Red Stripe pressing ahead with goal to reduce costs through Jamaican-grown inputs

KINGSTON, Jamaica, Thursday February 28, 2013 – A year after parent company Diageo declared its intention to replace 70 per cent of imported inputs with locally grown raw materials by 2020, Red Stripe has announced the signing of a memorandum of understanding with Jamaica Producers to explore the growth of cassava for use in its brewing.

The casssava study is part of the iconic Jamaican lager brewer’s plan to surpass Diageo’s global goal and replace up to 20 per cent of imported raw materials with local produce by 2014.

Jamaica Producers is among the largest growers of cassava in Jamaica. The company had a total of 85 acres under cassava production up to 2011. 

Red Stripe, which also reported a 31% increase in second quarter net profits to JAM$468 million for the period ending December 31, 2012, said this move was among a number of initiatives it had implemented to increase efficiencies across its operations in a tightening beer market.

“These transformational projects we have in place, including building a co-generation plant and plant optimisation, reflect a clear and differentiated strategy which should help us to remain resilient against a backdrop of a more constrained environment and sustained global economic uncertainty,” the Jamaica Observer quoted Red Stripe’s Managing Director Cedric Blair as saying.

“It is a strategy that is creating a strong foundation for current and future growth by responding to the significant opportunities that are available to us beyond a domestic-only focus,” he reportedly added.

Red Stripe said recently that it expects to complete a feasibility study on growing cassava for beer production in February. It has employed a full-time project manager and has already made a test batch of beer from the produce.

Meanwhile, the company has grown its bottom line on improved results in its domestic portfolio, resulting in a nine per cent overall increase in domestic net sales value for the half year. This was offset by a 22 per cent decline in export net sales versus last year following the business decision to change its direct export model for the USA to a royalty-based (both produce and sell under license) structure.

Cost of sales for the half year at JAM$3 billion decreased by 11 per cent versus the prior year. Gross profit for the half year improved by 11 per cent, due to a combination of higher domestic sales as well as the elimination of direct costs by Red Stripe with the new royalty structure for sales in the US market, the company said. Click here to receive free news bulletins via email from Caribbean360. (View sample)