Seprod to capitalise on marketing agency status with branded retail sugar product
Golden Grove Sugar Company is spending $120 million on maintenance and packing equipment to ready the St Thomas-based factory to start grinding cane in January 2016.
Seprod CEO Richard Pandohie says the company has drawn a line under last year's $800 million loss and is looking to chart a new course now that Golden Grove has been granted marketing agency status, which gives it the go-ahead to seek out its own markets - a status shared with only two others - marketing company Jamaica Cane Product Sales Limited (JCPS) and Chinese sugar producer Pan Caribbean Sugar Company.
Golden Grove has eyes on CARICOM markets.
"The first stage is to stabilise the business. Next year it's about understanding what we're doing and focus on building a brand while maximising our sales and distribution channels that we have not just in Jamaica but throughout CARICOM," Pandohie said.
Seprod/Golden Grove is using September and October to come up with a full marketing plan and brand identity for their sugar and molasses. The factory will be moving away from the traditional methods of delivering sugar to the consumer, which is largely sold in bulk form to retailers, who in turn repackage the crystals in small, transparent baggies for their shelves.
"Right now in Jamaica everybody produces sugar in these 50 kg bags and that is what is sold to the trade, except for some that is produced by JCPS. We'll be going into direct packages for the consumers," Pandohie said.
Marketing company JCPS distributes branded brown and refined sugar products called Jamaica Gold in 1 kg and 2 kg packages. Before it got its marketing permit this month, Golden Grove would have had to sell its sugar output to JCPS for it to market domestically and internationally.
Seprod is the only the second sugar producer to secure the permit after Pan Caribbean Sugar Company, which gained its designation around six years ago.
The Seprod CEO said experts have been engaged come up with new packaging and a name for the products to be developed at Golden Grove.
In the meantime: "We are registering several brand manes just in anticipation," Pandohie said. The sugar will be sold in one, two and five kilogram bags while the molasses will be marketed to speciality shops and Jamaicans overseas.
Golden Grove plans to export about 50 per cent of total output or around 4,000 to 8,000 tonnes of sugar per annum. For the 2015 crop, which ended in June/July, the factory churned out 16,018 tonnes of sugar from 196,631 tonnes of cane - a ratio of more than 12 to 1, which sits on the lower end of the efficiency scale.
Pandohie says of the plan to tap into Caricom markets that it's the first time a Jamaican sugar company has paid serious attention to the region.
The Golden Grove Sugar Company has bled $2 billion since Seprod bought the business from the Jamaican government in 2009. This is in addition to the $3 billion initial investment. Pandohie is expecting the factory to rack up more losses from the 2016 crop, but says the losses will abate shortly thereafter. Golden Grove expects a 16-20 per cent decline in sugar production for the upcoming crop.
The factory is fed by 3,796 hectares of cane fields. Just over 2,170 hectares of that is in private hands. Pandohie says small cane farmers in the area will continue to receive the same logistical support that they currently enjoy and will also continue to have guaranteed factory access for their cane production.
Both the marketing programme and the operations are undergoing changes.
Golden Grove is in the process of outsourcing the agricultural side of the business. Nearly 500 workers received their notice payment on August 4, totalling $58 million. Pandohie says redundancy payments of about $40 million were made on September 4 and that another $15 million for 238 persons covered under the heads of agreement with unions will be distributed by today, September 18.
The CEO reports that the total separation cost for Golden Grove is around $111 million.
Pandohie says critical to the future operation is improved productivity. He wants to maximise the throughput in the factory, and bring down the unit cost by increasing volume.
"We're obviously going to be looking at how we can improve the productivity and efficiency of the factory because one of the issues facing the Jamaican sugar industry is that our cost of production is out of line with the requirements for international competitiveness," Pandohie said.