Sleeman Brewery struggled after 1927 reorganization

The following is a re-print of a past column by former Advertiser columnist Stephen Thorning, who passed away on Feb. 23, 2015.

Some text has been updated to reflect changes since the original publication and any images used may not be the same as those that accompanied the original publication.

One of the outstanding local success stories of recent years is the revival of the Sleeman Brewing Company in 1985.

The head of the firm, John Sleeman, is the fifth generation of the family involved in Guelph’s beverage industry. The company has taken much pride in its local heritage, which dates back more than a century and a half.

The original Sleeman firm grew to be a significant industry in the 19th century, but it ran into rough times after the Canada Temperance Act of 1916, and continued to struggle in the early 1920s under the Ontario Temperance Act. Prohibition in Ontario was not as restrictive as in the United States. Ontario wine remained legal, and breweries could sell a “near beer” with minuscule alcohol content. Prohibition ended in Ontario in 1927, seven years before its repeal in the U.S.

The Sleeman firm produced a weak beer to conform to the law, but the watered down beverage found few fans. Much of the firm’s revenue in the early 1920s came from malt syrup and extract, and from soft drinks.

By then the firm was run by the third generation of the family in Guelph. Its origins ran back to 1845, when the first John Sleeman came to Guelph. He worked for six years for an early brewery, Hodgerts & Co., before starting the Silver Creek Brewery in 1851. After 1859, when John’s son George Sleeman joined the firm, business thrived. George took much pleasure in bringing in new machinery and technology.

As well as his outstanding success in business, George Sleeman is remembered for his civic boosterism, sports promotion, and political career. He served several terms as mayor. George Sleeman also built Guelph’s streetcar system, and owned Riverside Park and the resort at Puslinch Lake. In 1900, Sleeman incorporated the business as the Sleeman Brewing & Malting Co.

Two years later, as a result of losses suffered through his streetcar system, the banks seized the brewery. Sleeman responded by establishing the Spring Bank Brewery, on Edinburgh Road. Four years later he regained possession of the original Silver Creek Brewery from the Bank of Montreal.

By then malt products for the processed food industry were becoming very profitable sidelines. Indeed, the firm had passed to sons Henry and George A. more than a decade earlier. The  younger George spent most of his time in sales, while Henry supervised.

In 1927, with the introduction of a stronger beer in Ontario, the Sleeman family sold the original Silver Creek Brewery to Guelph’s other beer firm, Holliday Brothers. 

Determined to re-establish the Sleeman name on the revitalized beer market, Henry Sleeman reorganized the firm early in 1927 with a Toronto legal firm as the dominant shareholder. The new firm would use the Spring Bank facility, which had a capacity of 120 barrels per day. Capitalization was $500,000, divided into 5,000 shares of $100 each, of which the directors sold 3,800 to the public. Sleeman’s associates on the first board were Col. R.F. Rodgers of Woodstock, John Maylor of Forest, Clifton Moore of Cobalt, and Charles Black of Toronto, an experienced brewery manager who would be managing director.

An appraisal showed the assets to be worth roughly $350,000. That would leave a good margin of $150,000 for working capital. Henry Sleeman assured investors that output could easily be upped to 200 barrels a day. He estimated a gross profit of $2.50 per barrel. 

It looked like a fresh start for the venerable firm, but from the beginning nothing went well. Government auditors came sniffing around, questioning the executors of George Sleeman’s estate, and looking for possible underpayment of taxes and excise. They were appalled at the state of the firm’s accounting practice. George Sr. had been lax in looking after the dull routines of business, and paid even less attention to them in his old age. Neither George A. nor Henry had an interest in the front office either. The books and records after 1914 were handled by a succession of bookkeepers, and a decade later were in an appalling state.

Government officials dragged Henry Sleeman to a hearing in April 1927, where, shaking with nervousness and his voice a mere whisper, he struggled under questioning from the special prosecutor, N.W. Rowell, former Ontario Liberal leader and one of the top lawyers in Canada. 

Sleeman admitted that his firm paid no income or sales tax in 1926 because “we had no money to pay them.” To further questions, he said he did not know anything because the firm’s books were “mislaid.”

“Nonsense,” roared Justice Brown, the presiding official. “Where is your bookkeeper?” To the later regret of Rowell and Brown, the bookkeeper, Georgina Hussey, was in the room. On the stand she delivered a rapid-fire stream of convoluted explanations and contradictions, and soon showed she was fully equal to Rowell’s questioning. Apparently she originally had a desk at the office, but since 1921 she had worked at home, using occasional memos from Henry Sleeman to make her bookkeeping entries. There appeared to be two sets of books, neither of which was available. 

The last entries were posted in mid-December 1926, she recalled, and she had not seen the books since then. “I’ve searched the house upside down,” she said, and appeared to be sincere.

Unable to get even a fragment of useful information, a frustrated Justice Brown decided to give Henry Sleeman a month to produce financial records. The accounting books mysteriously appeared two days later, and auditors examined them carefully before levying an assessment of $1,985 in March 1928. By then authorities had detected irregularities in the accounts of more than half of Canada’s breweries. The Sleeman discrepancy was small compared to some. In Waterloo, Huether’s Brewery received a due notice for $49,568, and the Kuntz Brewery had to cough up $124,227 for underpayments dating back a decade.

The entanglement with federal authorities and the publicity surrounding it spooked potential investors and delayed the startup of the new Sleeman firm. Then there were some quality problems when the first bottles of Sleeman beer hit the market. During 1927 sales volumes and profit margins came in far below the initial estimates.

Dozens of breweries had been marking time during the temperance years, and with the door open again, they all sought to capture a big share of the market.

Local and regional brewers like Sleeman had done well in the early years of the century, when transportation was expensive.

*This column was originally published in the Wellington Advertiser on March 9, 2007.