Wed | Mar 20, 2019

Red Stripe hits virgin-drinkers jackpot, eyes mega foreign markets

Published:Friday | September 7, 2018 | 12:00 AM
Ricardo Nuncio, managing director of Red Stripe Jamaica.
Red Stripe Sorrel beer
Red Stripe Lemon Paradise beer

Local brewer Desnoes & Geddes Limited, which trades as Red Stripe Jamaica, is celebrating its 100th anniversary of corporate existence with bumper half-year sales driven by its fruity beer flavours that are a hit with new drinkers in the local market.

Jamaica remains the bread-and-butter market for the company that is now Dutch-owned, even as the brewery leverages the vast and expanding global network of its parent, Heineken International, to further rev up export growth.

"There has been year-over-year increase in volume and revenue largely due to the unprecedented popularity of the Red Stripe flavours," Red Stripe's managing director, Ricardo Nuncio, told the Financial Gleaner of the private company's financial results at year ending June 30 this year, on the cusp of its July centennial anniversary month.

Nuncio did not give details of the six-month balance sheet for the firm that did more than $22 billion in sales and posted more than $3 billion in after-tax profits last year. He noted, however, that the domestic market remains the main source of revenue, and that export sales continue to grow, with the company focusing on the Eastern European market even as it looks to bump up sales in Asia, particularly for its flagship lager, the 90-year-old Red Stripe beer.

Red Stripe Jamaica has attracted some public flak for its focus on new drinkers, but the company's top executive is pushing back.

"Most marketing strategists will agree that long-term brand sustainability is largely hinged on appealing to, and recruiting new consumers and occasions to drive further opportunities; a caution being to not alienate the brand's core consumers," he says.

As for the company's global strategy, it's pegged to "Heineken's global presence and expertise," Nuncio responded.

"Red Stripe is currently in over 30 markets globally and most recently we entered South Korea, with more focus on Eastern Europe," he added.

Eye on Europe

European countries such as the Czech Republic and Austria are considered important beer markets with very high consumption. The Jamaican beer is also destined for Germany, another big beer-drinking market in Europe, by next year.

Commenting on the most significant benefit for Red Stripe from its majority acquisition by Amsterdam, Netherlands-based Heineken NV in late 2015, Nuncio said the Dutch brewer and distributor's "world-class systems, processes, extensive marketing experience and a global network" can be leveraged for further export market expansion.

Heineken operates 165 breweries in more than 70 countries and sells close to 300 various brands of beer. It is the number two beer company in terms of dominance in the global market by volume behind the Belgian-Brazilian brewery, Anheuser-Busch InBev.

In August this year, Heineken inked a deal that gives it a leg up in the lucrative Chinese marketplace, where it has lagged in market share. It merged its fairly small but premium China business with Chinese market leader China Resource Enterprises, CRE, to gain a 40 per stake in China Resource Beer Company and an effective 20.76 per cent in CRE, with CRE, in turn, taking a 5.2 per cent stake in Heineken NV.

While the Heineken brand premium beer is being positioned for a wider uptake in the world's most populous country, it appears too early to say if Red Stripe or any other of Heineken's many beer brands will be similarly positioned to benefit from the China deal.

"We are not playing everywhere, but focusing on markets where we believe the return on investment is the greatest," Nuncio said about Red Stripe's growing global footprint. "With the new global campaign, we are ensuring that Red Stripe is viewed with a singular brand message," the beer boss added.

The Jamaican beer company this year unveiled its 'Stand Up for Your Stripe' global marketing campaign that chronicles the 100-year history of the brewery, utilising and showcasing the island's various indigenous music genres.

Red Stripe's local and foreign market push was preceded over the last three years since the company was acquired by Heineken, by an investment of more than US$35 million, Nuncio noted. The money went into a new packaging line, expanding the capacity of its cassava starch factory, upgrading the company's wastewater treatment plant and implementing an enterprise resource-planning system to improve efficiency.

"These have positioned us on a trajectory of long-term growth," he said.

Red Stripe has recently substituted imported malt in its beer brew with locally grown cassava, a move that has provided an important fillip to the agriculture sector. The beer maker also returned the manufacturing operations for most export markets to its Spanish Town headquarters in Kingston.

Red Stripe beer is still brewed under licence in the United Kingdom, and Nuncio is not closing the door on the possibility of other licensing deals for other foreign markets. "We are always exploring new opportunities," he said.

For him a Mexican national who has led the Kingston-based brewery for nearly three years since November 2015 Red Stripe's greatest accolade has been its longevity; its "ability to withstand the test of time for 100 years and the indubitable contribution we have made to the global impact of Brand Jamaica," he said.

"Not many companies can boast achieving 100 years of sustained presence. This feat is due in large part to the commitment and passion of our employees, concomitant with the loyalty and love that consumers have for this celebrated brand."

To mark its centenary, the company will be donating close to $20 million to its Desnoes & Geddes Foundation to fund 100 community projects across Jamaica. This was augmented by the contribution of 100 cents from every bottle of Red Stripe beer sold in July.