Wisynco enters beer market in deal with Budweiser brewer

Manufacturing and distribution company Wisynco Group Limited will be taking a shot at Jamaica’s beer market as distributor of Budweiser and other foreign brands owned by Anheuser-Busch InBev.

This comes as a fourth-quarter dip in revenues put a damper on the beverage and distribution company’s annual numbers.

Wisynco Group Chairman William Mahfood says they have a deal with Anheuser-Busch InBev SA/NV to exclusively distribute Budweiser, Corona, Becks and Stella Artois beer brands in Jamaica.

“We will start distributing their products in Jamaica in the next few weeks,” Mahfood told the Financial Gleaner.

Some of the InBev beers are already sold in Jamaica, but the identity of the distributors were not ascertained. Brands such as Budweiser, Stella Artois, Blue Moon and Becks have mostly occupied the premium segment of the market.

AB Inbev is the largest brewing company in the world owned by Brazilian and European interests, with a global functional management office in New York City, and regional headquarters in São Paulo, London, St Louis, Mexico City, Bremen, Johannesburg and other cities. It has approximately 630 beer brands that are distributed in 150 countries.

The Jamaican beer market is dominated by sole beer maker Red Stripe Jamaica, which markets brands such as Red Stripe, Red Stripe Light, Heineken, Guinness and Dragon.

Data on beer consumption is tightly held by Red Stripe – a Jamaican company that has gone through different ownerships and is now held by Heineken International. The Planning Institute of Jamaica reported that beer and stout production in 2019 totalled 60.7 million litres, which reflects a near nine million-litre decline in output over two years.

A decade earlier, beer and stout production was averaging 86 million litres, according to Statin data.

Red Stripe has said in the recent years that per capita consumption at 18 litres of beer per year is low in Jamaica relative to markets such as Trinidad, Mexico, United States and Brazil, where the estimates range from 40 to 72 litres.

Mahfood was tight-lipped on just how much beer Wisynco aims to sell.

“We think that the beer market in Jamaica is underserved so while Red Stripe and Heineken along with Guinness are brewed locally, we feel that there is an opportunity for increased competition in that space,” Mahfood said, while declining to give further details, citing market disclosure rules.

The deal comes at a time when Wisynco is not only grappling with the fallout from the COVID-19 pandemic, but also the ban at the top of the year of single-use plastics and styrofoam, products that were made by the company at its St Catherine base.

“We stopped manufacturing and selling styrofoam as of January 2020. We also took a five-month hit from COVID-19 which mostly affected our higher margin items,” Mahfood said, noting that the closure of hotels, schools along with bars and restaurants cut off key sales channels for some of the products manufactured and distributed by the company.

“A lot of the consumption of beverages goes through those channels, so that would have taken a lot of the profitability out of our company,” he said.

Revenues from continuing operations for the year ended June 2020 was $32.2 billion, or 19.4 per cent greater than the $26.9 billion recorded in the prior year.

Mahfood told the Financial Gleaner that the April to June fourth quarter was challenging, coinciding as it did with the full onset of the COVID-19 pandemic.

Prior to that quarter, Mahfood said, group revenues over nine months ending March had been rising at a much faster rate of 27.5 per cent.

COVID erased some of the gains, resulting with the result compression of profits that were just marginally better than the previous year at $2.66 billion compared to $2.54 billion.

Beverages and other manufactured goods represent 75-80 per cent of company revenues, he added. The margins from manufacturing are somewhat safeguarded by the fact that the group does its own distribution.

“Most of the increases in revenue came from the first eight to nine months of the year and, therefore, in the last quarter when we had the decrease in top-line revenue, it affected our performance over the prior year,” Mahfood said.

Still, the chairman was not displeased with the financial results, saying the company held its own under trying circumstances, due to the combined efforts of managers and front-line staff.

Wisynco laid off about 50 people connected with sales and marketing for the restaurant and hotel distribution channels – sectors that dramatically scaled back and shuttered, respectively, under measures to contain the coronavirus.

The lay-offs, Mahfood said, were done in a bid to cut cost.

“We’ve been looking at the areas of costs and expense management and have done a number of exercises in pursuit of this goal. We want to minimise the effect on our human resources,” he said.

In addition to beer as a new market for the group, Wisynco has entered the down-market channels of the FMCG, or fast-moving consumer goods segment.

“The little mom-and-pop operations, corner shops and so on, have proven to be great for us. The results have been tremendous; in fact, while most other channels have been in decline that channel has been increasing at 15-20 per cent,” Mahfood said.

“What that tells us is that at the grassroots level we can stimulate the economy by paying attention to those smaller customers; and that is the area that we’re really focusing on,” he added.

As part of its growth strategy, the company remains open to new acquisitions, and is currently in discussions with several large and small operators, Mahfood said, but offered no details on the prospects in its pipeline.

Wisynco’s M&A strategy has a dual tract – the purchase of equity stakes alongside distribution arrangements with the target company. It’s last deal was a 35 per cent acquisition of the JP Snacks operation in 2019.

“Yes, we are always open to the possibilities but any acquisitions that may be out there we can’t speak to right now since we are bound by confidentiality agreements,” Mahfood said.

neville.graham@gleanerjm.com