William McConnell, managing director of Lascelles deMercado and Company. - File

Ashford W. Meikle, Business Reporter

The loss of its distributorship of Diageo products would create 'a hole' in Lascelles deMercado's operations, the conglomerate's boss told shareholders, but the company later refused comment on the size of the business the contract represented.

Managing Director William McConnell said the cancellation would hit the Lascelles spirits business, the core of the group's revenue turners.

The group's 'liquors, rum and wines' segment last year was about $10 billion, or 55 per cent, of the $18.4 billion of operating revenues.

"Let me tell you, it will affect us because Diageo is a very big company, a good company and so when we lose the marketing rights of Smirnoff it will affect us," McConnell said at the company's annual general meeting, responding to queries raised by shareholder Christopher Burroughs.

"I think over the last 40 years we did a pretty good job of establishing their brands for them, particularly Smirnoff vodka," said McConnell.

Transferred to Red Stripe

Last October Diageo, the world's largest premium drinks company with brands such as Smirnoff, Johnnie Walker, Bailey's, Captain Morgan and Tanqueray, announced that it would transfer the Jamaican distributorship of its spirits from long-time distributor Lascelles deMercado to D&G/Red Stripe, Diageo's local subsidiary.

That move followed a story broken by the Financial Gleaner that Lascelles was about to enter the beer market with its own brand, Kingston 62 Beer in partnership with Beverly Lopez's Big City Brewing, which bottles the brew.

It put Lascelles in direct competition with the Red Stripe company, which markets its flagship Red Stripe beer, as well as Heineken and other brews.

On February 1, Red Stripe company officially began marketing and distributing the Diageo brands, which include Johnnie Walker, Smirnoff, Gilbey's, Myers Dark Rum, Gold Label Trelawny, and Gordon's Rum.

Concentrating on new deals

To plug the gap, McConnell said, Lascelles has been actively concentrating on new distribution deals for vodka brands, such as Absolut, Finlandia and Skyy.

"Negotiations have been completed but I am not sure if the agreement has been signed for us to represent Absolut," he said of the brand which is expected to compete directly with Smirnoff vodka.

"We feel that with the distribution capability of the company, we will be able to make Absolut into a very formidable force [and] with the combination of Finlandia and Absolut and Skyy, which is gaining favour worldwide, we feel that we will bring new excitement in the vodka market," he said.

For its financial year September 30, 2006, Lascelles operating revenue was up 13 per cent to $18.4 billion while it's net profit climbed 35 per cent over the previous year, to $2.5 billion.

ashford.meikle@gleanerjm.com