LOCAL brewer, Desnoes and Geddes (D&G) blamed tax increases and the decline in disposable income for the 45 per cent fall in after-tax profit for its December quarter from the comparative period in 2008.

The UK-owned company, which trades locally as Red Stripe saw its turnover drop two per cent to $3.63 billion whilst its after-tax profit dropped 45 per cent to $301 million.

“The contraction of disposable income at all levels of the society continues to have adverse effects on spending across all consumer goods, including alcoholic beverages,” stated the notes accompanying the financials. “The increase in the rate of Special Consumption Tax (SCT) introduced last year worsens the discriminatory treatment of beer against other alcohol categories, contributing to a significant decrease in our domestic volume performance.”

In May, the Government in one of its five tax packages in 2009 increased SCT on beer to 25 per cent from previous range of 16 to 21 per cent. Government was seeking to raise more than $20 billion to close the gap in the budget as a result of the economic downturn affecting small and large economies worldwide.

The company’s volumes were down even as it spent slightly more on marketing during the review period at $266.5 million versus $250 million a year prior.

During six months it spent $683 million on marketing with some three-quarters, or $501 million spent locally. The company defended its marketing spend as a strategy against the ongoing recession.

“The growth… reflected our strategy to maintain investment behind our brands despite the difficult economic situation,” stated the financials endorsed by chairman Richard Byles and new managing director Alan Barnes. “This specifically involved the launch of our new innovation, Red Stripe Bold, key summer promotional and sponsorship activities and the extensive implementation of…promotion in the second quarter.”

During the review period, general, selling and administration expenses increased 11 per cent versus the same period last year reflecting the company stated inflation and increased costs for administrative and other expenses from related companies.

D&G is incorporated and domiciled in Jamaica and is a 58 per cent subsidiary of Udiam Holdings AB, a company incorporated in Sweden, with ultimate parent Diageo incorporated in the UK.