Carlsberg Group eyes a big market share of Canadian beer with acquisition of Ontario’s largest brewer, Waterloo Brewing

CANADA – The Danish brewing company, Carlsberg Group, is pursuing a CAD144 million (US$106 million) acquisition deal for Waterloo Brewing, Ontario’s largest Canadian-owned brewery.

The deal is part of Carlsberg’s strategy towards 2027 to grow in categories beyond its core beer market, adding products like cider, seltzers, and premium brand beers.

The transaction is expected to close early in the first half of 2023, subject to approval by Waterloo Brewing’s security holders and the satisfaction or waiver of other customary closing conditions.

The company hinted that the transaction has been approved by the Boards of Directors of both companies, and Waterloo Brewing’s Board of Directors has recommended that Waterloo Brewing shareholders vote in favor of the transaction.

Directors and officers of Waterloo Brewing collectively hold approximately 40% of its outstanding common shares.

If successful, the acquisition is expected to strengthen the Carlsberg Group’s market position in Canada with local production and Waterloo Brewing’s brands, and to deliver significant supply chain and revenue synergies.

Carlsberg Group CEO Cees ‘t Hart said: “One of the priorities of our SAIL’27 strategy is to grow our business in attractive markets where we are small today, such as Canada. The acquisition of Waterloo Brewing significantly improves our growth prospects in the Canadian market.”

He added that Carlsberg’s international beer and cider portfolio complements Waterloo Brewing’s portfolio of local beers and ready-to-drink (RTD) beverages, creating a highly competitive company in the Canadian beer and RTD market.

In addition, Waterloo Brewing’s production facility in Kitchener, Ontario, will produce some of the Carlsberg Group’s brands, including Somersby cider, which has been produced at Waterloo Brewing since 2020.

Waterloo Brewing President and CEO George Croft was excited about becoming part of one of the largest brewing companies in the world.

Waterloo Brewing will be a great fit with Carlsberg’s strong, purpose-driven culture, and our Board of Directors is confident that joining Carlsberg is the best long-term solution for our employees, partners, customers, consumers, and community, he noted.

The acquisition announcement comes at a time when the Canadian Brewer has reported EBITDA for the third quarter of fiscal 2023 of CAD 4.4 million (US$3.24m), with a net revenue of CAD26.2 million (US$19.30m), a decrease from CAD26.9 million (US$19.81m) in the prior year.

Its gross profit was $5.4M, a decrease from CAD6.0 million (US$4.42m) in the prior year as much as the sales volume in the quarter grew by 3.2%. The industry sales volume as a whole was down by 4.3%.

As noted in the previous quarter, the company is continuing to see consumers trade down as a result of ongoing inflationary pressures, which have, however, contributed to the growth of the Laker brand.

This shift has negatively impacted the company’s premium beer brands and ready-to-drink products, putting pressure on the gross margins.

Consistent with industry trends, LandShark® volumes declined by 7.5% primarily due to softened demand for the Landshark seltzers but, the seltzers brand has still grown 5% on a year-to-date basis.

The company said supply chain issues continued in the quarter and resulted in contract volumes shifting to the fourth quarter of the fiscal year.

Recently, the owner of Waterloo Dark, Waterloo IPA, and Waterloo Grapefruit Radler renewed two strategic co-manufacturing partners which will result in approximately CAD18 million (US$13.26m) of combined revenue over the extended term of these contracts.

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