Ashford W. Meikle, Staff Reporter
MCKENZIE
RED STRIPE Jamaica has signalled its intention to refocus on its domestic business as it attempts to reverse years of decline in its sales volumes even as its export segment continues to show consistent growth.
Managing director, Mark McKenzie, speaking at Mayberry's monthly Investors' Forum on Wednesday, told the audience that the company's "exports are on a clear growth path ... and now it is appropriate to dedicate time and resources to our local businesses to ensure it is returned to healthy and sustainable growth."
Describing the new venture as Red Stripe's "transition to growth," McKenzie revealed that over the next few months, Red Stripe would turn its primary focus on its flagship product, Red Stripe Beer, as it moves to stamp its focus on the Jamaican landscape by "crafting a brand that is far more relevant to the adult population through innovation and renovation - making the brand more appealing and up-to-date. We'll do it through strong visibility at points of purchase and influence across the country."
SALES VOLUME DECLINING
Sales volumes of the brewery's domestic business, while highly profitable, have been on a declining trend while its export business - which is yet to become profitable - has grown. Although the company's domestic turnover continues to register growth (because of price increases), sales volumes have been declining. Volumes in 2005 declined by about two per cent. For the nine months to March 2006, there was a four per cent decline in domestic volumes.
A very different situation exists with its export segment.
In 2001 Red Stripe's parent company, Diageo, convinced the Minister of Finance to grant the company a five-year tax break, arguing that it needed the breathing space to completely overhaul its operations so that it could compete effectively when the liquor market became liberalised in 2005. That waiver will expire at the end of this month.
At the investors' briefing, Red Stripe's chairman, Richard Byles, pointing to the company's growing export volumes, defended the waiver.
"We have used that period to really build our export capability and in that respect the assistance from the Government of Jamaica with ... the tax rebate was of considerable help. The evidence of how we have used that tax break is available in our export numbers. There are very few companies that claim to be world competitive. Red Stripe is world competitive and is proving it in increased exports," argued Byles. Indeed the numbers support his argument.
EXPORT VOLUMES UP
For the 2005 financial year to June 30, Red Stripe's export volumes were up by some 31 per cent, while its turnover increased by 58 per cent, to $1.8 billion. In fact, revenue from Red Stripe's export constitute just under 21 per cent of its total turnover for 2005 compared to 15.7 per cent in 2004. For the nine months to March 31, 2006, the company experienced a decent nine per cent growth in its revenues, to $7.5 billion compared to the $6.8 billion posted the previous year. The increase in value was attributed to a 33 per cent growth in export volumes.
But, Byles, pointing to the importance of the company's local market, noted that "domestic sales growth is vitally important to us because it is a profitable business for the company mostly because the brand is very well known already and the investments that have been made in marketing is not as much as exports."
McKenzie said that the first step in resuscitating the brand on the local market would be to clearly define the role of each of the brands in Red Stripe's portfolio, reducing the internal competition among the brands, while focussing on the company's real competitors.
The managing director explained that the fundamental change in Red Stripe's marketing approach "will be supported by dynamic changes in our commercial structure in response to customer feedback. We change not only the structure but also the capability and the focus our sales force. They will be tooled and trained to grow the business of Red Stripe."
Explaining that the new thrust would be executed by growing beer sales, putting in place a wining sales structure, identifying the best team and reaching communities, McKenzie told the investors that Red Stripe would bring "new focus to [its] Jamaican business by addressing the things that we can control."
