E-Malt.com News article: Jamaica: Diageo’s Red Stripe beer delivers good revenues in Canada

International spirits company Diageo Plc has credited local subsidiary Red Stripe Jamaica for contributing to a 15 per cent spike in beer revenues in Canada, amid an overall sales slump in the neighbouring United States market, Jamaica Gleaner reported on December, 21.

Consumers drank more beer, specifically Red Stripe and Irish beer Harp, in the Canadian market, but less spirits in the financial year ending July 2011, said Diageo in its most recent annual report.

Export sales contribute to one-third of total revenues for Red Stripe but the company wants to increase that share in order to diversify the ailing local market.

Canada signifies a lesser-known growth market for the locally made beer. Canada, at nearly 10 times the population of Jamaica, offers a larger high-end market for the brand.

"Net sales declined as consumers continued to trade down, and there was a shift from spirits to beer and ready to drink. Beer volume increased 17 per cent and net sales grew 15 per cent due to the good performance of Harp (Irish lager) and Red Stripe," said Diageo in its financials.

Red Stripe, incorporated as Desnoes & Geddes Limited, is a 58 per cent subsidiary of Udiam Holdings AB, a company incorporated in Sweden, whose ultimate parent company is UK-based Diageo.

Red Stripe's September quarter revealed a 14 per cent dip in export sales to some J$861 million, underscoring problems experienced in the US market, financials stated. In an attempt to address that decline, the company announced in October that starting April 2012 beer sold to North America will be produced in Philadelphia in the US.

The shift will cut about 70 jobs, but will mean J$2 million to J$3 million more profit for the company, Red Stripe said in October.

"This model of moving production to the source of consumption is international best practice and is one that has been implemented by the majority of international brewers. We feel this is critical to the future growth of the Red Stripe brand in the USA, as it allows for the savings gained from economies of scale in production and lower distribution costs to be invested in additional A&P (advertising and promotion) support to increase brand visibility in the ultra-competitive US market," said Red Stripe in its September first-quarter financials.

Red Stripe, a company with J$7.7 billion in equity, made J$126 million in after-tax profit in the first quarter, which was up 10 per cent relative to the September 2010 period.


21 December, 2011