Liquid Eggs operation cracks under shortage
Mcpherse Thompson, Assistant Editor - Business
Liquid Eggs Limited, the Montego Bay-based marketing arm of the Jamaica Egg Farmers' Associa-tion, is seeking to recover but the future of the company is uncertain because it has lost a number of customers due to its inability to maintain supply during an egg shortage over the past year.
The company's clientele is mainly hotels and food services.
In a report to shareholders on its audited financial results for the year ended June 2014, Caribbean Producers Jamaica Limited (CPJ) disclosed A US$58,797 operating loss from Liquid Eggs, which it attributed directly to a severe market shortfall of available supply.
CPJ itself reported improved profit of US$3.46 million, up from US$3.1 million, despite the underperforming subsidiary. Its sales jumped from US$69.4 million to US$78.6 million.
"We had a difficult time getting the shell eggs which we needed to pasteurise for the plant and we had periods where we had to cease production, and it actually jeopardised several of our contracts. So it had a major impact on the plant," CPJ Executive Chairman Mark Hart told the Financial Gleaner.
Liquid Eggs Limited supplies the product to the hospitality industry, quick-service restaurants and local bakeries, some of which, according to Hart, made alternative arrangements, even used the shell eggs directly, and in one case a customer resorted to an egg-cracking machine.
"We actually imported two containers of eggs, but by then it was too late," he said.
more balance needed
Eggs have been in short supply for nearly a year, stemming at one point from the market exit of several small egg farmers, who went out of business following the glut of 2012; and later a low supply of pullets or layers.
"We really need to have a more balanced supply and demand," Hart said. "At the end of the day, if you have too many people producing no one is going to do well, and if you have not enough production, hotels (will be) scrambling trying to get the product. And the supermarkets. And householders. And the school feeding people. It's chaos," he added.
At the top of the year, egg producers said the shortage was persisting because of panic buying, and forecast that the problem would have eased by the second quarter based on the number of birds that had been put into production.
Supplies are now said to have normalised.
The Liquid Eggs plant is operated through a company called Caribbean Egg Processors Limited, a joint venture in which Caribbean Producers owns 50 per cent and Liquid Eggs Limited owns the other 50 per cent. CPJ's losses from that investment have accumulated to US$312,241, according to the company's yearend results.
Liguid Eggs is currently weighing the state of the market, including the likelihood of regaining lost business, with discussions ongoing with the company's egg producing partners.
"It's been a difficult period for the company. It took a while for us to build up a good business and we had a steady stream of clients (and) they were demanding the product," Hart said about the plant, which was established in 2007.
Liquid Eggs also supplies Nutrition Products Limited, which has been using its product as a substitute for imported butter oil in the making of nutri-buns under the school-feeding programme. That client "is still on board," he said.
Asked what the company would do if they were unable to obtain a sustained supply of shell eggs, the CPJ chairman said, while local production is the preferred option, Liquid Eggs may have to turn to imports temporarily "but only on an as-needed basis".
"The whole purpose of the factory is to support local egg farmers. But the plant needs to keep its customers, it needs to keep in business," Hart said.
President of the Jamaica Egg Farmers' Association, Roy Baker, said the supply market was both hurt by the addition of consumption tax to table eggs and the 'severe glut' of 2012 in which Ministry of Agriculture data shows egg production of more than 14 million dozen eggs against an average of 11.5 million dozens.
Baker, who is listed as one of six directors of Liquid Eggs Limited, said the tax served to worsen the effects of the glut as "consumers were unable to purchase eggs at those prices and it caused a further dip in demand". It left farmers without the required capital to restock their farms and so created a shortage in 2013.
There is now normality in the market in terms of supply and demand, Baker said.
Liquid Eggs' other five directors, as recorded by Companies Office, are Mark Campbell, Vincent Fenton, Cislin Halloway, Alfred Jennings and Norman Williams.