SPUR Tree Spices Jamaica has acquired a 51 per cent stake in Canco Limited — the privately-owned, Seaforth, St Thomas-based agroprocessing company more readily identified by its Linstead Market Jamaica brand of canned ackee and callaloo. The acquisition cost was not disclosed.
The acquisition comes months after Canco Limited sought a buyer.
"I was trying to sell the whole company," Norman McDonald, chairman and CEO of Canco Limited, told the Jamaica Observer. He said "about 12 parties showed interest" and after a process handled by PricewaterhouseCoopers, it was whittled down to two and Spur Tree was chosen as the preferred bidder.
"I think they gave us the best deal in more ways than one, not just monetary," McDonald said, adding that he felt very comfortable with the team at Spur Tree. "I think it is a good deal for us and for them. We have two companies with some products which are similar. Both brands are loved by the public, locally and abroad and both of us export about 90 per cent of our products and we have similar visions of the future and very compatible skills."
Albert Bailey, CEO of Spur Tree Spices Jamaica, said he was "pretty excited about the acquisition", which he outlined fits into Spur Tree Jamaican's thrust to have a bigger footprint in the market for ackee exports to the United States.
"The factory is beautifully laid out. It is one of the best factories and largest ackee factory in Jamaica. So, the foundation is there to really take this brand to the next level," Bailey continued.
"They have formulation for about 20 products. Some of them have already come to market and some are yet to come to market, so there are opportunities to build them out, and really to capitalise on that brand to become a global brand with a global reach, and it has the base of ackee," he told the Business Observer.
Bailey said most of the money spent to buy the stake in Canco is earmarked for investing in the company. "We are going to retool, we are going to invest additional working capital for the build out of additional product lines," he added as he outlined that was how the deal was structured.
Going after ackee market
Bailey said the acquisition of the stake in Canco will help it to grow its presence in the ackee market. Just last year, Spur Tree struck a deal with Exotic Products, an entity which also produces ackee and callaloo, to help it reach that goal.
"We want to have a significant footprint in the production of ackee in Jamaica, that is why we have purchased Exotic Products, which is one of 10 FDA-approved factories in Jamaica."
He said since that deal was signed, a second line has been added to the Danvers Pen, St Thomas-based factory. The goal is to double the production of ackee and callaloo produced by that factory in the short term.
"In support of that, we have also purchased a property through the Factories Corporation [of Jamaica] out in Port Morant that we are going to use to collect and pre-process ackee to support the inflows into the factory in St Thomas. So we're invested heavily in this because this is a strategically important product that really is oftentimes in short supply, and therefore it provides you with a certain amount of leverage in the marketplace."
Bailey outlined that the ackee business is a big one for Spur Tree, explaining that the demand for the product, especially overseas, was the driver behind it's acquisition of Exotic Products in St Thomas.
"Ackee is a big part of what we do. About 98 per cent of the ackee that Exotic does is actually sold under the Spur Tree brand."
New distribution channel
He added that the current issues of inflation and higher interest rates in the United States and talks of a recession have sapped some of the energy out of the market, but added that the company has already responded by doubling its promotional activities in recent months while it has gained entry into a new supermarket chain.
"Demand is a little soft now because of uncertainty, but we have not seen any significant decrease in demand, and we are in the market and we are working," he added.
"In recent times, our products have been placed in one of the largest chains in the US. It's called Stop & Shop. So we rolled out our product on an extensive four-foot shelf space in the first Stop & Shop supermarket in June of this year and by the end of October, we'll be in 10 Stop & Shop," Bailey beamed.
Stop & Shop Supermarket Company is a regional chain of supermarkets located in the north-eastern United States. It currently operates 415 stores chain-wide and Bailey is licking his lips at the prospect of getting his Spur Tree products in more than 10 stores.
"And we are also discussing with them not just the selling of our bottled products, or canned products, but we are also discussion with them about doing a marination programme, which is selling marinated, rotisserie chicken, and all of those things using our seasonings similar to what we did in ShopRite."
"So there are opportunities that we are still exploiting in this environment, so we feel pretty good about where we are and the things that we are working on."
He said he had a meeting on Monday with Spur Tree's largest distributor in the United States, and has agreed to roll out new products through that entity before the end of the year. Strategies are also being devised to boost sales during the period in which the US celebrates Thanksgiving and Christmas.
The company also has products which are not sold locally, like its rice and cornmeal which are distributed through one entity in Florida.
"That's some of the things that we are working on right now to have a full-blown set of products that we can increase our shelf space because what we have is a situation where, because our products have done so well for a lot of retailers, they are willing to give us more space, but you have to expand the reach in order to get additional floor space. So, those are some of the products that we have identified that we will be putting there to capitalise on this opportunity," Bailey said.
He said the company produces the rice and cornmeal through a co-packing arrangement and plans to roll out other products using similar arrangements.
For now, Bailey said Spur Tree will be focused on deepening its penetration in existing markets while working with Massy Distributors to push the brand into the Caribbean. He said several issues have caused the company to delay the roll-out of new products, but pointed out that is getting back on track.
"But in addition to that, we are always looking for opportunities for investment in other business, for acquisitions, for amalgamation, as far as it aligns with our strategic objectives."
Can shortage resolved
A shortage of cans earlier this year had a significantly negative impact on its revenues and profitability, forcing the company to adopt by forward buying cans for ackee and callaloo.
"The supplier said based on demand, the ackee crop earlier this year was good and that sent up the demand for cans which was more than they had anticipated and that is why they ran out. It was a big issue, it was discussed at the JMEA because it was a widespread thing that affected all ackee producers."
"For us, the real thing is that it meant we could have produced more, but couldn't. It meant some of our anticipated revenue never materialised," Bailey added.
During the company's second quarter which ended June 30, it reported revenues amounted to $201 million, up just 1.5 per cent and lower than the company had anticipated. Profit of $38 million was up 35 per cent.
Looking at the company over the longer six-month period — January to June — profit of $89 million was almost double the performance of the prior year.
Another quarter ended on September 30, and though the numbers are yet to be finalised ahead of being made public, Bailey was optimistic things are still looking up for Spur Tree Jamaican.
"We continue to work hard and we expect at the end of the year to have reasonable growth in sales and reasonable growth in terms of profits," was all he would say about the figures for now.