Sleemans Case Study

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Table of Contents:

1. Introduction ---------------------------------------------- Pg 3

2. Problem Statement -------------------------------------- Pg 3

3. Analyzing Case Data:
I. Industry Analysis --------------------------------Pg 3 II. Competitive Analysis --------------------------- Pg 4 III. Porters Five Forces ------------------------------Pg 4-5 IV. Internal Analysis ---------------------------------Pg 5-6 V. Financial Analysis --------------------------------Pg 6-7

4. Alternatives --------------------------------------------------Pg 7

5. Recommendations ------------------------------------------Pg 7

Introduction:
Sleeman Breweries is back on the streets after a (much earlier) run-in with the law. After being forced to sell its brewery in 1933 to pay taxes on beer smuggled into the US in defiance of its Prohibition laws, the Canadian brewer opened the taps once again in 1985. The company's brands include Sleeman, Upper Canada, Okanagan Spring, Seigneuriale, Shaftebury, and Maritime Beer. It also owns Quebec microbrewer, Unibroue. The company's beers are sold in Canada, the US, and the UK. Sleeman Breweries has been a subsidiary of Japan's Sapporo Breweries since 2006. SBL was rated as one of Canada’s best managed companies

Problem Statement:
Chantel Dumont is an investor who is interested in investing in Sleeman Breweries Limited. Dumont is evaluating whether the risk and opportunities provided by the investment in SBL will be a wise decision. Dumont knows the risk of investment but her problem is that she needs to decide whether the future potential of SBL will outweigh the risk of investing.

Analyzing Case Data:
Industry Analysis:
The Canadian Brewing Industry accounted for $7 Billion of sales in 1999, the industry sales had increased in 1998 but fell in 1999. The Canadian industry has rationalized considerably through mergers, acquisitions and new microbrewery spinoffs, and continues to do so. Over the years, the industry's structure has changed as the number of conventional plants has decreased, while the number of micro-breweries has increased considerably.  While competition among brands for market share is high, some nationally-brewed beers have seen a decline in sales while there has been an increase in local or regional favourites. This trend has been seen in the past as well, since many popular national brands evolved from either local or regional favourites. Breweries to be successful had to build brand awareness and establish brand images that would differentiate themselves from their competition, the ultimate goal was to attract a loyal customer base.

Competitive Analysis:
The Brewing Industry was dominated by two large breweries, Molson and Labatt, having 46.6% and 46% of the market. Microbreweries and imported beers made up the remaining 7.4% of the market. It was expected the microbreweries and imported beers’ share of the market would increase between 8-10% by 2003. Other main competitors were the 46 microbreweries in Canada as of 1996, but there was high rate of failure for microbreweries. The Top Microbrewery Competitors in 1998 were:

1. Big Rock
2. Brick Brewing Company
3. Unibroue
4. Granville Island

Porters 5 Forces Analysis (Brewery Industry):
1. Threats of new entrants:
* Barriers to entry:
* Capital Intensive
* Distribution networks and agreements
* Regulations and Taxes
* Microbrewers are subsidized in Canada
* Economies of scale in marketing, production and distribution. 2. Rivalry:
* Price competition
* Increasing in Canada, particularly Eastern Canada
* Increasing competition from imported beers (however, national brewers own part of these breweries). * Growing popularity of micro-breweries and other craft-beers. * Alternative: expansion to super-premium beers and other segments with lower demand elasticity.

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