Due to the rising demand for its products and aim to satisfy its burgeoning export market, Honey Bun (1982) Limited is looking to lease a new factory space in the coming months.
This was revealed by Honey Bun's CEO Michelle Chong at the company's annual general meeting held on Wednesday at the Courtleigh Hotel and Suites. Honey Bun currently operates out of its 11,500 square feet factory on 26 Retirement Crescent.
“During 2021, we had advanced negotiations in leasing a factory to expand our growing manufacturing footprint which should commence early this year in 2022. This will significantly increase our production capacity and our ability to grow and innovate new products,” Michelle explained.
The company had expanded its outlet footprint to six locations across the island along with a rebrand of its Buccaneer Jamaica Rum Cakes. Currently, the company is looking to grow its export footprint even further in Florida, USA and Ontario, Canada. Honey Bun was able to secure a distribution agreement with some of the largest supermarket chains in both locations. This is a bid to continue growing the company's sales which have grown by double digits throughout the pandemic and by 44 per cent to $644.70 million in its first quarter (October – December).
Despite these grand ambitions, the CEO extended caution as the company gears up to deal with the rising cost of fuel and commodities along with the strained supply chain dynamics. This has led the baking business to have a more frequent revision of its pricing mechanisms amid the variables in the environment.
“We increased prices in February and as we did it, the price of flour went up. We're looking at developing a strategy and policy around how frequently we do this as we've never experienced something of this nature. Our strong cash position allows us the flexibility to achieve this and has been a part of our long-term strategy to face difficulties such as times like this. We have developed and enlarged our pricing policy so that we include all the aspects that are required. Yes, we probably might have to look at another price increase,” said Michelle to the shareholders in attendance.
Chief Operating Officer (COO) Daniel Chong further added that there's no specific item which is going up more than the other as they're all going up. Apart from the general cost increases to the inputs, he added that the current rise in fuel costs will result in additional expenses to manufacture goods in their ovens and distribute them to their various clientele.
“Everything is going up. There's not one thing that's really going up much more than the other. Since the war started in Ukraine, we've really not seen an effect except when fuel goes up. We do know that futures of wheat and other such commodities that are supplied by Russia and Ukraine are going up. We do expect to see increases in another few months and we've been in close contact with suppliers and we're okay for now plus couple months,” the COO detailed to shareholders.
While Honey Bun has the cash to stock up on inventory, the company is limited by the lead times and space to store some of these products. This comes as Ukraine has banned the exports on key agricultural goods such as wheat, corns, salt, meat and grains. Russia and Ukraine are among the top five wheat exporters in the world. The price of wheat and oil futures have risen by 44 and 40 per cent year to date to US$1,090 and US$106, respectively.
In her explanation, the CEO said, “Our programme for the reserve of inventory is different for different items. Each item has a pre-order quantity based on the lead time it takes to get inventory. Some things we have to use a lead time for as much as six months because it takes longer to get the item in stock while others which you can get easily have a shorter lead time.”
The issue of stocking up is also constrained by the supply chain dynamics which are still playing out from the novel coronavirus pandemic. Seprod Limited CEO Richard Pandohie pointed out on Twitter that more than 60,000 20-foot containers are transported monthly from China to Europe via Russia's railway system. Pandohie noted that this will not only add more pressure on stressed maritime shipping, but also make the cost of supplies more expensive along with actually getting them to their final destination.
Even Proven Investments Limited's most recent acquisition of Roberts Manufacturing Company Limited is facing headwinds due to the rising cost of inputs. Roberts manufactures animal nutrition, edible fats and oils which are exported across the Caribbean, Central and North America.
“We're meeting and assessing the impact of the geopolitical issues on our pricing and we're trying to determine how we position ourselves as a result of it. It has had some impact on our input prices,” stated Proven Management Limited CEO Christopher Williams.
While Honey Bun expects to maintain its current growth trajectory from the official reopening of schools, shareholders clamoured for the company to get more shelf space as their kids demand the products which are running out at various supermarkets. This comes as the company's brand equity exploded during the pandemic.
“No matter how we express ourselves, as demand goes up, the shelf space does not increase in accordance. I'm asking you all when you don't see the product, report it to the cashier and management and tell them you need to see more space for Honey Bun. It's a very small space and doesn't reflect in terms of how much business our competitors are doing,” Michelle told a shareholder.
Honey Bun will also be planning to spend heavy on marketing and sales for the Jamaica's 60th year of Independence. The company launched a Goldie product in 2012 during the 50th Independence celebrations. Honey Bun will be giving away branded bags and items for persons who purchase their products from the start of the Easter celebration until the independence event.
“First, we have some plans to do something for Carifta and it's going to be in July which will lead into the Jamaica 60th celebration. We plan to do some sampling, partner with some radio stations and community centres with the diaspora there [UK]. Also, we would like to do some sampling at a Birmingham church,” Business Development Manager Loriann Tater closed.