E-Malt.com News article: Jamaica: Increased marketing spend fails to lift sales for Red Stripe

Jamaica’s leading beer maker Red Stripe doubled its marketing spend in the December quarter, but the near half a billion dollar investment failed to lift sales, The Gleaner communicated on February, 23.

The company spent J$465 million on marketing and promotions in the quarter, compared to J$266 million in the 2009 period.

The figure rose to J$961 million in its first half-year ending December 2010, compared to J$683 million in HY 2009.

Red Stripe now says it will pull back on its export marketing in the periods ahead, but said the full-year spend would close higher than the previous period to support the launch of Red Stripe Light in North American markets.

For the quarter net profit fell to J$205 million, from J$350 million last year, despite a two per cent gain in revenue to J$3.01 billion.

The company has been facing decline in volumes in the domestic market, where sales fell by a combined 4 per cent in its last two quarters.

"The ongoing contraction of the entire alcoholic drinks market continues to exert a drag on our volume and revenue performance," the company said in a statement.

The declines in Jamaica were offset by a half-year gain of nine per cent in export revenue, the company said.

Revenue for the half-year increased by just J$3 million to J$5.7 billion net of excise taxes, while six-month profit fell 39 per cent from J$525 million to J$319 million. Trading profit also dropped 37 per cent to J$457 million.

Red Stripe's performance has been depressed since the recession. Last year, as sales and profit retreated, the company advised its 3,400 stockholders that it would delay dividend payments as it tries to regain lost ground.

The brewery, which is run by Allan Barnes, says it expects to face challenges to business growth in its core business, beer, as a result of the change in excise tax policy, which it says gives rum "a large tax advantage" over all other categories of alcoholic beverages.

"This disparity serves to disadvantage the company's products in a fiercely competitive market and we will continue to lobby for a level playing field in the interest of fairness, conformance to international best practices and public health," Barnes and chairman Richard Byles said in a statement issued with Red Stripe's half-year financial report.

The new special consumption tax rates are:

Beers and stouts, J$1,134 per litre of pure alcohol

Overproof white rum, J$450.00 per litre of pure alcohol

Other alcoholic beverages including wines, liqueurs and cordials, J$960 per litre of alcohol.

Red Stripe paid J$1.19 billion in SCT charges in the July-December period, compared to J$1.24 billion at HY2009. The charge is applicable to domestic sales only.

At the top of the year, the company, whose core business is beer, shuffled its spirits portfolio of products distributed on behalf of parent Diageo Plc, in an attempt to grow business in that area after the market showed promise.

The portfolio grew by 30 per cent last year.


23 February, 2011