Cracking open a refreshing history of Labatt’s
Name some icons of Canadian consumerism. Poutine? Maple syrup? A certain doughnut shop’s coffee? Ketchup potato chips? Of course, many would say beer. Such is the material basis of Canadian identity. Yet sometimes the Canadianness is superficial and fleeting. Maple syrup is not exclusive to Canada; that doughnut shop is owned by a Brazilian investment firm. And ask any scoffing beer snob, this one included, and you’ll learn that our three big brewers are not even Canadian anymore. How did we get here?
In Brewed in the North, the Carleton University historian Matthew J. Bellamy traces the growth and internationalization of what was arguably at one time the most Canadian of breweries, John Labatt Limited. From the birth of the company’s namesake, John Kinder Labatt, in Mountmellick, County Laois, Ireland, in 1803, through to the takeover by the Belgian juggernaut Interbrew, in 1995, Bellamy tracks the growth of what was once a small regional brewery in London, Ontario, run by immigrants whose interest was in creating a business that would support their families. He runs through the various business decisions of Labatt’s descendants, the exigencies of expanding sales opportunities, the challenge and potential of railway-based market growth, the threat of Prohibition, the opportunities of wartime austerity and post-war boom, the need for a truly national brewery and the hurdles to building one, competition, diversification, divestment, predatory investors, and the final big sellout. It is a remarkable ride.
In history, context is everything, and Bellamy is a master at providing it. Not content to say that Labatt was born in Ireland, moved to London, England, and then to London, Ontario, he draws from a range of sources to add texture to each environment. As a result, we gain an impression of what life may have been like in Mountmellick, in the British capital, and in the latter’s Ontario namesake. Bellamy provides a sense of how those environments shaped Labatt’s business and life decisions. There may be a certain overreach in such context (we cannot really know, for example, if Labatt’s life in England had “cemented in his mind” the importance of speedy and reliable transportation, or if he even paid any attention to the canal business in Mountmellick), but the detail does give us a story and analysis that is never dull or pedantic. And throughout, it remains informative and rooted in the main concepts of social and business history.
It is quite a history. John K. Labatt was an immigrant with an extended family to support and some acres of land. His is not necessarily a rags-to-riches tale, since he was not impoverished when setting up his wheat farm near St. Thomas, Upper Canada. But it is certainly a story of a man who had an eye to providing a quality product and could see business opportunities when they appeared.
Witnessing the growth of the brewing industry, especially in garrison towns like London after the 1837 Rebellion, Labatt joined other farmers in cultivating barley for this industry. Soon he joined forces with a local brewer, Samuel Eccles, to operate the London Brewery; he eventually bought out Eccles. Attentive to opportunities to expand his reach, Labatt was an early advocate of railways and even offered some financial backing to companies linking London with surrounding markets. By the time he died in 1866, he was the proprietor of a strong regional brewery. It was up to his descendants, first his son John Labatt II and then the children and grandchildren of his large family, to build a multinational corporation.
As Labatt’s moved beyond London, it encountered competition from other large breweries, along with other challenges and opportunities. It is here that Bellamy’s book becomes as much a study of the Canadian brewing industry generally as it is a case study of Labatt’s itself.
John Labatt II demonstrated a certain playfulness with the law when faced with local prohibition. Under the Canada Temperance Act, individual counties could vote themselves dry. In the mid-1880s, numerous counties in Ontario chose this direction, and Labatt met sales restrictions mostly by surreptitious selling. He also turned toward bottles, which were easier to hide than barrels. In such tactics, he was not alone.
The stories of other established and more ambitious breweries intersected with Labatt’s as the company expanded. Eugene O’Keefe, in Toronto, and John Molson, in Montreal, dominated their markets. Even as John Labatt II had a tenuous presence across Ontario by the 1890s, he was looking beyond the country’s borders for new markets. That exploration included a failed attempt to break into the massive and lucrative Chicago beer market.
Brewing faced its biggest challenge during Prohibition. Notwithstanding the fact that many temperance advocates saw spirits as the major problem, beer and wine were also swept up in provincial prohibitions spurred, in most places, by the wartime emergency of 1914 to 1918. Attempts at diversification of production — making malt syrups, sorry attempts at low-alcohol “temperance beer,” and other barley-related products — failed to return the sort of profits that beer itself did. Numerous brewers shut down. Faced with a similar fate, Labatt’s family-run board of directors opted to follow the advice of a cagey general manager, Edmund Burke, to give him free rein and not ask any questions.
Burke, perhaps following the libertarian philosophy of his Enlightenment namesake, exploited connections in the United States and legislative loopholes in Canada in order to sell Labatt’s beer wherever possible. His efforts kept the company afloat. Toward the end of the 1930s and into the 1940s, however, professional management and accounting techniques came to the fore — along with the need to make the industry respectable, keep the temperance tide at bay, and market beer as an honest product. People like Burke were replaced by a new, university-educated management class.
