Correction & Clarification
In the story titled 'Excise tax policy anti-business' published in Sunday Business, October 31, 2010, the photo of Alan Barnes was incorrectly captioned Richard Kellman. The photo of Richard Byles posing with the Red Stripe bottle was not a file photo as captioned but taken from Red Stripe's 2010 annual report.
For 10 months, Desnoes and Geddes Limited, which trades as Red Stripe Jamaica, has been lobbying the Government to adjust its special consumption tax (SCT) policy, but on Friday, the brewery said its efforts at securing a rollback had got nowhere.
And now the company is blaming the tax for its poor performance during the past year when beer sales got slammed by broke consumers.
Sales revenue dropped one per cent to J$13.33 billion on weaker volumes in the year ending June 30, 2010, and profits were cut in half to J$789 million.
Turnover was down one per cent, but the company's excise tax liability rose 22.6 per cent, from J$1.8 billion to J$2.2 billion.
No decision made
"I think that intellectually, there is a greater appreciation of the problem, but what we haven't been able to achieve is a decision," said Red Stripe chairman Richard Byles at the Diageo-controlled company's annual general meeting in Kingston.
"It's been studied, it's been recommended; technical persons have looked at it, but we have not had a decision," he said.
Byles described the SCT, which was raised on several categories of products last year as "discriminatory".
The tax on stout beer, a category in which Guinness falls, increased from 16 per cent to 25 per cent; and from 21 to 25 per cent on Smirnoff Ice, Red Stripe, and other beers; whereas the tax on spirits moved up one point, from 24 per cent to 25 per cent.
The Red Stripe chairman said that if the SCT were not reviewed the tax would become counterproductive and would yield less revenue for the Treasury. The SCT is applicable to domestic sales, not exports.
"If we continue on this trend where we are finding it harder and harder to make sales volumes that we need to make, what will eventually happen is that the taxes that we pay year after year are going to fall," he said.
"We haven't seen it yet, but we are approaching the point where we will see that because our volumes are so low, the taxes will become counterproductive and the Government in total will receive less," he added.
Looking ahead, Allan Barnes, managing director of Red Stripe, said his job was running an efficient shop, and he was confident of making up some of the lost ground.
"We are managing our costs as well, much more than we ever did before," Barnes said. "All of this sets us up for a much stronger position in 2011."
He added a rider - the economy- saying his prediction for growth is tempered by the recession.
"Since the start of 2011—for as a financial year we started on July 1 - the economy has remained tough, the economy has remained very tough, the outcome of the civil unrest, [and] now Hurricane Nicole," he said.
"Whilst competition remains extremely fierce, with the small amounts of disposable income consumers have in their pockets, the outlook for us is going to continue to be one of fighting really hard for every single case we can get [sold]."
Barnes said the company would continue with its innovations.
Last year, the brewery launched six new products: Red Stripe Light, which was unveiled in a "stubby" package in two major markets, Miami and Atlanta, and which helped to drive a four per cent increase in net sales value of its export shipments; Dragon Stout Spitfire, which was introduced to the local market in May targeting the younger population; and new Smirnoff flavours - Smirnoff Green Apple, Smirnoff Passion Fruit and Smirnoff Cranberry - were added.
"We have ramped up our innovation team so that we have even more people looking at the consumer opportunities, looking at the brands available, and extending the brands into new pack sizes and even brand variance," Barnes said.