Tue | Aug 22, 2017

Red Stripe brewery investing €16m to double capacity

Published:Friday | August 5, 2016 | 8:00 AMNeville Graham
Ricardo Nuncio, managing director of Red Stripe Jamaica.

Managing Director of Red Stripe Jamaica, Ricardo Nuncio, says by year end the Jamaican brewery would have doubled production capacity, dedicating more to exports.

Nuncio says a new line costing €16 million will have a capacity of about half-million hectolitres, which is close to five million cases. This will boost total capacity to 10 million cases, he said, allowing the company to boost exports.

The investment translates to more than $2 billion in local currency. Red Stripe Jamaica was acquired by Heineken last year.

"With that new capacity, the intention is for the export market mainly so that we will keep our current line completely focused on the domestic market. We expect a big uplift in our volumes in exports and so we feel that we will be using about 50 per cent capacity; but that should be ramped up going forward, say the next three years," Nuncio said.

The move to restart production for exports follows a reversal of a 2012 decision by then owners Diageo to outsource production of beer to be sold in foreign markets to Latrobe, Pennsylvania, in the United States. The franchise operation was aimed at servicing the US market.

In the wake of that decision, a class action lawsuit on behalf of US consumers alleged that phrases like 'Jamaican Style' and 'Taste of Jamaica', which appeared on the bottles, were misleading labelling by Diageo. The case was eventually thrown out of court and sources close to Red Stripe have consistently downplayed its effect on the decision to repatriate the volumes produced in the US.

Greater efficiency

Nuncio said the number four bottling line at Red Stripe's Kingston plant has been lying idle as a result of the export franchise arrangement. He cited the need for greater efficiency and technological upgrades as reasons for its replacement during a tour of the plant on Wednesday by Government officials, Finance Minister Audley Shaw and Industry Minister Karl Samuda.

"We'll be replacing this with a more efficient line that will have greater capacity, and it will be totally dedicated to exports," Nuncio told the Financial Gleaner, explaining that the plan is to gradually ramp up production as the company grows exports.

"It won't be used 100 per cent for the first two to three years, but we have a projection that will allow us to have capacity for the next seven years or so," he said.

Meanwhile, the import-substitution driven Project Grow is said to be ahead of targets. Nuncio told the Financial Gleaner that cassava was already supplying 10 per cent of the raw material content for making beers, ales and stouts. It's twice the five per cent level that Red Stripe initially predicted it would have reached at this stage of the project.

Red Stripe was aiming initially for 20 per cent substitution overall under Project Grow, but on Wednesday Nuncio was already talking of a more aggressive 40 per cent target by 2017.

The company presently has 500 acres under cultivation - 200 at Bernard Lodge and another 300 at Cheesefield, both in the parish of St Catherine. Nuncio says the plan is to double the acreage to 1,000 and pump more money into processing the cassava.

"We are investing US$1.9 million for a cassava-processing plant that will allow us to process up to 100 tonnes. In addition, we plan to invest an additional US$3 million for the cassava malted syrup plant," Nuncio told the Financial Gleaner.

neville.graham@gleanerjm.com