Today, we publish the eighth of 15 stories on the nominees for the Jamaica Observer Business Leader Corporate Award. To be considered for nomination, all companies had to be at least 50 years old, or be able to trace their roots to 1962 or before. The award presentation and announcement of the Business Leader Corporate will take place on Sunday, December 2 at the Jamaica Pegasus hotel in Kingston.

THE Geddes and Desnoes families sent tectonic shockwaves throughout corporate Jamaica in September 1993 when they announced that they would no longer be in control of the company that manufactured one of the island’s most revered brands.

Desnoes & Geddes Ltd was founded in 1918, so by 1993 the brand and the company that stood behind it had seeped deep into the country’s collective consciousness. Jamaicans had taken it for granted that this iconic institution would always remain in local hands and firmly under local control.

But the two families, who together held 72 per cent of the ordinary shares in the publicly traded enterprise, announced that they had reached a deal to offload enough of their stocks to make Diageo PLC the controlling shareholder.

Acquiring 51 per cent of the Jamaican firm cost Diageo (Guinness) US$62 million and allowed the D&G principals, along with scores of minority shareholders, to cash out at a price that represented a premium above the prevailing market value.

Though it was the largest single foreign investment within the economy in decades, many feared that the country would eventually lose bragging rights to ownership of the cherished Red Stripe beer.

But the major shareholders were more far-sighted and savvy in going for this deal than many people gave them credit for.

In the first instance, the major shareholder at the time, Paul H Geddes, the son of Thomas Geddes, co-founder of the company, was getting on in age. He died in 1999 at 89. Thomas, along with Eugene Peter Desnoes founded D&G.

Secondly, the public’s worst fears never materialised.

Red Stripe, as the company has been called since 2001, remains publicly listed, and its primary manufacturing operation is still located on Spanish Town Road in Kingston, where some 600 Jamaicans find work.

While it is true that faced with skyrocketing domestic costs and the realities of the competitive global marketplace, the company has recently had to act on previously unthinkable ideas; its investments over the past two decades have made it possible to maintain its core production facilities within Jamaica.

Last year, many Jamaicans were taken by surprise when Diageo announced that, beginning April 2012, it would begin producing in America all the Red Stripe beer it sells within that country. The move, the firm said, would drive down the cost at which it could deliver this product to the highly price-sensitive Americans by 50 per cent. Seventy employees in Jamaica would be sent home.

Make no mistake about it, Red Stripe survived up to the early 1990s because of the willingness of the previous owners to constantly plough back significant portions of the firm’s profit into upgrading and expanding the operation.

But the local environment in which it operated took a dramatic turn for the worse during that decade and beyond.

The brewer increasingly faced competition from new but determined players in its domestic market. Even more critically, costs — including energy — kept skyrocketing. The owners needed to invest billions of dollars more in plants that would reap greater efficiency — that came with even smarter automation, used less of Jamaica’s expensive energy, and expanded capacity so as to allow it to rapidly grow export sales.

Red Stripe has survived to earn net profit of $1.2 billion for the 12 months to June 2012. It continues to be a major source of high-level employment within the island, largely because of the deep-pocketed white knight investor who had the capacity, belief in the product, and commitment to its development to respond to the growing capital needs.

In 2011, $4 billion of Red Stripe’s revenue came from overseas consumers. Some $9.2 billion of its sales were generated locally. But export earnings for the year to June 2012 declined by 16 per cent, largely due to softness in the US demand.

Red Stripe was a fairly large company in 1962 when Jamaica won political Independence from Britain. It had about 300 Jamaicans on its payroll and its beer and soft drinks were household names.

The first major post-Independence expansion was in 1966, when it installed a plant at Bogue in Montego Bay. It reached a milestone the following year — earning profit of $1 million.

Throughout the 1960s and 1970s, Red Stripe built a reputation not only as large employer of labour, but as a corporate leader in staff welfare and remuneration. It became a magnet for some of the island’s most skilled workers and competent engineers.

A public issue on the Jamaica Stock Exchange in 1970, in which eight per cent of the stocks were sold, raised capital that went toward a $3-million expansion and plant upgrade.

The decade of the 1970s witnessed rapid expansion in the range of drinks manufactured by Red Stripe, including Heineken beer which it introduced to the market in 1973 under a production licensing agreement with the Dutch owner of the brand. Mackeson, a stout, was also produced under licence, adding to Red Stripe’s own Dragon Stout that it introduced in 1961.

The popular Ting hit the Jamaican market in 1976, and shortly after was exported to nearly two dozen countries.

The company entered into a licensing arrangement in the late 1970s with a British outfit to produce and distribute its Red Stripe beer to Italy and Spain.

Throughout post-Independence Jamaica, Red Stripe has been an exemplary risk-taker, with its investments steadfastly rooted in the belief in its flagship product.

In the early 1990s, the firm doubled its output capacity. Back then it had a staff complement of 1,200.

This company has demonstrated remarkable flexibility and adaptability in the way it has met the many challenges it has faced within the market.

For example, it took the decision to streamline its operation around production, distribution and exporting of beer in the late 1990s, offloading its non-alcoholic beverage lines to Pepsi Cola (Jamaica) Bottling Company. Also in 1999, it sold its wine and spirits business to Wray & Nephew Ltd.

Those transactions yielded Red Stripe hundreds of millions of dollars and allowed it to narrow its focus on its brewing business.

It was also a win-win deal because, not only have those products not been lost to the Jamaican market, they have continued to thrive — some now doing significantly better than they did under Red Stripe. Ting for example, is reported to have tripled its volume within two years of ownership by PepsiCo.

If there is any Jamaican company that has been unrelenting in its drive to really expand its export market, it is Red Stripe. In 2005, exports accounted for roughly 20 per cent of its sales. Last year export earnings amounted to just over $4 billion or approximately 30 per cent of the company’s sales of $13.2 billion.

Red Strip beer reaches markets as far-flung as Brazil and Europe, Australia and Canada, and the Caribbean.

Creativity has also been one of the hallmarks of this corporation. It is forever expanding its product ranges, experimenting in new formulations and tweaking current product lines. This has not been without its benefits.

For example, while it suffered a 16 per cent decline in export sales last financial year, domestic sales in an adverse economic climate grew by seven per cent. The company attributes this to positive market response to its range of new products — Tallawah beer, a new Red Stripe Lite flavour, D&G White Overproof Rum, and Malta Light.

Yet, as evocative as its decision to outsource the Red Stripe production to a North American firm (only for the products sold in that market), this arrangement is nothing new. Currently, it has similar contracts in Antigua, the UK, and Canada. And neither is it unique, especially among manufacturing companies that have had to weather Jamaica’s adverse business climate.

Moses Jackson is the founder and convenor of the Jamaica Observer annual Business Leader Award programme. He may be reached at moseshbsjackson@yahoo.com