More investment, more beer
DESNOES & Geddes Limited, operating company for the Red Stripe Jamaica brewery, will invest €12 million or about $1.7 billion this year in order to develop a new packaging line and technology system to handle expected growth in volumes for the next decade.
The current line operates at full capacity since the brewery decided last financial year to once again make beer, bound for the United States market, in Jamaica.
The new line will allow for the handling of the local and overseas product demand. The company will also implement new inventory and dataprocessing software to improve sales and productivity. “Our current line is not capable of supplying the demand for the next three years. Right now, our line is at maximum capacity, we have no room to grow. So we are investing in this line to manage our demand for the next 10 years,” Red Stripe Jamaica Managing Director Ricardo Nuncio said in a Financial Gleaner interview at the Red Stripe brewery in Kingston on Thursday. Concurrently, the company will consider introducing beers from Mexico and other markets into Jamaica. It’s aimed at growing local consumption of beer by offering choices to consumers in a market that trails other regions. Sol, the primary beer under consideration, falls within the Heineken group. Red Stripe Jamaica is a 95.78 per cent subsidiary of Heineken. Nuncio expects to make a decision on new beers within six months. These beers would target Jamaicans looking for variety rather than targeting tourists in the hospitality sector. That’s because tourists are mainly looking for Red Stripe to get that Jamaican experience, he said.
“Sol, which is a Mexican brand, can compete with Corona [the large Mexican beer] in a good way. We are also looking at innovations and there are a couple of international brands, but we should see more variety in the next six to eight months,” said Nuncio.
Last year, Red Stripe invested $3.5 billion, according to its 2016 annual report issued for the annual general meeting, also held on Thursday at the Kingston brewery. The funds were spent on maintaining the existing line, new equipment, 800 coolers, new detectors, new bottles and crates, and cassava plant mill.
The brewery now uses cassava as an input for 10 per cent of its beer raw material, which offsets importation. It expects to increase the ratio to 20 per cent by year end, and is on track for the ultimate target of offsetting 40 per cent of importation.
Red Stripe Jamaica now has 1,000 acres for cassava planting. Another 1,000 acres are controlled by independent small farmers from whom it buys the tuber.
“So we have 2,000 acres that are available to plant and harvest from. This year, we expect to end with 20 per cent of cassava in our beers,” Nuncio said. Nuncio indicated that the company plans to continue its focus on growing the local market, add new export markets, and staff, saying those aims were the reason Heineken acquired Red Stripe from Diageo in October 2015. Despite the growth in exports, the domestic market will remain the largest earner of revenues for the brand in the long term, said Nuncio.
On the exports side, the company introduced Red Stripe to Australia, Brazil and Dubai last year. This year, the brewery plans to seek out markets in Mexico, Ireland, South Africa and Russia.
The company made net profit after tax of $3.35 billion for the year ending December 2016, up 21 per cent. Turnover increased 20 per cent to $19.2 billion.