SPUR Tree Spices, the Kingston-based manufacturer known mostly for its wet seasonings and spices, has set it sights on pushing its products into Europe and Africa as it plots to diversify its product offerings to become a full-fledged food company.
While Spur Tree Spices is active in the Jamaican market, its primary focus is on the export market from which it generates approximately 90 per cent of the company's revenue. Apart from long-standing relationships in the US, Canada, the UK, and the Cayman Islands, overtime, the company has expanded its exports to Central America, the Caribbean and Australia.
It recently signed a deal with Trinidad-based Massy Group which has a strong foothold in Trinidad and Tobago, Barbados, Guyana, and St Lucia to help it deepen its roots in the region. Still, it plots the way forward to enter new markets.
"We are aware that there are still markets where there is great potential, and we are actively working to capitalise on this," Metry Seaga, chairman of Spur Tree Spices, said in notes accompanying the entity's annual report which was published on Wednesday. "With our sights set on European and African markets, we aim to explore better distribution channels to increase our customers and expand our footprint," he continued.
"We want to go far and wide. We want to expand our ability to produce. We want to see our products in every corner of the world, and why not Africa? The taste profiles are similar and there is no reason Spur Tree Spices products shouldn't be there," Seaga added in an interview with the Jamaica Observer, when asked what prompted the company to explore new markets.
"We have started some preliminary discussions with a couple of people. I have held discussions with some distributors, but we have to do due diligence to ensure we are employing the right people [to distribute our products]," Seaga continued.
Apart from targeting the European and African markets, the company is also actively growing its presence in the Canadian and Latin American markets.
"This diversification of the revenue stream will serve as a safety net for the company, while adding to its revenues and profits," Albert Bailey, CEO of Spur Tree Spices, noted.
Currently, Spur Tree Spices' products are predominantly found on the shelves of West Indian-owned businesses or in specialty food sections. It has been targeting the mainstream market in recent years and is now pushing for it in a bigger way.
"One of our primary objectives moving forward is to secure placement on the conventional shelves of major supermarkets and big-box retailers. This will not only have a significant impact on our operations but will yield remarkable growth and open up tremendous opportunities to transform the way Spur Tree Spices operates," Seaga noted.
With markets opening again after lockdowns to stem the spread of the novel coronavirus, Spur Tree Spices said it is now seeing the full recovery of distribution patterns in the north-eastern US.
"This enabled the company to roll out its products to 11 stores of the Stop and Shop Supermarket Company, with over 100 locations in the north-eastern US. The partnership has been progressing well with opportunities for growth. In 2023, the company will pursue continued expansion in this market, and it will be the primary location for testing out consumer response to the company's new products as it diversifies and expands its brand. The company's products have also been resonating with a diverse group of consumers as more people become interested in exploring flavours from cultures outside of their own," Bailey said.
The company pursued additional revenue opportunities in other markets, such as the US south, resulting in 68 per cent sales growth in that region.
Bailey noted that for over eight months in 2022, the company worked on the development of new product lines which are to be introduced in 2023. He told the Caribbean Business Report that the new products were developed to satisfy the demand of its distributors who have been asking with expectations for an aggressive roll-out of new products.
With the introduction of new products such as creamed coconut and canned coconut milk in the next few months, Spur Tree Spices will move beyond seasonings and spices to becoming a full-fledged foods company.
"These will be rolled out in tandem with the company's strategy to maximise its potential in the local food service industry at restaurants and hotels," the CEO said.
Still, Bailey said part of the company's risk-mitigation strategy is to ensure that its local market is profitable enough to sustain the company's base costs, in the event of major challenges to the export market. In 2022, the company's sales in the local market grew 44 per cent.
The push comes as the company recorded its best-ever revenue and profit out-turn. Spur Tree Spices recorded revenues of $1.03 billion in 2022, up 20 per cent. This was primarily driven by higher sales from the parent company of $906.88 million. Its net profit in 2022 was $116 million, up 27 per cent. Ninety-two per cent of the company's earnings is in US dollars.
"Our many notable achievements are owed to several strategic investments made during the year. The most significant was the acquisition of majority shareholding in Canco Limited, an agro-processing company popularised for its canned ackee and canned callaloo products," the company noted.
Spur Tree Spices acquired a 51 per cent stake in Canco Limited in October last year for $350 million, aided by a loan from First Global Bank. The company said for the first 12 months, the loan will attract interest at a fixed rate of 8.75 per cent and thereafter a variable rate per annum. The principal repayment will commence upon completion of the 12 months moratorium with the loan maturing in six years, October 2028. The facility is secured by first demand debenture and guarantor's debenture over the present and future assets of Spur Tree Spices Jamaica Limited and its other entity, Exotic Products Jamaica (Successors) Limited.
The acquisition of Canco Limited enables Spur Tree Spices to own and distribute products under the iconic Linstead Market brand. That brand, just like the Spur Tree Spices brand, generated over 90 per cent of its revenues from exports.
Since being acquired, Canco Limited has contributed revenue of $117.8 million and loss after taxation in the amount of $2,431,000. Spur Tree noted that had the business been consolidated at January 1, 2022, contribution to its revenue would increase by $268.9 million and loss after tax would be increased by $37 million. Bailey is, however, optimistic that plans in place will help to turn this around.
As it relates to local operations, the company said it will explore the possibility of expanding its arrangements at the Spur Tree Factory Garmex Freezone and will continue to rationalise its operations to gain greater efficiencies in all areas of its business.
It also said it remains committed to supporting the local agricultural sector and farmers by utilising locally sourced raw materials in our production process. The company sources about 80 per cent of all inputs from local suppliers, including farmers.
Spur Tree Spices remains an employer of choice, with a tremendous employee retention rate of over 90 per cent of its workforce. In 2022, the company further increased its workforce from 49 to 72 employees to support increased production and capacity building for the year and onwards.