Labatt prez to SAQ: play fair
Liquor retailer's aggressive marketing is giving spirits unfair advantage

A logo on the Société des Alcools du Québec's Web-site says "moderation tastes good." But if you ask Marc Portelance, the government liquor retailer is being anything but moderate in its marketing efforts.

Portelance, who recently took over as president of La Brasserie Labatt, used his introductory press conference to lash out at the expansion of SAQ's distribution network and its aggressive discounting practices.

According to Portelance, these actions are giving the wine and spirits industries, an unfair competitive advantage over the breweries, which are losing shelf space in traditional distribution points. Quebec beer products are for the most part not sold in SAQ outlets, so increases in SAQ sales often come at the expense of the brewery industry.

"The consumer's budget is inelastic," said Portelance. "If he gets a good deal at one place, he won't have money to spend at another."

The beer industry has long held an uneasy truce with the wine and spirits industry. Domestically manufactured beer products are for the most part sold in supermarkets and corner stores, and wine, spirits and ports are mostly sold in SAQ outlets. But the increase in the number of those outlets is changing the balance of power.

The SAQ network buildup will see the number of its outlets jump from 453 in 1998 to a projected 800 by the end of this year. The number of stores will climb from 340 to 400 during that period.

But it's SAQ's recruitment of 250 new licensed agents - dépaneurs who sell SAQ products - that is really getting under the brewery industry's skin. Quebec's dépaneurs have long sold lower end wines.

But these newly recruited agents are also allowed to sell premium wines, ports and spirits. And the shelf space storeowners allocate to stock those products, often comes at the expense of space normally allotted to beer.

"When the SAQ started recruiting these agents, they were only supposed to be in remote areas between 75 and 100 kilometers from regular outlets. That was fine, because people should have access to these products," said Portelance. "But recently they have been setting up outlets closer to major population centers."

Portelance also isn't happy about SAQ's aggressive discounting practices, which include price breaks of 25 per cent on certain products, as well as various specials and coupons. The beer industry has a hard time matching these tactics because of tougher statutory restrictions to its marketing practices, most of which SAQ is exempt from. So Portelance wants the SAQ to back off.

"They should play by the same rules that we do," said Portelance.

But the SAQ isn't the only challenge on Portelance's agenda. Labatt has done well in recent years, boosting it's market share from 36.2 per cent of the Quebec beer industry in 1998, to 41.7 per cent in 2001. It has also done well south of the border, with Labatt products accounting for almost 60 per cent of Canadian beer sales to the U.S.

But the company has been having a hard time maintaining its visibility relative to its biggest rival Molson. And both companies continue to be beset by challenges from imports and specialty products. These have grown from close to zero to 12.6 per cent of Quebec's beer market during the last 13 years.

Labatt --a fully owned subsidiary of Belgian based Interbrew-gets less media attention than Molson, a public company, which benefits from the visibility that comes with having an actively traded stock

Recent moves such as the end of Molson's diversification strategy, its renewed focus on brewery operations, strong financial performance and the return of management personnel to Montreal from Toronto have significantly improved its luster.

Portelance also lists labour relations and capacity issues at Labatt's LaSalle plant as big upcoming challenges.

Several of the company's collective agreements are coming up for renewal during the next year. The company's London, Ontario plant workers have been on strike since January, refusing to accept a package already accepted by Toronto workers that would see hourly wage rates jump from $26 to $31 over the next six years.

But if there is anyone who is up to these challenges it's probably Portelance, who got his training as a chartered accountant, before drifting into the beer industry due to advice a marketing professor once gave.

"He told me to make sure to work in an industry whose product I knew well and loved," said Portelance. "And beer was the only one that met those criteria."

 

Photo caption: Labatt's new president Marc Portelance cites marketing competition from the SAQ and labour relations as two key upcoming challenges.

Highlight this quote: "The consumer's budget is inelastic," said Portelance. "If he gets a good deal at one place, he won't have money to spend at another."

 

Peter@peterdiekmeyer.com

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