SPUR Tree Spices has reached an agreement with Atlanta-based BAK Foods to broaden the distribution of its products in the US, a deal which is estimated will boost the food company's revenues "by a few million US dollars each year". Under the deal Spur Tree Spices will be producing various products under a private labelling arrangement which will come with the BAK Foods label.
BAK Foods is a distribution company which supplies over 600 Jamaican restaurants across 12 states in the United States and is owned and operated by Boris Smith, a Jamaican who also distributes products for GraceKennedy, Wisynco Group, and Walkerswood, among others.
"We are very excited to have a partner like BAK Foods on board," Albert Bailey, CEO of Spur Tree Spices, told the Jamaica Observer.
"Over the years we have been getting a number of requests for private labelling arrangements but because we were primarily trying to grow and expand our brand and we did not have the capacity to undertake any massive venture into that area, we held off — although we did it for a few customers. But as part of our strategic vision we have been making investments to increase capacity and, having done that, we can now take on, in a more significant and meaningful way, private labelling arrangements. In fact, that was one of the primary goals that we had when we decided to invest significantly in upgrading capacity at our Garmex factory," Bailey continued.
Bailey said this is the first significant arrangement coming out of that investment, "and it is something that we will be pushing as we move ahead to engage other potential customers who have been reaching out to us".
He said the company, after being approached by BAK Foods, visited that company last week to do demonstrations with its products, cooking for the staff to get them to taste the products they will be selling — and just a few days later it got an initial order.
"We have an order for two 40-foot containers with them now, and the line includes jerk seasoning, browning, festival mix, ackee, callaloo, hot sauce and some other items that we are working on for future consideration," Smith told the Business Observer.
The first shipment will leave Jamaica in the second week of September, with the other shipment to leave before the end of that month.
"Based on the potential annual sales to be derived from this we are talking about over a million US dollars per year...and that can grow into much more significant numbers as we build the relationship," Bailey added. He said there are other areas that can be exploited with BAK Foods beyond the current private labelling arrangement, but declined to go into details because no agreement has been reached as yet.
For Smith though, the choice was simple.
"The vision is to make sure that the authentic Jamaican flavour is available from products that come from Jamaica. It must say 'Made in Jamaica' and not [be] made in Thailand or Dominican Republic or Belize, or somewhere else. The availability of that to the North American market...we want to go to US barbecue restaurants with a product that is made in Jamaica to give that authentic experience.
"With our product lines that we carry we tend to have two SKUs [stock-keeping units] for the top-selling items. So, for example, for jerk seasonings we carry brands like Walkerswood and then we also offer an alternative, and what we are doing with that alternative is we are going into private label as the second choice for the customer," he said.
Smith outlined that his company, owned and operated by Jamaicans, seeks to source authentic products made in Jamaica for the US market, especially for Jamaican-operated restaurants.
"That's the motivation for us to do the private label, because we would still be able to do an authentic Jamaican product and offer it at a lower price so that they still have a choice on a product made in Jamaica — meaning dollars are going back to Jamaica. Instead of carrying an American brand or another label, we want the items that are carried to come from a Jamaican company with the raw materials sourced in Jamaica, so it benefits Jamaica and Jamaicans," he contimued. "And for more and more of our private labels we are trying to do that, not just with Spur Tree but also with a lot of the other items that we can get made in Jamaica. Spur Tree won the agreement because they are the best at what they are doing. They actually came to our office, did a demonstration by cooking and custom-made the jerk seasoning to what we know the market wants."
Bailey said the deal will see Spur Tree starting to recoup the investments it has been making to increase capacity to grow revenues and profits which reached over $1 billion and $115 million, respectively, last year. He reminded that he has been sending signals to the company's investors that once the various projects the company is undertaking are fully implemented, significant benefits will flow to both the revenue and profit side.
"This is the largest one because Bak Foods has a far reach," he pointed out. "It means a lot. And, again, what I want to emphasise is that we are being very strategic about our investments, and the investments we are making are building blocks towards what we want Spur Tree to be in the future and so everything is strategic and calculated."
He said the companies are in discussions now to expand into other products.
"They could potentially become partners in certain other projects that Spur Tree wants to undertake," he said while declining to go further because the discussions are preliminary.
Bailey also said there are other cooperations and partnerships which the company is considering at the moment.
"We have a number of significant requests for partnerships similar to this on the table... both locally and overseas. I am actually doing some costing to send to some potential partners [and] all of these are new arrangements. We are doing pricing to send out to them this week. They have also come to us and said, 'We have heard of you guys. We have seen your products, we have seen your growth. We have been watching your history and we want to work with you.' "
For this current arrangement with BAK Foods, Bailey and Smith said local farmers are to benefit.
"That was very important in our conversation with Spur Tree, meaning that they are going to support the local farmers. They are going to support the little guy who have two acres and is growing some pepper...so that the money is spread out in the country," Smith said.
"There will be a significant increase in the local raw materials that we would need," Bailey added as well as he acknowledged that farmers will benefit.
"It's a combination of having authentic Jamaican products being available to all the markets in North America as well as giving the Jamaican restaurants an alternative to the top brands coming from Jamaica."
"When you walk into a Jamaican restaurant you want Jamaican brands. You don't want a Jamaican restaurant to become like a Taco Bell, so to speak, where it's a Taco Bell with not one item or ingredient that comes from Mexico."