Labatt is closing one of its two British Columbia breweries as it moves to cut costs and keep in lock step with rival Molson Inc., which is attempting to win support for a merger with Adolph Coors Co.
But the Toronto-based brewer yesterday played down speculation that the decision to close its New Westminster, B.C., plant and lay off 180 workers will soon be followed by a shutdown of one of its Ontario operations.
"We will take time to review the impact of the New Westminster closure on our network before making a decision on anything else," said Neil Sweeney, a spokesman for Labatt, which is owned by Belgian-based InBev SA.
"No decision has yet been made on any other breweries."
Brewery workers in New Westminster were told yesterday morning that they will lose their jobs when the brewery, which has operated since 1879, shuts down next April.
Labatt said it will continue to supply Western Canada from existing breweries in Creston, B.C., and Edmonton, which are scheduled for multimillion-dollar upgrades.
"The decision to close the brewery was extremely difficult for all involved," said Stewart Gilliland, president of Labatt Breweries of Canada.
"This decision is based on our need to reduce excess capacity in Western Canada and improve our long-term competitive position."
But it came as no surprise to one analyst, or to union officials, who said New Westminster is a victim of "me too-ism" in an increasingly cost-conscious Canadian brewing industry.
Labatt is trying to cut about $50-million in costs from its balance sheet and doesn't need two breweries in B.C., said Michael Palmer, a beer industry analyst and president of Veritas Investment Research Corp. He said that the company is struggling to keep up with Molson, which it sees as having the cost advantage.
As part of that effort, Mr. Palmer said he believes Labatt is mulling the possibility of closing its London, Ont., brewery, which was the target of a lockout two years ago that left bad feelings on both sides.
"There wasn't a lot of room to expand in New Westminster and the feeling was that they couldn't make it into a modern brewery," he said.
He said Labatt is deeply committed to a marketing campaign that emphasizes the mountain mystique of its Kokanee brand, which is brewed in Creston.
Labatt's Mr. Sweeney said the company plans to invest $20-million in the Creston operation to build a can line. "We see years of growth ahead for the Kokanee brand," he said.
The company will also sink a further $14-million into the Edmonton plant to expand production of the Budweiser brand, making it better able to serve markets in Saskatoon and Calgary.
John McNamee, a first vice-president with the Brewery, General and Professional Workers Union in Toronto, said the decision to close the New Westminster operation was not a total surprise, given that Labatt has been reviewing its operations.
"But it is still a shock when you hear it," said Mr. McNamee, adding that the decision is "an obvious disaster to employees who make their livelihoods there."
Labatt has operated in New Westminster since 1958 when it bought what was known as the Lucky Lager Brewery.
New Westminster employees are set to receive a severance package worth an average of $70,000 each.
Labatt said it has set aside a proposed $1-million support fund to assist its employees during this transition, which will be released upon the successful negotiation of a closing deal with the union.