Business

Jamaican Teas samples Walmart

Tea maker tests retail chain in Guatemala with hopes of expanding into Latin America

BY SHAMILLE SCOTT Business reporter scotts@jamaicaobserver.com

Wednesday, May 14, 2014    

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JAMAICAN Teas Limited is sending samples of its products to Walmart in Guatemala, with hopes that it can tap into the Central and South American markets, after visiting a trade show there.

The store chain is owned by a joint venture between US retail giant Wal-Mart Stores Inc and Walmart de Mexico y Centroamerica, and is the largest retailer in Central America with locations in: Costa Rica, Guatemala, El Salvador, Honduras, and Nicaragua.

John Mahfood, CEO of Jamaican Teas, said the company is always trying to get into new markets.

For instance, the company is also looking to Africa.

"But it's a long process and it won't happen overnight," said Mahfood.

Last year, the tea maker surpassed the $1-billion mark in revenues for the first time.

During the financial year ended 2013, the company's export earnings increased by 46 per cent to $293 million and accounted for 51 per cent of total sales from manufacturing operations.

About half of its export sales is to the Caribbean market, while the remainder is shipped to North America, with Trinidad and Florida being the major growth areas, the company said.

On the domestic side, sales from its manufacturing operations increased by 25 per cent to $577 million, while sales from its retail business increased by 29 per cent to $466 million.

"This was achieved against the background of a continuing weakness of the local economy, due partially to fiscal and other measures introduced by the Government and the central bank during the year," the company said. "Our unit sales from manufacturing increased in both the domestic and export market and this was achieved as a result of both improved penetration and product diversification."

Jamaican Teas developed Instant Honey Ginger, 100 per cent Jamaican Ginger, Refreshing Mint, and Instant Chocolate in cans during the year.

The company also formed a partnership with a small processing facility in a bid to address farmers' inability to adequately process herbs that is supplied to the tea maker.

"One of the problems we have in buying local herbs is the ability to treat them," said Mahfood. "So we have partnered with a husband and wife who have a few grinding and drying machines and the ability to clean the products."

The capital expenditure required for additional equipment for the facility won't be substantial.

"It's a prototype at this stage to see if it is economically viable," he said. "If it works, we will take on more products."

The company in its annual report said that it expects that the cost of the local products will be higher than the imported items.

Through H Mahfood and Sons Limited, a subsidiary of Jamaican Teas, the company plans to have 71 units at Orchid Estate in St Thomas, which was purchased for $63 million within a year. Twenty-nine of the units have already been partially built.

It will start building two model units in June and take as much as six weeks to complete.

"We will build based on the orders." Mahfood said.

During the year under review, the company incurred $107 million in expenses, up from $90 million.

"We maintained a tight rein on expenses during the year; however, devaluation of the local currency and attendant inflation helped to push some costs higher than the rate of inflation," the company said. Additionally, Jamaican Teas paid more in loan interest as it borrowed more compared with 2012.

"Repairs, maintenance and advertising rose above the rate of inflation; the latter was to increase our presence in a tight market and labour cost increase is tied primarily to incentive-based payment to staff," the annual report added.

Jamaican Teas has been granted a cambio and money transfer licence for its Savanna-La-Mar store and expects that this will have a beneficial effect on the results going forward.

The company owns Carmen's Court, in Kingston, as part of its real estate developments, as well as and JRG Shoppers' Delite Limited, which operates a supermarket in Kingston and another in Savanna-La-Mar, Westmoreland, and Bay City Foods Limited, a 49 per cent owned associated company, operators of a supermarket in Montego Bay.

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