Such changes meant that brewers, often competing to undercut one another, also had to work together when an existential threat appeared. This collaboration appeared subtly during the First World War and Prohibition, in the shape of the Moderation League. With unclear connections to the brewing industry, the league encouraged governments to water down Prohibition and replace it with laws that encouraged the consumption of less potent liquor, with alternatives such as — ahem — beer.
During the Second World War, renewed arguments for Prohibition, combined with the fact that Prime Minister William Lyon Mackenzie King was himself a non-drinker and no friend of brewing, led to the development of marketing strategies that discouraged overly zealous restrictions. The Public Relations Committee of the Ontario Brewers was the innovation of the American firm Lord & Thomas, which had been contracted to help brewers defend their image and resist the push for wartime Prohibition. The story of the PRCOB is an especially important contribution to the history of booze in Canada, and Bellamy explains how this organization, from the shadows, was able to motivate worker protests and encourage Canadians to view beer as unproblematic and important for the national war effort — and essential to our growing sense of identity.
After the Second World War, John Labatt Limited continued to grow, expand, and compete, but this expansion created new hazards. The transformation of Labatt Pilsener into Blue helps illustrate the challenges.
Labatt sought to create a national brand and link it to a national sense of identity, no mean feat in a country with diverse regional cultures, two official languages, and strange interprovincial trade barriers. The term “Pilsner” was seen by Canadians in places like Ontario, the most lucrative beer market, as staid and uninteresting. For many in western Canada, however, it represented the quality of European tradition and the central European roots of many. So when the company decided to rebrand its Pilsner as Labatt Blue, which worked in both English and French, it introduced the change in various ways throughout the country. For one thing, it rolled out different tag lines: bottles in Ontario read “Call for a Labatt Blue,” while others read “The great beer Westerners call Blue.”
Despite the success of Blue (it soon became the most Canadian of Canadian beers, despite the presence of a competing beer actually called Canadian), Labatt was reluctant to invest much in another national beer. In tight competition with Molson and Carling O’Keefe, the company sought to bring big American brands to Canada through contract brewing arrangements. As a result, Labatt introduced Budweiser, while Carling O’Keefe got Miller and — a harbinger of the future — Molson connected with Coors. Over the short term, there was an uptick in sales. But over the long term, American beers cut into the sales and identity of Canadian beer. The product offerings of Canadian brewers were increasingly American. The marginal increase in sales and the Americanization of beer in Canada were “representative of the Canadian corporate condition,” Bellamy notes, which was marked by an inability to look beyond the national boundary for opportunities.
The rest of the story is one of attempted expansion, a general lack of imagination on the part of executives, and a series of failed opportunities that weakened the company and made it vulnerable to corporate raiders. Diversification brought a range of products under the Labatt umbrella, along with forays into sports and entertainment, including Canada’s second major league baseball franchise, the appropriately branded Blue Jays, in the late 1970s. Eventually, in the ’90s, the push for diversification shifted to one of divestment and a renewed focus on brewing. By that time, Labatt owned or had major investments in The Sports Network and its French-language equivalent, Réseau des Sports; the Discovery Channel; the SkyDome (later the Rogers Centre); and a host of other smaller companies, from department stores to makers of foodstuffs.
Expansive growth had made the company remarkably inefficient, as a 1989 consultant’s report made painfully clear. It argued in excruciating detail that the company was in too many places, that it had lost sight of its core strength of making beer, and that it needed to “do that and little else.” As part of the restructuring process, Labatt attempted to expand into other markets by buying breweries around the world. But such efforts were not always profitable right away, so they depressed share prices and made the company ripe for the picking by activist investors, such as Gerry Schwartz. Ultimately, Schwartz’s attempt to buy and gut Labatt, through his Onex Corporation, pushed Labatt into the arms of Interbrew, which was considered less predatory. It, at least, was a brewer — not a divest, gut, and resell capitalist.
The denouement of Labatt is also a story of the beginning of the end for Canadian brewing. Beyond Bellamy’s examination, but germane to the topic, is the takeover of other Canadian brewers. In 2005, Molson, which had absorbed Carling O’Keefe in 1989, merged with Coors, which was headquartered in the United States but traded on both U.S. and Canadian stock markets. A year later, Sleeman, a craft brewer that had expanded across the country by buying other regional craft brewers, was bought by the Japanese brewer Sapporo. As Bellamy notes, Labatt generally ignored the rise of craft brewing in Canada. Yet that rise represented a reaction to the Americanization of Canadian beer, somewhat ironic since the momentum for craft beer came from the United States. Regardless, it soon returned brewing to its small-batch, quality-oriented roots.
Brewed in the North is a striking story, and Bellamy tells it well. He has a command of business history but does not beat us over the head with theory or complete marketing lingo. There are some odd gaps: he alludes to Labatt’s union several times but does not provide an extended discussion of unionization and what it meant to the company. This seems odd in a business history about brewers. And, at times, sections seem overly long. Nevertheless, the book is an impressive achievement.
My biggest criticism? With so many corporate ads reprinted in the book, I found myself wanting to get my hands on a cold, bland, and mass-marketed lager. Perhaps that is the real legacy of brewers like Labatt: the connection between beer and identity, and the ability to get into our heads.