SEPROD Group of Companies has commenced the roll-out of a $5-billion investment with the acquisition of a state-of-the-art Compact Flex Filling machine slated to increase production at its subsidiary Serge Island Dairy by some 45 per cent.

The Tetra Pak equipment, acquired at a cost of US$3.5 million, will not only boost production for the domestic market but is expected to give Seprod an even bigger share in the export arena.

The $5-billion capital injection, which will be rolled out over two years, will be in new technologies, staff training and partnerships to drive growth, increase exports, and engage in import substitution.

The announcement was made at a factory tour of the Serge Island facility in St Thomas last week, as Seprod — which manufactures and distributes edible oils and fats, dairy and fruit beverage, corn products, baked snacks, among other items — kicked off its 75th anniversary celebrations.

Chairman of Seprod PB Scott said the Tetra Pak machine will allow Serge Island to deliver top-quality products at very competitive prices in both the domestic and export markets.

Excellent investment climate

Noting that this is now an excellent climate for investment in Jamaica, given the serious fiscal discipline being consistently applied, Scott said it is important to reinvest constantly in order to remain competitive in the market place.

“We used to produce Swizzle (juice drink) in 250ml. The market demanded 200 ml but the same machine couldn’t produce the 200 ml so we had to reinvest and retool to produce a product that is slightly smaller, significantly cheaper and addresses the need of the market,” he told the Business Observer.

Serge Island, he said, is the most modern and efficient dairy plant in the region.

“In our dairy you will find equipment you will only find in the most modern processing plants around the world producing products that are competitive in both quality and price on any stage,” Scott said.

For the group which has seen gross revenue of $14.77 billion in 2014, operating profit of $1.45 billion, and a total asset base of $14 billion, the chairman said Seprod has retooled its factories and built brands offering great delivery and authenticity.

Import substitution

Serge Island , he said, represents one such brand with some $2.5 billion having been invested in its operations.

“This investment and the new machines will substantially increase productivity, in turn reducing cost and making Serge more competitive to grow in both our domestic markets — substituting imports on the juice side, as well as giving us a competitive edge on the exports,” Scott said.

He noted that Seprod currently exports in excess of US$10 million, but this is expected to grow substantially.

Chief Executive Officer of Seprod Richard Pandohie said the expansion at Serge Island will improve efficiency and allow the company to be more competitive, both locally and in the region.

“Two of the key plans that we have is import substitution, because we want to replace a lot of the imported goods coming here and we want to expand exports,” he later told the Business Observer.

He also disclosed that Serge Island will be moving into other value-added products such as whipping cream and yogurt.

“We believe that in the dairy side and the value-added products, like whip cream etc, we can get 75-80 per cent of the whip cream market, and we can increase our dairy sales by 25 per cent based on import substitution and that is within this year,” he explained.

A product development team from Sweden, he said, is currently in the island helping to get this project off the ground.

Meanwhile, Pandohie said the company is moving to increase its exports to some 11 per cent.

Export strategy

“Currently our export is nothing to speak of. We are at four per cent of our total revenue in export, which is under US$10 million. At the end of this year we expect to be closer to 10 to 11 per cent, and within three years we expect about 35 per cent of our business to be coming from export,” he said.

The group’s products are currently sold in North America, the UK, Canada and Caricom markets but, according to Pandohie, the plan is to get into some South and Central American countries as well.

Pandohie said there has been no challenges in getting into these overseas markets.

“So far it has been surprisingly pleasant in the sense that our initial forecast has been redone and made at a higher level. The numbers that have been coming back have been more positive than our projection. The Jamaican brand is an excellent brand, and our association with it has been a big help in getting acceptance into the market,” he said.

Meanwhile, the CEO said he is seeing a renewed sense of optimism in the manufacturing sector, with several companies now investing.

“There is stability in the macroeconomic environment and the predictability in the environment is what a lot of people need prior to investing their money, and that stability is creating a renewed sense of optimism and renewed investment,” he said.

Group Marketing Manager for Seprod Group of Companies Roger Thompson said the company is constantly designing products to satisfy consumer demand, while substituting for the imports coming into the country.

“The business on a whole is based on manufacturing and so, as the consumers become more learned and more discerning in what they need and what their taste profiles are, then the manufacturing entity has to respond to them, so customer centricity has really become the focus of the organisation,” he said.

Jamaicans, he said, have grown more supportive of locally produced goods.

“So, as long as we are able to compete efficiently with the imports and as long as we continue to generate high-quality products at a consistent level then I think the local population will eventually all come onboard to consume our local-made products as opposed to imports,” he said.

Minister of Industry, Investment and Commerce Anthony Hylton, in addressing the ceremony, said the investment will not only increase production but employment in St Thomas.

“It will also allow for increased employment as the machine will facilitate expansion of the plant from two shifts to three shifts over the 24-hour cycle seven days a week,” the minister said.

He pointed out that small dairy farmers who supply milk to the plant will also benefit greatly.

According to Hylton, the investment is timely as Government has created a targeted plan to allow manufacturers and exporters, such as Seprod, access to international markets through development of the National Export Strategy.

“This is extremely important as we encourage companies to adopt an export-centric model to facilitate their growth and expansion beyond the 2.7 million people available in the Jamaican market,” he said.

Additionally, Hylton said the legislation for the establishment of the Special Economic Zones (SEZ) will come on stream later this year.

“The SEZ will enable the Jamaican businesses to provide products and services to large-scale organisations operating out of the special economic zone. This will allow local companies to enter the global supply and value chain without the attendant trading cost,” he said.