Gov't 'Good Faith' Key To Brewery's 100-Job Growth

Originally Published in The Tribune

June 25th, 2014

By: Neil Hartnell

 

Sands Beer’s manufacturer yesterday said its planned $15 million growth 
strategy, which could more than double its workforce via the creation of “over 
100” jobs in the next five-10 years, depends on the Government maintaining 
the ‘tax advantage’ it holds over its BISX-listed rival. 
 
Jimmy Sands, the Bahamian Brewery & Beverage Company’s principal, told 
Tribune Business that the decision to proceed with the $2 million ‘first phase’ 
was intended to show “good faith” in living up to its expansion promises. 
 
Disclosing that the initial 20,000 square foot expansion would increase 
production and storage capacity at its Freeport facility by 20 per cent, Mr 
Sands said it would add 15 jobs, taking the company’s workforce to 85-strong. 
 
Emphasising that all he wanted was an “equal opportunity” to compete, Mr 
Sands said the Government’s decision not to alter the ‘tax differential’ 
advantage he holds over Commonwealth Brewery in the 2014-2015 Budget 
had enabled him to pull the trigger on the expansion first phase. 
 
“The reason why I’m going ahead with it is because the Government, in the 
last 2014-2015 Budget, did not alter the tax differential that we currently have,” 
Mr Sands told Tribune Business. 
 
“To show good faith, I decided I would go ahead with this expansion. We have 
into the Government a 10-year plan, of which we need some assurances that 
the differential will be maintained year after year.
 
“I can’t be going through this ‘don’t know what’s happening tomorrow’. To 
show good faith, we’re going ahead with this expansion,” he added. 
 
“We’ll add 15 jobs. Right now, we have 70, and that will take us up to 85.” 
 
Mr Sands said he “anticipated” creating more than 100 new jobs and “more 
than doubling the workforce” if we he was able to execute on his full $15 
million expansion. 
 
“The Brewery wishes to embark upon an additional $13-$15 million worth of 
expansion and growth over the next five to ten years, and looks forward to 
signing an agreement with the Government to ensure that it is allowed to enjoy 
at least the same tax benefits against its competition as was enjoyed by 
Commonwealth Brewery in relation to imported beers,” he added. 
 
Tribune Business exclusively revealed last year how the Bahamian Brewery & 
Beverage Company had been forced into a last-minute postponement of its 
planned first phase expansion, amid fears it would have to “shrink drastically” 
given government plans to impose a 75 per cent increase in its tax burden. 
 
Ministry of Finance officials at that time wanted to increase the duty Mr 
Sands’s company paid on domestic beer sales from $2 per liquid gallon to 
$3.50. 
 
This, Mr Sands said at the time, would have slashed the ‘duty spread’ 
advantage the Bahamian Brewery & Beverage Company enjoyed over its 
main rival, BISX-listed Commonwealth Brewery, by 50 per cent. 
 
Commonwealth Brewery was paying $5 in duty per liquid gallon, but Mr Sands 
said it did not incur the shipping costs his firm did in getting product to the 
Nassau market. 
 
And, backed by the deep pockets and economies of scale provided by its 75 
per cent majority shareholder, global brewing giant Heineken, he argued that 
the Bahamian Brewery’s main rival enjoyed distinct competitive advantages 
that could put his firm out of business. 
 
Now, with the expansion back on, the Bahamian Brewery & Beverage is 
effectively ‘dipping its toe in the water’, proving it will hold up its end of the 
bargain and deliver on its investment commitments, provided the Government 
does the same. 
 
It is also the first Freeport manufacturer to publicly unveil job-creating 
expansion plans, an ironic development given that Prime Minister Perry
Christie touted only foreign-owned industrial concerns when unveiling his tax 
roll-back. The Bahamian Brewery & Beverage Company is 100 per cent 
Bahamian-owned. 
 
Mr Sands yesterday said the brewery had signed a contract with Freeport 
Construction for the expansion, with the necessary building materials already 
on order. 
 
“We hope to have it completed by early fall, November at the latest,” he told 
Tribune Business, indicating that the need for extra production capacity and 
storage had also motivated the expansion. 
 
“We’re up to full capacity now, and it will give us added volume,” Mr Sands 
said. “It will give us a 20 per cent increase in productivity and storage. 
 
“I feel confident in terms of the negotiations we’ve been having with the 
Government. At least we’ve been in dialogue with one another, whereas in the 
past they’d just slam it down my throat and I’d have to scramble. 
 
“They talk about this level playing field, but all I wanted was an equal 
opportunity and the fair chance that Commonwealth Brewery enjoyed for 20 
years. At least give a Bahamian a chance. The main thing is that I just want an 
equal opportunity to grow this Bahamian company.” 
 
That is a reference to the $8 tax advantage that Commonwealth Brewery 
enjoyed over foreign/imported beers for 20 years, and Mr Sands said his 
company could only survive through similarly favourable tax treatment. 
 
“It’s vital,” he told Tribune Business. “If that is removed, we’ll be out of 
business tomorrow, and we’ll go back to a monopolistic industry in wines and 
spirits. We’ll create a monopoly again, and monopolies are not healthy.” 
 
The current $2 million investment represents the Bahamian Brewery & 
Beverage Company’s third expansion since it started operations in 2007, and 
Tribune Business calculations suggest Mr Sands and his fellow investors will 
have ultimately invested around $42 million if they go through with their full 
$15 million growth plan. 
 
Mr Sands confirmed that the investment would “be close to $40 million”, and 
described his expansion plans as “almost like a breathe of fresh air”.
 
Read original article here

 

Created by:Barefoot Marketing
Date created:June 27, 2014