Canada: Hamilton brewery is eyeing on the growing premium market

The Hamilton brewery known for selling its beer at a low price is looking to the growing premium market, according to Toronto Star Newspapers.

"Management believes that, at some point in the future, there may be an opportunity for Lakeport to launch a value-priced product into the growing import/premium segment," Lakeport owner Teresa Cascioli she wrote in a prospectus filed with the Ontario Securities Commission last week.

"Lakeport would consider partnering with a brewer currently participating in the import/premium segment, or launching its own brand ..."

The prospectus document outlines a plan to raise money by selling units in a new income trust to the public. In the document, Cascioli outlines a future in which the company will grow both within the buck-a-beer category it helped create and by breaking into new markets.

Lakeport has been a resounding success in the price-conscious category, growing its business from a razor-thin profit of $308,000 on sales of $47 million in 2003 to almost $4 million on sales of $80.6 million last year.

To finance that strategy, the company hopes investors will pay $10 each for units in a new Lakeport Brewing Income Fund which will, in turn, own some undecided portion of operating company Lakeport Brewing LP. The sale of units in the trust is being underwritten by Scotia Capital Inc., RBC Dominion Securities Inc. and Westwind Partners Inc.

Income trusts allow investors to share in the equity of a company. Where conventional corporate structures are taxed on revenues net of cost, trusts distribute their income to unitholders before it is taxed.

Beer industry analyst Peter Holden, of Toronto-based Veritas Investment Research Corporation, says Lakeport's move has the potential to pay dividends by positioning the company in the only parts of the Canadian beer business that are growing. "Everyone is intrigued by this move at Lakeport," he said. "The overall market isn't growing at all, the only growth is at the high and low ends, the buck-a-beer end where Lakeport plays."

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