The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamian Brewery and Beverage Company’s founder yesterday warned that eliminating the $3 per liquid gallon tax advantage he currently holds over BISX-listed Commonwealth Brewery would “wipe out” his firm, as he called for the Government to establish a competition watchdog and relevant laws.

Jimmy Sands, in what is another salvo in the brewing war between his five year-old company and its long-established New Providence rival, told Tribune Business that he found Commonwealth Brewery’s tactics to squeeze him out of the market “distasteful”, adding that doing so would potentially harm pricing and choice for Bahamian consumers.

His concerns are divided into two strands, and all stem from the inherent advantages Commonwealth Brewery has as a vertically-integrated brewer, wholesaler and distributor and via its backing from 75 per cent majority shareholder, Heineken International.

Mr Sands is arguing that Commonwealth is attempting to squash the competitive threat he poses by signing exclusive supply deals with independent liquor retailers, where they agree not to sell or promote Bahamian Brewery’s products.

While telling Tribune Business he had successfully resisted efforts to squeeze Sands, and its other beers, out of the New Providence retail market, Mr Sands also expressed concerns over Commonwealth Brewery lobbying the Government to equalise the tax rates on the two companies.

Under the current structure, passed in the 2010-2011 Budget, Commonwealth Brewery pays $5 per liquid gallon in taxes, while Bahamian Brewery pays $2 per liquid gallon - giving the latter a $3 advantage.

Mr Sands, though, told Tribune Business that Commonwealth Brewery was lobbying the Government to remove this differential so that both companies were taxed on manufacturing at the same rate.

Maintaining the difference, he explained, was crucial to Bahamian Brewery’s survival, Mr Sands said, especially given that it incurred a $1.04 per case in transportation costs to get its product from Freeport to Nassau - costs Commonwealth Brewery did not have.

And, given the latter’s greater production capacity, which enabled it to spread costs and generate economies of scale, coupled with Heineken’s financial and marketing might, Mr Sands said her feared eliminating the tax differential would push Bahamian Brewery into oblivion.

“They want to even the playing field by bringing me up to the same level as them, and if that is done they’ll wipe me out,” Mr Sands told Tribune Business. “I pay a slightly lower duty structure than they do.”

He explained that Bahamian Brewery had been able to exploit the additional tax incentives offered by the Hawksbill Creek Agreement, whereas Commonwealth Brewery had chosen to base itself on New Providence.

Mr Sands met recently with Prime Minister Perry Christie to discuss his concerns, and added on the tax issue: “My feeling is that the Government is in my corner, and I’d like for it to remain there and, if anything, to help me out. He [the Prime Minister] seemed to lean that way. At least that was the kind of vibe I felt off him.”

Reiterating that eliminating the tax differential would have “a drastic impact” on Bahamian Brewery and its products, Sands, Sands Light, Strong Back Stout, High Rock Lager, Bush Crack Beer and Triple B Malt, Mr Sands told Tribune Business that the company had more than-quadrupled its Bahamian workforce since opening in 2007.

After starting with 14 employees, he added that Bahamian Brewery now had 60-65 staff spread through its various operations, Mr Sands said his entry into the market had forced Commonwealth Brewery to cut prices and pass savings on to the consumer.

His other issue, he explained, was that as a vertically-integrated company with 60 wholly-owned retail outlets via Burns House, Commonwealth Brewery had the ability to lock him out of a vast section of the market.

Alleging that it had tried to tighten its grip by signing up independent retailers to exclusive deals that involved selling only Commonwealth’s products, Mr Sands said he had been “somewhat successful in breaking them” and using his relationships from Butler & Sands days to gain retailers “one by one”.

Suggesting that it “may come down to that one day”, when asked if Bahamian Brewery was contemplating legal action against its larger rival, Mr Sands agreed that the Government needed to introduce long-awaited competition laws and a watchdog body to enforce them.

“What they want is total distribution throughout the Bahamas, and that’s their goal,” Mr Sands said of Commonwealth Brewery.

“They want, I hate to say it; they want to destroy us. They call that competition. It may be competition in their part of the world, but I find it very distasteful in these islands of 300,000 people.

“There’s no question about it. I’m a big thorn in their side. They want to walk on me like a fly. But I don’t plan to go anywhere. We’d like the Government to keep an eye on them, and not let them run away.”

Tribune Business attempted to contact Commonwealth Brewery managing director, Nico Pinotsis, for comment but was told he was out of the country. E-mailed questions sent via an assistant were not replied to before press time.