Ashford W. Meikle, Business Reporter

Mark McKenzie, managing director of Red Stripe. - File

Red Stripe, which officially acquired the distributorship of the locally imported Diageo spirits Thursday, says it plans to revamp the marketing of the brands, but said shelf prices would not be affected immediately.

"We don't expect to be changing prices in any significant way - certainly not in the short-term, and certainly not reducing prices," said Mark McKenzie, managing director. "The consumers won't see a change."

Last October, Diageo, the world's largest premium drinks company with brands such as Cuervo and Tanqueray, announced it would transfer the Jamaican distributorship of its Spirits from Lascelles deMercado, to its local subsidiary.

The move occurred around the time that Lascelle's wines and spirits subsidiary went into beer making, in direct competition with Red Stripe.

Strengthening product mix

Diageo acquired Red Stripe (then Desnoes and Geddes) in 1997 and, in keeping with its global product mix - sold off the non-alcoholic drinks business to Pepsi Jamaica.

"Most of the brands we deal with are premium brands, and consumers don't respond well to price changes, certainly not downwards as it affects the image," said McKenzie.

Red Stripe is now looking to strengthen its product mix.

"What we do intend to do is look at prices to the trade and try to make it a bit more attractive for the trade to buy in and buy a cross section of our brands. It's a strategic decision to consolidate brands under the Red Stripe umbrella.

McKenzie said the new strategy was a natural evolution of the business.

Citing regulatory restrictions, he declined to make any projections about how the distributorship would affect the bottomline of Red Stripe, a listed company.

Earnings

For its financial year to June 30, 2006, Red Stripe had earned a net profit of $2.1 billion on revenues of $10.1 billion, an eight per cent increase over the previous year's sales. In fact, Red Stripe's performance was bolstered by the growth in its export segment, which climbed by 31 per cent.

However, there has been some reversal in the company's performance based on the first quarter, ending September 30, 2006.

While turnover amounted to $2.6 billion, a 13 per cent increase, there was a 29 per cent drop in its net profit, which dipped to $207 million. But, while domestic volumes increased by a 13 per cent, there was a 10 per cent decline in its export volume.

McKenzie says that Red Stripe will be concentrating heavily on marketing to push sales of the new brands to boost the company's bottomline.

Much expansive business

"What we hope to do is to concentrate more on the marketing, sales and distribution. Clearly, what we want to do is to bring the brands into bigger brands with stronger connections with our consumers to which we are catering, and growing the business is what we expect to achieve - a much bigger and expansive business," he said.

For its 2006 financial year, the company invested over $1billion in marketing, about half of which was spent locally.

"The way you look at the entire business is through consumer motivation and you target brands at different consumer motivation and meet their needs," said the beer executive.

The marketing and distribution of the spirits will be kept sterile from the brewery's flagship beer, but Red Stripe won't be hiring new staff or making infrastructure changes to accommodate the distributorship.

"There is a difference between spirits and beers and how we are allowed to distribute them," McKenzie said.

"The law does not allow you to deliver spirits on a route truck; the spirits will go through our direct delivery system where we take orders and deliver direct to customers. And we are completely prepared in terms of our staff which we have been training since July last year."

ashford.meikle@gleanerjm.com