The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Kalik exports “are becoming less competitive” due to the Bahamian economy’s high operating costs, Commonwealth Brewery’s managing director revealed yesterday, with revenues from the US market down 20.4 per cent year-over-year.

Speaking to Tribune Business after the BISX-listed brewer revealed an 11.5 per cent income increase for 2012, Nico Pinotsis said high energy, tax and raw material costs had made the company’s Kalik exports less competitive when matched against rival Caribbean products.

Although US sales account for less than 1 per cent of Commonwealth Brewery’s $118.468 million top-line, they fell by almost $200,000 year-over-year - from $980,415 in 2011 to $780,464.

“Our exports declined last year,” Mr Pinotsis told Tribune Business. “The reason for that is that we are becoming less competitive versus other Caribbean [products].”

Describing the Bahamas’ high cost business environment as the main factor behind the decline, Mr Pinotsis added: “We have to price our products a little bit higher.

“Things like energy, raw materials, raw material packaging, import duties on our raw material packaging materials. It’s making our exports a little less competitive than they used to be.”

Noting that Kalik was the only brand Commonwealth Brewery exports, Mr Pinotsis added: “We are addressing the issue with our importer in the US to see if it can be dealt with in a better way. The US environment is becoming more and more challenging in that respect.”

Mr Pinotsis’ remarks again highlight the difficulties Bahamas-based manufacturers face in trying to remain competitive against cheaper-priced imports, and the challenge they will have in exploiting export opportunities generated by agreements such as the Economic Partnership Agreement (EPA).

The major obstacle, apart from the relatively high cost of energy, is the Bahamas’ high-priced labour - and the productivity employers get from that labour.

The export issue was not material to Commonwealth Brewery’s overall 2012 financial performance, and represented a minor negative in a year when its net and comprehensive income grew by almost $2 million - from $17.32 million to $19.317 million.

Mr Pinotsis said the BISX-listed company had performed “pretty close” to target, adding: “When you start a year you never know what’s going to happen, but as the year evolved it was more or less what we expected to see.”

The Brewery’s improved financials were driven largely by a growing top line, which expanded by more than $5 million or 4.8 per cent - from $113.409 million to $118.468 million.

“It’s mainly revenue growth,” Mr Pinotsis said of Commonwealth Brewery’s performance. “Sales volumes, higher tourist arrivals in 2012 - Spring Break was certainly excellent.

“We had more activity in the domestic market. The volume mainly came out of beer growth. Kalik did well, did better than the other brands. Bahamians are becoming more and more proud of Kalik. We have put extra money behind Kalik as well.”

Reluctant to provide figures, given that liquor market competition is increasing and rivals, chiefly Grand Bahama-based Bahamian Brewery and Beverage Company, do not have to publish their financials, Mr Pinotsis said the 4 per cent year-over-year increase in sales volumes indicated Commonwealth Brewery was increasing market share.

“I wouldn’t believe we are losing. If you look at beer volume developments, we must have seen a little increased share,” Mr Pinotsis told Tribune Business.

Disclosing that Commonwealth Brewery’s Clifton Pier facility was not running at full capacity five-six years ago, during the boom ‘peak’, Mr Pinotsis said it was unlikely to use 100 per cent of existing production space over the next two years.

Emphasising that the company was “cautiously optimistic” for 2013, he added: “If tourist arrivals don’t become disappointing, I don’t see any reason why we will not see continued small growth in net income and similar indicators as well.”

The Burns House retail subsidiary will receive particular focus this year.

Mr Pinotsis told Tribune Business: “There are plans to upgrade the retail network. We have just finished upgrading our Harbour Bay store. We have to do some things at the airport with the new international terminal coming on stream.”

Burns House is aiming to secure the liquor store tenancy for the new international departures/domestic arrivals and departures terminal at the Lynden Pindling International Airport (LPIA).

Disclosing that other Burns House stores would also see upgrades in 2013, Mr Pinotsis pledged that Commonwealth Brewery would “introduce a couple of new products” to the Bahamian market, although he declined to divulge details.

He told Tribune Business that the Jimmy Sands-led Bahamian Brewery and Beverage Company was not the only source of competition for Commonwealth Brewery.

Wine and spirits importers were increasing, and Mr Pinotsis alluded to the problems caused by the so-called ‘grey market’ - smuggled beer and liquor imports.

“Products coming in from outside the Bahamas, it’s questionable whether they have paid all duties. Those are the challenges we face,” he said.

“On the other hand, good competition keeps you on your toes.”

Commonwealth Brewery also remained true to its word, generating a 100 per cent dividend payout to investors. Some $13.05 million went to majority 75 per cent shareholder, international brewing giant Heineken BV.