KRB looks for growth in contract bottling... But quietly building own rum brands
Avia Collinder, Business Writer
Its 3,000-square-foot bottling centre along Constant Spring Road in Kingston is particularly impressive. And should it spend the projected J$9 million on new equipment next year to triple its capacity, the 300 bottles of rum a day it will be able to produce will remain a proverbial thimble full in the context of Jamaican's, spirits output.
But KRB Lea Jamaica Rums Limited not worried. It is taking time, slowly growing its business rather than stretching itself with costly, unaffordable expansion.
"In the bottling segment, we are hoping to see a 25 per cent improvement in business next year," said business development manager, Duncan Messado, who oversees operations from a loft in the high-ceiling factory.
Or, Messado's projection stated another way: blending and bottling rums for other people will, in the short term, outstrip the growth of KRB's own Port Royal brands.
Of course, Messado agrees that building brand value offers the best returns. But it is an expensive and often risk business, as even companies much larger, and with more resources than KRB, can attest.
Added Messado: "The revenue from contract bottling is less than what we make from distribution of our own brands, but it is consistent. We continue to operate profitably."
Messado's father, Geoffrey, his uncle Gordon and three other partners, Howard Hamilton, George McLeish and Peter Thomas, acquired KRB Lea in 2002 from former owners Stephen Fung Lee and Michael Shim.
Fung Lee and Shim used to blend and bottle a line of rums under the Trelawny label, named for the Jamaican north shore parish that was once a major sugar-producing centre and an important 18th-century commercial centre.
But four years ago, they re-branded the rums line as Port Royal - a quaint little town at the edge of the peninsula that shelters Kingston harbour, the world's seventh- largest natural harbour. But Port Royal has added romance.
In the 17th century, it was the hub of pirate activities in the West Indies and the lair of the then king of pirates, Henry Morgan. It became a famous British naval base, but its renown was elevated by an earthquake of 1693 when half the city was lost in the sea.
With Port Royal amber, silver, white and gold, as well as their Lea white overproof, bottled KRB Lea, according to Messado, has a little less than 10 per cent of the Jamaican rum market.
It sells in bulk to bakeries and the catering trade as well as supplies bars, hotels and airport duty-free stores with its branded products.
The company employs seven full-time production staff. They will have to be retrained when the new equipment is up and running by mid-2011.
For now, though, the primary focus is not spending scarce and too expensive marketing dollars in an attempt to quickly build awareness for its brands.
The strategy, instead, is go aggressively for contract branding, which KRB Lea already does with brands such as Lion Pride White Overproof, Country Traders, Royal Jamaican and Smatts.
In fact, half of KRB Lea's production already comes from such contract bottling. The owners provide their own formulas, packaging and marketing and distribution once the blending and bottling is done.
""For us, no risk is involved," explained Messado.
By following this strategy, KRB, which sources its raw rum from National Rums Limited, has increased revenue and tripled volume over the past three years, according to Messado.
"As brands take off, we will increase the size of the facility to keep up with demand," he said.
Presently, the best prospects for growth appear to be Smatts, owned by a United Kingdom-based company named Swashbuckler Limited and Royal Jamaican, owned by a Canadian operation called United Distributors.
This, however, does not mean that KRB is ignoring its own brands or the domestic market.
According to Duncan Messado, despite the recession that has clipped 10 per cent from domestic sales over the past two years, KRB expects to grow its Jamaican brands over the next few years.
He believes that the company has a promising toehold, including, he said, a 30 per cent share of the rums consumed in the Spanish-owned hotels that have sprung up in Jamaica over the past five years.
Said Messado: "What we offer is a great product and a lot of flexibility. With our small overhead, we can offer a more affordable product."