BEER maker Red Stripe has signed a memorandum of understanding with Jamaica Producers (JP) to explore the growth of cassava for use in its brewing portfolio.

Red Stripe made the announcement at the same time it reported a 31 per cent increase in second quarter net profits to $468 million for the period ending December 31, 2012. The casssava study is part of the brewer’s plan to replace up to 20 per cent of imported raw materials with local produce by 2014, and among a number of initiatives the company has implemented to increase efficiencies across its operations in a tightening beer market.

“These transformational projects we have in place, including building a co-generation plant and plant optimisation, reflect a clear and differentiated strategy which should help us to remain resilient against a backdrop of a more constrained environment and sustained global economic uncertainty,” said Red Stripe’s Managing Director Cedric Blair.

“It is a strategy that is creating a strong foundation for current and future growth by responding to the significant opportunities that are available to us beyond a domestic-only focus,” he added.

JP is among the largest growers of cassava in Jamaica. The company had a total of 85 acres under cassava production up to 2011. The Business Observer was unable to reach JP managing director Jeffrey Hall last night for comment.

Red Stripe said recently that it expects to complete a feasibility study on growing cassava for beer production in February. It has employed a full-time project manager and has already made a test batch of beer from the produce.

The partnership between Red Stripe and JP comes two weeks after the brewer announced a joint venture Pepsi-Cola Jamaica to form a 50:50 sales and distribution joint venture company, Celebration Brands Ltd. The joint venture will be owned equally by the two entities and will sell and distribute all Red Stripe/Diageo and Pepsi brands in Jamaica, making this venture the single largest beverage distribution company in Jamaica with their portfolio of world-renowned brands.

Meanwhile, the company has grown its bottom line on improved results in its domestic portfolio, resulting in a nine per cent overall increase in domestic net sales value for the half year. This was offset by a 22 per cent decline in export net sales versus last year following the business decision to change its direct export model for the USA to a royalty-based (both produce and sell under license) structure.

Cost of sales for the half year at $3 billion decreased by 11 per cent versus the prior year. Gross profit for the half year improved by 11 per cent, due to a combination of higher domestic sales as well as the elimination of direct costs by Red Stripe with the new royalty structure for sales in the US market, the company said.