Tue | Mar 20, 2018

‘Money back’ bottles a billion-dollar sector and boost to brewer’s bottom line

Published:Sunday | September 27, 2015 | 12:00 AM

Red Stripe's stubby, brown bottle with its painted red and white label is more than a cultural icon.

It is also the centrepiece for a $1 billion sector within the domestic economy - the 'money back bottle'.

The local beer maker currently pays $10 for each glass container and $160 for each crate making its way back to its plant located on Spanish Town Road in Kingston under its deposit-refund system - a mainstay of the company's operations for some three decades now.

In the main, 'empties' are used by retailers to get discounts on future orders of beer, but that's not to say that consumers in need of quick cash - such as the 'bottle police', who seek out the often-discarded bottle to sell to the local wholesale - is not an important part of the recycling effort.

Today, over 100 million bottles of beer - including Heineken, Guinness, and Dragon Stout - are packaged in glass, which make their way back into production each year.

As a result, a beer bottle has an average lifespan of three to four years.

What's more, the company replaces just 20-30 per cent of the float with new bottles annually.

Put another way, it is recovering 70 per cent or more of the bottles that leave the plant.

That's a major improvement from the 1990s when D&G - the then owner of Red Stripe - cited that it recovered just half of the iconic squat bottles.

"We see returnable bottles as not just a cost-saving measure, but also as a force for good with regard to the environment," Red Stripe Jamaica's Finance Director Bruce Kidner told Sunday Business.

Indeed, reusing bottles provides the local brewer with a 20 per cent saving on packaging each year. That's more than $200 million, which goes to the company's bottom line each year.

Last financial year, which ended on June 30, the local brewer changed out its entire Heineken bottle and crate float to accommodate a new contemporary design, according to Kidner.

"In addition, we also invested in returnable glass to support the overall growth in the rest of the beer portfolio and, in particular, our innovations Red Stripe Sorrel and Red Stripe Lemon Paradise," he said.

This cost the company $600 million more than it would typically have spent on purchasing additional bottles and crates for the float.

However, the one-off expenditure reflects a major transformation being undertaken by the beer manufacturer.

In the last two years, Red Stripe has commissioned a cogeneration plant; a flexible packaging line; modern, efficient fermentation vessels; and a carbon dioxide capture mechanism.

By the end of December, the brewer is expected to commission new upright maturation tanks, which will mark the completion of a $1.4 billion brewery consolidation project.

"Expected savings from the entire brewery consolidation are expected to amount to close to $500 million," according to Kidner.

Over the last three years, Red Stripe has increased its gross profit margin from 37 per cent in 2012 to 42 per cent in 2015, while it reduced its operating expense as a percentage of net sales from 24 per cent to around 20 per cent.