( L - R ) BURROWES and REID
PEPSI-COLA JAMAICA, which controls over half of the market for carbonated soft drinks, is set to handover the distribution of its products in Kingston to Red Stripe. The deal will give the brewers islandwide control over the delivery of Pepsi's sodas, Pepsi announced on Monday.
With the agreement, which comes into effect on July 10, Pepsi will make 70 sales and distribution staff redundant, triggering a strike at the company's bottling plant on Spanish Town Road in Kingston. The company employs 300 people.
Pepsi Jamaica's general manager, Andrew Reid, said the decision would "further enhance" his company's leadership in the Jamaican soft drink industry and improve its customer service. However, it was not immediately clear what saving will accrue from the deal and how this will impact on Pepsi Jamaica's bottom line.
Kingston accounts for about 40 per cent of Pepsi's estimated Jamaican sales of seven million cases, or 168 million bottles, of soft drinks annually, so its addition to Red Stripe's distribution portfolio will represent a significant chunk of business for the brewing company. That Red Stripe distributes soft drinks for Pepsi-Cola Jamaica is not without an ironic twist.
Owned by the British food and drinks company Diageo, Red Stripe formerly operated under the company's registered name Desnoes & Geddes (D&G), until it, three years ago, began trading under the name of its best-known Jamaican brand - the lager beer, Red Stripe.
FRANCHISE TO BOTTLE PEPSI
When the Diageo subsidiary, Guinness, bought D&G in the 1990s, one the business it spun-off was D&G soft drinks, selling the business to Pepsi Americas, from which D&G had a franchise to bottle Pepsi soft drinks in Jamaica. Desnoes & Geddes bottled several soft drinks under is own brand and these have been maintained by Pepsi-Cola Jamaica
Pepsi Americas is the second largest Pepsi bottler in the world, with operations in the United States, Eastern Europe, Puerto Rico, the Bahamas, Trinidad and Tobago and Barbados.
Red Stripe at one point contracted out the distribution of its products, but brought the business back in house in the late 1990s, saying that it not only gave the company greater control over the market but allowed for efficiencies.
Last week Pepsi had hedged on whether it was close to a full distribution deal with with Red Stripe, with Pepsi's sales manager, John Burrowes, claiming that both companies were only talking. Such negotiations had been on-and-off for years, he said.
"We are working on improving the efficiency,"Burrowes said. "We are trying to develop a rate structure that is more equitable."
Red Stripe delivers products from eight distribution centres in rural Jamaica, which currently also serve Pepsi. Delivery is by Red Stripe's transport.
"Apparently Pepsi wants a similar arrangement for the parish of Kingston," a source told Wednesday Business.
