Business

Jamaican Teas is stirring up the future

SSL in the Money

Justin Jones

Wednesday, July 11, 2012    

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Last month, Stocks & Securities paid a visit to Jamaican Teas Limited's (JAMT) operation on Norman Road to discuss its progress after listing on the Junior Market and the company's future plans.

The company, which has approximately 50 per cent of the local market share, controls the "Tetley" brand of tea in the Caribbean as well as the "Caribbean Dreams" brand. It is the largest manufacturer of teas in the Caribbean with almost one half of its products exported to other Caribbean markets and North America. They have also diversified into the retail business and are on the look-out to acquire more supermarkets.

Upon entering the facility, we were greeted by the hum of machinery and the distinct smell of peppermint, one of the company's best sellers, which permeated the entire plant. I had previously been to JAMT and noticed that there seemed to be less empty floor space than I remembered.

We were greeted by Mr Charles Barrett, Sales & Marketing Manager for the company, whose main focus is to increase sales, identify new markets for expansion and support existing customers with training and marketing; working closely with them via strategy discussions and on-site visits. He also assists with product development and updated us regarding new developments.

The company is planning on launching its own line of bottled "essence" water that will be imbued with local Jamaican flavours under the "Jamaica Blue" brand. They intend to produce guava, watermelon, cucumber, lemon grass and june plum flavoured water comprised of natural spring water from St Mary and essences produced in Jamaica. Mr. Barrett stressed that they do their best to source raw materials locally first, thus adding to the mantra of buy "Jamaican, build Jamaican", and then look overseas if they are unable to acquire what they need. In the past they ventured into iced tea, which did reasonably well but was stopped as they had to import the product from Tetley USA. However, the bottled water facility has the ability to produce iced tea and they may revisit that prospect.

Another exciting product that they have planned is a 100 per cent Jamaican Ginger tea to commemorate Jamaica's 50th year of Independence. For the company's current ginger offerings, they have not been able to get enough local ginger. As such, a portion of ginger has to be imported and blended in with the rest of the ingredients. However, the company is acquiring as much local ginger as it can to ensure that they will be able to meet the demand for this new product.

Mr Barrett has also stated to SSL that they are in the process of upgrading their factory processes to comply with international standards. The global manufacturing industry is moving towards a certification system and suppliers must meet these benchmarks in order to export their goods. Of note, the company is currently trying to break into the European market which has stringent codes. It bodes well for the company to adopt international conventions as it will make for an easy transition into new markets.

After our discussions with Mr Barrett, he then took us on a factory tour. At a glance, I could see that quite a bit of the floor-space has been utilized. A section on the factory floor, which was reserved for the storage of raw materials, had boxes stacked almost to the roof. There were several machines in operation, including two additional pouching machines which were purchased a little under a year ago to ramp up production.

Next we were shown the storage areas which were almost filled to capacity. One of the storage spaces, that is adjacent to the factory, was recently acquired by the company. Mr Barrett admitted that the current layout is not a fully efficient one but that issue would rectified by moving into a bigger space. However, items do not stay long as distributors come up to three times a week, even while experiencing some slowdown in turnover. We next met with Mr John Mahfood, the company's CEO, who would give us more information on this big development.

Mr Mahfood greeted us warmly and we began to discuss future plans. As alluded to earlier, the factory is running out of space and we were informed that they are bidding some real estate that would provide additional space for expansion and the ability to create new products. Currently, the factory takes up approximately 18,000 sq ft and the new space is about 34,000 sq ft, which would more than accommodate their intentions.

Mr Mahfood mentioned that although the downturn in the economic environment has taken a small toll on sales, they have been counteracting this by actively expanding into new territories and boosting exports to current markets. Essentially, local sales are down but exports are up. They are trying to increase exports to Spanish speaking Caribbean islands but it is proving to be a challenge as traditionally they are coffee drinkers.

With regards to the current budget, Mr. Mahfood feels that it focuses on constriction rather than expansion. The cost of electricity and other economic factors will impact small manufacturing businesses. To drive the economy, you need to create businesses which will in-turn drive employment.

In discussing the Junior Market, he relayed that he had a fantastic experience and would encourage other businesses to take advantage of the opportunity. The Junior Market helps companies grow and create jobs and provides additional marketing and visibility that you would not ordinarily gain access to. It forces you to perform at a higher level and exposes you to other investors, such as pension funds and overseas investors. In fact, they have already received offers from overseas entities.

Jamaican Teas is clearly poised to increase their presence in both the local and overseas markets. They have steadily been performing, seemingly unnoticed, in the background. It has been a good example for others to follow and has weathered several ups and downs. With its future plans and directives laid out, one can expect to see the company do big things in the years to come.

Justin Jones is an Investment Analyst at Stocks and Securities Limited and can be contacted via jjones@sslinvest.com

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