Ashford W. Meikle, Staff Reporter

Mark McKenzie, managing director of Red Stripe. - File

RED STRIPE, once known for its aggressive marketing and high visibility in the Jamaican marketplace, appears set to return to the 'good old days.' The company has hinted it will revamp its marketing strategy to resemble something of the old times in an effort to reverse years of declining sales volumes at home.

"Exports are on a clear growth path ... and now it is appropriate to dedicate time and resources to our local businesses to ensure it is returned to healthy and sustainable growth," said Red Stripe's CEO, Mark McKenzie as he expressed the company's satisfaction with the growth trend in the export business. He was speaking last Wednesday night at an investor briefing organised by the brokerage house, Mayberry Investments.

In 2001, Red Stripe, a subsidiary of the United Kingdom food and drinks group, Diageo Plc, convinced the Jamaican government to grant it a five-year tax break, saying that it needed the breathing space to completely overhaul its operations to effectively compete when the liquor market became liberalised in 2005. That waiver will expire the end of this month and has apparently operated to good effect, judging from Red Stripe's rising export sales.

For example, for the 2005 financial year to June 30, Red Stripe's export volumes were up 31 per cent on a turn-over that increased by 58 per cent, to $1.8 billion. In fact, revenue from Red Stripe's export constituted just under 21 per cent of its total turnover, compared to 15.7 per cent in 2004.

NINE PER CENT GROWTH

Further, for the nine months to March 31, 2006, the company reported a nine per cent growth in its revenues, to $7.5 billion, but the bulk of the rise in sales was attributed to a 33 per cent growth in export volumes.

All this, according to the company's chairman, Richard Byles, pointed to the efficacy of the waiver.

"We have used that period to really build our export capability and in that respect, the assistance from the Government of Jamaica with ... the tax rebate was of considerable help," he said. "The evidence of how we have used that tax break is available in our export numbers. There are very few companies that claim to be world competitive. Red Stripe is world competitive and is proving it in increased exports."

DECLINING SALES

However, Red Stripe's domestic market has not fared so well with declining volume sales of its flagship lager, even though turnover has increased because of price rises.

In the 2005 financial year, for example, volume was down by about two per cent, company officials said. For the nine months, to the end of last March, volume declined by four per cent when compared to the comparable period for the previous financial year.

Byles insisted that the domestic market was a segment of the business that Red Stripe could not afford to ignore. "Domestic sales growth is vitally important to us because it is a profitable business for the company, mostly because the brand is very well known already and the investments that have been made in marketing is not as much as exports," he told investors.

Red Stripe dominates the Jamaican beer market, with its Red Stripe lager, Heineken, a lager it brews under licence, and Guiness Stout, a brand owned by its parent group. It is challenged only by a smaller domestic brewer, Real Rock, and few imported brands sold mostly in hotels and high-end establishments.

DOMESTIC VOLUMES LOW

But in recent years, Red Stripe has said that its domestic volumes have suffered a tight economic situation, storms and concerns over crime and violence that kept patrons away from community bars. It was not immediately clear if these issues remain seriously relevant and if Jamaicans may be drinking less for other reasons.

However, McKenzie is keen to resuscitate the Red Stripe brand on the domestic market and said that this would start by clearly defining the role of each of the brands in Red Stripe's portfolio. This would help to reduce internal competition among the brands while focusing on the company's real competitors.

Fundamental change in Red Stripe's marketing approach "will be supported by dynamic changes in our commercial structure in response to customer feedback" McKenzie said.

"We have changed not only the structure but also the capability and the focus our sales force," he said. "They will be tooled and trained to grow the business of Red Stripe."