Red Stripe plans 3-yr transformation of beer plant

Sabrina Gordon, Business Reporter

Beer maker Red Stripe Jamaica will be investing half-billion dollars to modernise its Kingston plant.

The plan requires not only new equipment but also a reconfiguration of the plant.

"Historically, the brewery has been built as a kind of conventional cellars where we put all the tanks in a room, cool the room and cool the tanks," said Cedric Blair, newly appointed general manager of Red Stripe Jamaica.

"No brewery is built that way anymore, so we are actually building a brewery outside and will close those buildings and vessels down and install external tanks that will help us reduce our energy consumption, reduce water consumption and will use significantly less footprint," Blair told Sunday Business.

Red Stripe will spend US$6 million (J$546 million) on the project, which will be done in phases lasting up to three years.

excess space

Blair said the new facility will cover a much smaller area of the complex, and that the excess space would be used for storage and other functions.

The complex, including the space occupied by distribution partner Pepsi Jamaica, is about 85 acres, the new GM said.

"We will use a fraction of the size of the facility for the new plant," said Blair on the margins of Red Stripe's annual general meeting on Friday.

"We will be able to put this new updated brewery in about three to four acres - both the brewery house and the vessels. So we will knock down the old building, sell most of the tank and use the space for further redevelopment or storage of empty bottles," he said.

While most of the work in terms of  equipment is expected to be done within this financial year, the project is to be done over a three-year period.

"We can't just knock the whole thing and go from scratch because we still have to produce beer. So we will put in the new vessel while also taking down some sections of the building," Blair said.

"The timeline for getting it done is over two to three years but the bulk of the expenditure will be done in this financial year into the next," he said.

Red Stripe's financial year closes in June. For financial year 2012, the company reported improved net profit of J$1.23 billion off reduced turnover of J$13.15 million. Profits rose J$151m, whereas sales fell by J$118m.

Its cash stash grew more than three-fold from J$274 million to J$973 million during the year, or close to twice the amount to be expended on the project on which most of the expenditure will be done in the early phase, according to Blair.

Red Stripe will install new fermentors, new bottling tank, maturation tanks, new pipes and equipment, new filters, new coolers as well as the necessary supporting equipment that goes along with the different vessels, he said.

energy production

Red Stripe is also pursuing the development of its own co-generation plant for energy production to power the brewery.

The company expects to start seeing savings from its energy plant in 2014.

It is working on another initiative to cut production costs by using more local raw materials in the brewing process, and will by 2014 source at least 20 per cent of its raw material needs from inside Jamaica, said Blair.

The plan involves replacing some imported barley and high maltose syrup imported from the US with cassava grown in Jamaica - the initial target, he said, is 20 per cent replacement by 2014.

"In Diageo, we use a lot of local raw material from elsewhere - cassava, sorghum and sugar - so one of the things we are looking at doing, and which we are discussing with the Ministry of Agriculture, is the use of cassava as a possible source for brewing material, because it is done elsewhere," said Blair.

"We are looking at how to replace at least about 20 per cent of our brewing material that we import with locally grown cassava and we have been talking to various cassava farmers."

The cassava idea remains a work in progress but Blair said it was a serious project.

"... The project is something very interesting to us and we will continue to pursue it," he told Sunday Business.

Much will depend on whether farmers can deliver the product in the consistency, volumes and quality that the beermaker will require. Red Stripe says it is willing to work with the farmers to improve their yields, which is currently at about a third of the level that the brewery would require.

"We would expect to have yields of 45 to 60 tonnes per acre; I think we are in the 10 to 15 tonne range now, but we can always improve the capability of the farmers to produce at much higher yields," Blair said.

Meantime, Red Stripe continues to focus on export growth and brand development.

The company has identified four growth markets: Brazil and Mexico where it already has a presence; as well as Chile and Argentina.

"Initially we would be potentially shipping from Jamaica to those markets but once it gets to scale of something like North America then we will look to adopt a similar model like in North America where we manufacture there," Blair said of the company's push into Latin American.

"We can't take it for granted that people will constantly be adoring our brand, so we want to constantly look at the brand equity and value creation, and how we make sure that we remain relevant," said Blair.

Red Stripe is also in markets in the United States, Canada, United Kingdom and other parts of Europe.

sabrina.gordon@gleanerjm.com