Salada looks to exports and diversification to counter gov't cess

Business

Salada looks to exports and diversification to counter gov't cess

Lobby for a rollback of cess continues

BY DURRANT PATE
Observer business writer

Sunday, February 23, 2020

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Food manufacturer and coffee processor Salada Foods is looking to greater exports and diversification to counter the negative effects of the government cess, which is affecting the company financially.

Salada General Manager Dianna Blake-Bennett disclosed at the company's annual general meeting (AGM) on Thursday that already Salada has been prospecting for new markets and has employed diversification strategies, which have seen some success. However, she readily admitted to shareholders that Salada's business model, as it now stands, is under imminent threat from the imposition of the cess.

Last year Salada paid $90 million in cess, which is levied on imported green coffee beans at a cost of USD$1.41 per kilogram. Imported green coffee beans is a raw material used to manufacture instant coffee, which is Salada's primary manufactured product.

Arising from this, the company got an $81-million hit on the cost of sales which adversely impacted operating profit, which declined by 37 per cent as a result.

PENETRATING NEW MARKETS

Blake-Bennett told agitated shareholders that the company is looking at penetrating the markets of the United States, United Kingdom, European Union and China. However, she emphasised that the challenge which the company has encountered is getting its products into these territories, where there are large pockets of Jamaican Diaspora members.

This, is in addition to identifying a reliable distributor who will carry the products in these Diaspora communities. The Salada general manager outlined other strategies to build and grow the business, thus negating the negative effects of the cess.

These include a “focus on new channels and introduction of a series of new products to engage different kinds of consumers, and of course we must continue to engage our young people as they represent what the brand would look like in the future,” Blake-Bennett told shareholders at the AGM, held at Jamaica Pegasus hotel in New Kingston.

While growing the export business, the Salada boss declared that the domestic market, which is the company's primary source of business will not be left behind as there will be a greater push to be engaged in the growing contract business, whereby manufactured products are produced and sold in bulk. This will be an added feature of the diversification push to mitigate added cost occasioned by the imposition of the cess.

SHAREHOLDERS VENT ABOUT CESS

Some shareholders openly vented their views about the cess killing the company financially, and questioned management about its lobbying effort to get a relaxation or abolition of the cess. In fact, two shareholders stopped short of criticising the management for not doing enough to convince the Government to abolish or relax the cess.

The management and the board of directors in attendance made out a case to the shareholders that everything possible was done to convince the Government to do away with the cess, but their pleas fell on deaf ears. In spite of this, the management and board say they will continue to lobby the Government on this matter, hoping that a rollback of the cess is possible.


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