Tue | Dec 12, 2017

Flour rivalry heats up - JFM cuts prices, changes distributor

Published:Wednesday | November 29, 2017 | 12:00 AMAvia Collinder and Neville Graham
Paul Scott, president of the Private Sector Organisation of Jamaica and chairman of Seprod Limited converses with Managing Director of jamaica Flour Mills at a PSOJ function on November 28, 2017. Seprod became JFM's rival in the flour market last month, when it commissioned Jamaica's second flour mill.
Packages of counter flour made and distributed by new market entrant, Jamaica Grain & Cereals Limited.
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Jamaica Flour Mills Limited, JFM, has cut prices on bulk supplies of flour and launched an advertising campaign touting the special qualities of its products.

The downward price adjustments are unusual for this time of year when demand is high and business robust in the run-up to the yuletide season.

But it follows JFM's recent change of distributor and comes within the context of new competition, with the launch of a second flour mill in Kingston by Jamaican and American partners, last month.

JFM has slashed the price of bulk purchases of bakery flour from $3,800 to $3,600 per 45kg package; and from $3,275 to $3,115 for counter flour.

Counter Flour Plus will fall from $3,675 to $3,495 per bag; while High Gluten bakery flour is being offered to bakers at $3,900, down from $4,100.

JFM Managing Director Derrick Nembhard said Tuesday that the cost cuts were due to favourable import cost reductions and would last "certainly through the first quarter of 2018."

The price cuts were effected despite his own observation that demand for JFM's product is "traditionally higher at Christmas and Easter."

JFM which currently has 98 per cent of the market, according to Nembhard, will continue to maintain its dominance based on its "track record and years of service," he insists.

JFM also recently cut ties with Massy Distribution, turning instead to Cari-Med, which Nembhard says is "a larger distributor with increased presence in the market."

 

Price remains the same

 

Notably, he said, the mill has not increased prices in the last two years. But he also indicated that JFM expects "sales will obviously reduce as distributors associated with the Musson Group will buy internally."

The new flour mill is an investment by Seprod Limited and Seaboard Milling, both of which are joint venture owners of Jamaica Grain & Cereals Limited. Musson is the largest shareholder in Seprod, with a 45 per cent stake.

Seprod CEO Richard Pandohie said JFM's price cut brings it more in line with prices being offered by Jamaica Grain.

JFM, which is owned by American milling company ADM, touts its products as GMO free, with a one-year shelf life, no bleaching agent added, environmentally friendly and stacks easily. Jamaica Grain pitches its product as enriched, GMO free, and low in sodium, cholesterol and fat.

"We feel the country benefits from a variety of options where flour is concerned so we're not here to replace anybody or take a JF Mills out of the market," said Pandohie. JFM is truly a blue chip company that has been around for decades. We have a lot of respect for them. What we see is that consumers are benefiting from the competition in the market place and we're happy for them. Congrats to JFM for taking that decision," he said.

Pandohie says he is not interested in a price war with JFM, while noting there is sufficient space in the Caricom market for all players to operate profitably.

"The bottom line is that we intend to make this a competition between brands," he said, adding that Jamaica Grains will soon be introducing several corn and wheat products.

The local flour market is also served by traders, who buy from foreign markets. Premium Foods began importing the commodity from Trinidad in June, under the Special Palm brand. General Manager Omar Newell says the market is benefiting from fresh entrants.

"It's good that consumers are benefiting from this reduction. The price of wheat has been down and we passed on those savings to consumers but more important the coming on stream of Seprod ahead of schedule has helped," he said.

"We get our flour from a facility that is five years old and that certainly can compete with a facility that is over 30 years old," he said.

business@gleanerjm.com