METRO DRAWS A SUIT WITH OWN-LABEL BEER

MONTREAL (FNS) -- Metro-Richelieu here has begun to sell private-label beer in its supermarkets, despite a court challenge by Molson and Labatt, Canada's two largest breweries.Metro introduced Norois Premium beer earlier this month in more than 700 of its retail outlets. Metro said it has confidence in its interpretation of the law, which the chain says allows it to sell private-label beer. Molson

MONTREAL (FNS) -- Metro-Richelieu here has begun to sell private-label beer in its supermarkets, despite a court challenge by Molson and Labatt, Canada's two largest breweries.

Metro introduced Norois Premium beer earlier this month in more than 700 of its retail outlets. Metro said it has confidence in its interpretation of the law, which the chain says allows it to sell private-label beer. Molson and Labatt, both based in Toronto, claim the move is illegal under the existing alcohol distribution law in Quebec.

A Quebec Superior Court judge will hold hearings on the dispute in September.

"The law stipulates there should not be a direct link between a beer distributor and a retailer," said Yvon Millette, president of the Quebec Brewers' Association, whose only two members are Molson and Labatt. "In this case, Metro is a direct owner of a retailing chain."

The beer is brewed by Lakeport Brewing Corp. of Hamilton, Ontario. Millette said, however, that Metro is calling the shots for the program, because it decided to launch and sell the private-label beer in its stores.

"Metro even designed the packaging and set the alcoholic content. They claim Norois will be offered to other retailers, but I doubt you'll see it on the shelves of [rivals] Provigo and IGA," Millette said.

Norois has an alcoholic content of 4.9% vs. the standard 5.5% for regular Canadian beer. It also sells for less -- $4.22 ($3 U.S.) for a six-pack, compared with more than $7 for regular strength beer.

"We wanted to offer consumers a quality alcoholic beer at the best possible price, so we decided

to launch an in-house brand," said Gilles Caron, Metro's vice president of marketing. He said the beer is not targeting any particular segment of the market, but is designed for the average consumer who is looking for the best quality-price ratio and who buys an average of one case of beer a week.

In addition to Norois Premium, Lakeport brews Norois nonalcoholic beer, which Metro has been selling since 1992. The Cott Corp.-owned Lakeport also brews President's Choice private-label beer for Loblaw stores in Ontario, where grocery stores can't sell alcohol. The beer is distributed through provincially controlled Brewers' Retail outlets.

In addition to Metro and Loblaw, Lakeport has contracts with several U.S. chains, including Wal-Mart; and has a 20-year agreement with Pabst brewery to use its surplus capacity at its plants in San Antonio, Milwaukee and Olympia, Wash.