Susan Gordon, Business Reporter

McKenzie

The decision by the Jamaican brewers, Red Stripe, to withdraw sponsorship of live music shows is being driven by the need to protect the integrity of the brand globally, in the face of the company's strategy internationally, remarks by the company's managers suggest.

Kingston-based Red Stripe is a subsidiary of the international food and drinks firm, Diageo Plc, under whose ownership the company has pushed hard to market its lager internationally, as a premium brand.

But this attempt at top-tier positioning of the product overseas, managers apparently felt, was in danger of being undermined by some of what happens at live shows where some Jamaican dancehall openly promote violence, often against gays.

Some dancehall artistes faced gay-promoted boycotts in several United States cities, Britain and several countries in continental Europe.

Banned in UK

"Two years ago, the company was banned from a leading entertainment chain in the United Kingdom because it sponsored an event in which lyrics glorifying violence were used," Red Stripe's CEO, Mark McKenzie, told members of the Rotary Club of St Andrew in a speech this week.

Last week, Red Stripe, which trades on the Jamaica Stock Exchange as Desnoes and Geddes, announced that it would end its long-standing sponsorship of the 15-year-old music festival, 'Reggae Sumfest', which takes place in August in the north-shore city of Montego Bay.

Despite standing to lose an estimated US$2 million in value as a result of cancelling its headline sponsorship - according to a highly placed executive - Red Stripe said that it could no longer place its reputation "at risk" by being associated with events where violence might be promoted.

While not reversing the decision, Red Stripe this week appeared to have softened its position. McKenzie told the Rotary Club members that the company might still offer some financial support to 'Sumfest', but without the trappings of being a title sponsor.

McKenzie, however, declined to tell the Financial Gleaner how much the company might be prepared to spend on such a scaled-down sponsorship arrangement and how it might work for the brand.

Cancelled

He, however, suggested that without some Red Stripe support, the festival - seen as a significant attraction for Montego Bay's tourism and an economic boon to the city - might have been cancelled.

A year ago, Red Stripe reported that it had spent around J$400 million on its sponsorship of 'Sumfest' over the years, but did not give a breakdown of how the money was allocated and whether it was all in cash.

For the year to last December 31, Red Stripe had a turnover of $6.48 billion, an increase of 15 per cent over the previous year. The company's net profit decreased by 20 per cent at the end of its six-month period ending December 31, 2007, relative to the corresponding period. Profits declined from $756 million to $608 million last year.

Total sales volume (including exports) increased three per cent during the first half of 2007 relative to the year before. But even while its domestic volumes grew by four per cent, export volumes for the six-month period was flat when measured against last year.

Deeper penetration

Against this backdrop, the imperative for Red Stripe to even more jealously guard its brand would be strong, as it tries for deeper penetration into the European market.

It recently acquired a new distributor in Sweden, according to the company's website.

In his Rotary club speech, McKenzie, as the company had done when it announced it was pulling out of the sponsorship of live shows, underlined Red Stripe's obligation to its shareholders and its responsibility to remain profitable.

"We will not put the integrity of this company or ourselves on the line (not) to deliver results," he said. "I don't think anybody would expect that of us."

susan.gordon@gleanerjm.com