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  The smaller brewers are hopping, too

BENJ GALLANDER and BEN STADELMANN

Friday, January 21, 2005

While abundant media suds are being spilled over giants Coors and Molson, ample frothy action is taking place among the smaller players. Take Lakeport Brewing, where Teresa Cascioli has teamed up with Vengrowth Capital and the National Bank of Canada to assume control of the brewer and become the first Canadian woman to be a majority owner in this realm. Her position as president and CEO surely strikes a blow against the glass ceiling that holds back female executives.

Cascioli, who joined Lakeport in 1999 when the company was in bankruptcy, has been a major factor in this brewer's turnaround, making it profitable while increasing market share by 400 percent. She wants more, hoping that she can "Steeler" away more business from the big boys. In addition, she's considering acquiring other brands to enhance the 10 currently in the stable.

We're not suggesting that Brick Brewing is in her sights, but it has been one of our favourites. We purchased it for our personal accounts around a year ago at between 67 and 82 cents a share. The company has exceeded our expectations, already trebling to our initial sell price of $2.24. One of us packed up his shares and sent them down the hatch at the target. The other, however, while wary of staying at the bar too long, feels that this outfit has a few upward chugs left — that it is still, so to speak, in the wort stage of the brewing process, prior to being brought to a boil and adding some hops. A sale during fermentation, before filtration and carbonation, would be just fine.

Brick is a classic case of what happens when a stock emerges from the holding tank. Sleepy when purchased, the trading volume rarely exceeded 10,000 shares. Today, it usually surmounts 35,000 shares. That's a heck of a jump.

The stock is trading at its highest level since 1998, with good reason. For the first nine months of 2004, revenue vaulted 41 percent to $17.4 million, while net income hit $1.7 million, bounding 512 percent compared with the 2003 tallies. The reasons for this is across-the-board improvement in the company's beer labels, accompanied by the launch of the PC brands in Ontario and Quebec.

In November, a private placement of common shares added $5.4 million to corporate coffers. New financing from Roynat Capital was also put in place. Brick president and CEO Doug Berchtold stated that the financial structuring is now complete and "[t]he company is now poised to make additional investments both in brands and operations to further sustain improved financial performance in future fiscal periods."

More brands? Heck, maybe Brick and Lakeport should team up and take a shot at Coors/Molson? After a 2-4 or two, it is amazing how expectations can dilate.


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