius, if not elegance in its simplicity. This puts Brick in a position where it can start acquiring other brands as well, like Formosa Springs.

In 1998, since the Lakeport Brewery hasn’t been running at full capacity, they go bankrupt. They’re taken over by Alpha Corporate Holdings.

By 2005, the discount category is a really big deal. That year, Brick sees a 325% rise in sales of their Laker brands. Lakeport has about 7% of the Ontario market share. President’s Choice, possibly sensing a shift in the wind, contracts their brews to Brick.

In 2006, the high point of the Buck-A-Beer craze, Lakeport has 11% of the Ontario Beer Market share and two of the top ten brands at The Beer Store.

In 2007, Labatt decides enough is enough and buys the Lakeport Brewing Company for 204 million bucks. That’s a pretty small price to pay for 11% of the market. (To give you an idea, that is 4% more than all of the craft beer market share in Ontario in 2013). They acquire the Lakeport brands and Brava.

In 2008, the Buck-A-Beer craze ends when Ontario raises the minimum beer price to $25.60. This obsoletes the incredibly catchy “Make ‘er a Laker, it’s a buck a beer” radio commercial, which we can all be thankful for.

In 2010, Labatt does something incredibly clever and decides not to sell a brewery capable of producing 10% of the beer in the province to a smaller, hungry rival in Minhas brewing. They do the sensible thing by gutting the brewery and figuratively salting the earth. This prevents anything like this concatenation of circumstances from ever occurring again, since no one really has the capacity to compete. It angers the Teamsters Union, but tactically it’s the best option.

In 2012, the minimum beer price in Ontario is raised to $29.35. There is no convenient way to turn this price into a catchy radio jingle, and for this we owe our thanks to the AGCO.

So, that’s why everyone owns all of the brands that they own even if many of those brands are more or less identical, historically. This sequence of events accounts for approximately 2/3rds of the entire market segment.

Wouldn’t it have been easier to just put down the cookies and enjoy an Amstel?

4 Thoughts on “Discount Beer February – How We Got Where We Are

  1. I never realized that Laker and Lakeport were completely different beers/owners. I pay attention only down to a certain level. This obviously being the first 4 letters of the name.

  2. The Ont gov’t did me a favour when they raised the price of discount beer to where it is not discount beer. Since then, I buy only Ontario Craft beer since the price is not an issue as it once was. I don’t look at the price any more. I go by the flavour. Discount beer to me is anything in the “Big Ten” category. Unflavoured and over priced yellow fizzy beer.

  3. Tapsucker on February 8, 2013 at 10:38 pm said:

    Cool! A foodie does coke! And pepsi, and cheesies…

    Actually, I’m very interested in your coverage. It’s not so much to trash or legitimize these brands, but putting them in context is great. Some big ‘legitimate’ brands are hardly any better, or even as good as some of these discounts. I’m not inclined to drink a big named European lager, but if I was, why not have a local knock-off cheaper and possibly better? Let’s not forget, corn syrup get’s exported to the old world too, and shipped back as premium yuppie juice.

  4. What a great post! What I like about it is that if offers a reliable summary of the history of buck-a-beer brands and yet still finds time for cleverness and sarcasm. I actually learned a thing or two reading this (and I have read Sneath’s book). I appreciate that this post tells us that beer trends are not inevitable consequences of market forces, but conscious decisions made for myriad reasons. You could be inundated with Minhas today, if not for the foresight of Labatt to say no. Sure, they did it for their own selfish reasons, but, as an Albertan, trust me – you are better off.

    I am looking forward to more Discount Beer February posts. What marvelously wonderful idea.

    Cheers!

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