SPUR TREE SPICES said it has taken steps to be more self-reliant in producing some of the raw materials it uses to make its various sauces and spices after facing severe shortages last year due to weather extremes.

Albert Bailey, CEO of Spur Tree Spices, said supply challenges forced the company to purchase raw materials at exorbitantly high prices just so it could meet demand in the competitive export market and were behind a decline in its profit margin despite racking up record revenues during the year.

“The major challenge that we faced last year was with regards to the consistent supply of raw material inputs and especially on the local side, because most of our raw materials are sourced locally. But earlier in the year, we had a significant period of drought that seriously impaired the availability of raw material inputs, such as scallion, thyme and pepper, and those are the three main ingredients that go into our sauces,” Bailey outlined in an interview with the Jamaica Observer.

“The demand for these raw materials is increasing, because as sectors like tourism grow, the demand will grow for these raw material inputs and if the supply side is not growing at an even rate to cover the higher demand, what you are going to have is an extension of the shortage and once that happens you are going to have price increases resulting from that, so what we have to look at is exactly how do we deal with the supply equation, not just from an environmental standpoint, in terms of weather conditions and the other vulnerabilities in the sector, but we also have to look at how do we find sustainable ways of dealing with the increased demand that will naturally come from the expansion of the economy.”

He said the conditions forced the company to pay up to four times the normal price for raw materials, such as pepper, and with some 60 per cent of revenues coming from the sale of its sauces and spices, the decision was made to pay the price if the company was to continue securing shelf space while courting new business.

“We had to buy at ridiculously high prices just to keep our shelf spaces stocked for the most part, but that’s a sacrifice that we understood that we had to make, because you work so hard to get that shelf space and once you lose it, its hard to regain it.”

But he said continuing to purchase the raw materials at a high price is not sustainable and so the company entered the joint venture with a farmer who has 240 acres of land to grow enough material to supplement what it gets from farmers, in terms of items such as pepper and scallion. Other items will be grown later at the property as Spur Tree Spices increases its product line, Bailey said.

Still, he was clear to stress that growing some of its raw materials does not mean Spur Tree Spices will stop taking produce from farmers.

“We have always seek to establish relations with our farming partners. That’s something that has been a prime objective of this business because we understand the critical nature of having adequate and timely supply to our overall business objectives.”

“However, situations like the increased demand and also the weather condition that significantly affect the supply side, they do happen from time to time and we have to find ways of overcoming those in a much shorter period of time. So while our goal is to strengthen the existing relationships, we also have to look for ways to ensure that our business doesn’t face the same challenges that we faced last year. We have to learn from that experience, so hence we have gone into a partnership in which we are working directly to produce some of the items that we need.”

“This situation did not only affect us, it affected all producers. This farm also supplied other producers, so one of the important things that we want to ensure is that those producers are still able to get their usual supplies…Spur Tree is investing directly in this venture to help to resolve what we see as a long-term challenge that will be confronting not just us but also other producers and the availability of raw materials for the local market as well as the export market. This is what we call a complementary action, both for our business and the other businesses that depend on this farm.”

He added that at no time has the company considered importing the raw materials to supplement the local supplies.

“Our vision statement speaks to us taking the unique flavours of Jamaica to the world. It talks about being the premier manufacturer and distributor of unique Jamaican flavours to the world, and we don’t want to compromise that at all. We think that the flavours of Jamaica are very unique in terms of taste, in terms of profile, and that’s what the distinction is as far as our products are concerned on the international market. And that is why,when we look at the issue of shortages and we look at who we are and who we want to become, all of that is embedded in the notion that what we are building our business on is the unique and beautiful flavours that are part of this country, and so it was an easy decision for us to say, ‘Let’s find a way, either by working with our farming partners or doing some of this to because we need to capitalise on the flavours of this country because it is unique and loved by people all over the world.’ “

He said even with the higher prices paid for inputs, Spur Tree Spices and its competitors can’t just move prices because the input costs have increased.

“We just don’t have that flexibility in the market to move prices. In most of the markets in which we operate we might get the chance to move prices once per year, and not by any significant margin, sometimes less than five per cent, and especially in the states, price movements, customers are very sensitive to that. So we had to be absorbing those increases and taking a hit with those gross margins.”

Absorbing the margins means that while Spur Tree Spices recorded $1.46 billion in revenues last year, a 42 per cent increase on the previous year, its profit dipped 24 per cent from $115 million in 2o22 to $87 million last year.