Business

US drink maker bemoans low Jamaican ginger supply

By Steven Jackson Business writer jacksons@jamaicaobserver.com

Friday, December 20, 2013    

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REED's, a fast growing US drink company wants more Jamaican ginger but can't get consistent supplies.

It underscores missed market opportunities for the potent local crop which actually dipped export production.

"We are willing to buy 100 per cent Jamaican ginger if capacity is up to where it needs to be at a competitive price," indicated Chris Reed, founder and CEO of REEDs, in a recent Caribbean Business Report interview.

Reed's core product is its Jamaican-style ginger beers, with September quarterly sales hitting a record US$10 million, up from US$7.8 million a year earlier, financials of the NASDAQ listed company indicate.

"Our core brands of Reed's Ginger Brews and Virgil's continue to be the dominant growth factors and focus of the business," indicated Reed in a notice to shareholders recently. The company also launched a new line of drinks -- Club Kombucha, which includes the flavours pomegranate-ginger and mango-passion-ginger.

These products rocketed its September-quarterly profits to US$34,000 or 140 per cent higher than year earlier levels.

Interestingly, local farmers and traders only began supplying REED's within the last two years but a consistent supplier still proves futile, he revealed.

"Today, an extremely low percentage of our ginger supply comes from Jamaica. However, we want to purchase more from Jamaica if production increased," he added.

In 2011, the Ministry of Agriculture reportedly vowed to increase production to meet global demand. However ginger export sales declined some eight per cent year on year to US$601,000, latest ITC data indicates. The US imports the bulk of Jamaican ginger.

Mailed CBR queries to the Ministry of Agriculture over many weeks along with follow-up messages resulted in no response to date. Jamaica's ginger, viewed as amongst the finest in the world, reportedly earns some US$8,000 per ton, according to previous estimates from the Ministry of Agriculture and Fisheries. Additionally, there is roughly a 170-ton market for Jamaican ginger based on Ministry estimates but the island only manages to meet a fraction of that demand.

"It doesn't seem like it has a full scale supply. There is too much of a lag time because we need the ginger now, not six months from now," Reed posited, adding that he currently needs to fill capacity for ginger pulp. "Currently, we are searching for a fresh ginger pulp without any fiber supplier".

REED's was formed in 1987 and went public some seven years ago. The company holds US$3.7 million in shareholder equity up to September 2013.

One third of its purchases are accounted for by "one vendor". Going forward the company plans on spending more on marketing to drive sales.

"As we move forward, we expect to go from a company that pushes its brands into the marketplace to one that drives sales by promoting and advertising the brands to create consumer demand," Reed indicated in a recent shareholder's notice.

He added: "This change has begun with the hiring of a top level marketing consultant in 2013 with a number of cooperative marketing programs, including sponsoring a concert tour, partnering up for a large benefit with the Life is Good company, and Snoop Dogg's inner city organic gardens initiative MindGardens. We're developing marketing models and testing new pull campaigns to drive future growth. As we muscle up, expect to see more noise around our brands in the marketplace."

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