E-Malt.com News article: Jamaica: Red Stripe takes seriously the competition coming from the new entrant Lascelles Wines & Spirits

Red Stripe, which boasted sales of $10 billion at the end of its financial year in June 2006, 11% above last year, is taking new market entrant Lascelles Wines & Spirits (LWS) seriously, saying its strategy to counter the expected rivalry from Kingston Beer 62 would be to grow its brand and cement its market, Jamaica Gleaner News published November 22.

"We're not taking the competition lightly," said Mark McKenzie, managing director for Red Stripe, the operating name for Desnoes and Geddes Limited as well as the brewery's flagship beer.

"Red Stripe has plans in place and we welcome the competition. We've done a number of things to build our brand equity in the local market which is already growing."

But the company also plans to cancel in February 2007 a distribution deal it has with another member company of the Lascelles deMercado Group, Wray and Nephew Limited, which distributes its spirit brands, with McKenzie justifying the move as an income-booster.

"All those funds paid out to a third party will come inhouse and become our own income," said McKenzie, adding that the spirits would add synergy to the company's portfolio. Wray & Nephew distributes Bailey's Irish Cream, the Johnny Walker range of whiskies and Smirnoff on behalf of Red Stripe.

It's LWS' virgin entry into the beer market, but the company is no lightweight in the liquor business, with its sales coming in at over $9 billion in its nine months of operation to June 2006.

In addition, it has partnered with an existing though not well-known brewery, Big City Brewing, to manufacture and bottle Kingston Beer 62.

Red Stripe, meantime, has been on a renewal drive with heavy promotions of the Jamaican bottled brand. In fact, its marketing costs climbed 20 per cent, from $887 million to just under $1.1 billion at the end of June.

The added cost fed through to depressed profits of $2.21 billion (2005: $2.35 billion) and earnings per share of 79 cents (2005: 84 cents), but McKenzie and chairman Richard Byles said in a combined statement that if the $406 million one-time gain on fixed asset disposal was stripped from Red Stripe's 2005 financials, the current year's after tax profit would show an improved 14 per cent.

The company distributes brews Red Stripe, Heineken - Heineken Finance NV and Heineken International Beheer BV are the second and third largest stockholders of Red Stripe with 303 million and 130 million shares respectively - Dragon Stout, D&G Malta and Guinness.

In July, Red Stripe also reshaped its sales team and pricing system to drive new business, based on the advice of its marketing department.

"We've completely revamped our sales force who were originally contracted to us and employed them inhouse," McKenzie told on the periphery of D&G's 87th annual general meeting.

The sales team now comprises 32 inhouse and 45 front end salespersons overall.

In the year ahead, the company plans to boost exports which at $1.9 billion moved from 21 per cent of total sales in 2005 to $2.6 billion or 25 per cent of total sales in 2006 - and continue upgrading the plant, said McKenzie.

Red Stripe, which retooled its bottling line with savings of $2.7 billion since 2002 under a tax moratorium from Government, is now constructing a $300 million wastewater treatment plant.

The company, in its 2006 annual report, said its bottling operation was at 98.7 per cent efficiency, a 25 per cent improvement over the prior year.

Said McKenzie: "We've been here for a long time and represent a significant part of the market. We're happy to have competition. There's nothing wrong with it. It puts you on your toes."

Red Stripe is a Jamaican lager-style beer whose logo is a bold, diagonal red stripe. It was originally brewed by the Desnoes and Geddes company (founded by Kingston natives Eugene Desnoes and Thomas Geddes) as early as 1928, but in 1993, that company was purchased by the huge multinational makers of Guinness, Diageo. It is 4.7% alcohol by volume.


22 November, 2006