Berger Jamaica now producing former rival Penta brand
Once its foreign import rival in the paint market, Berger has brought the production of Penta paints in-house, a new arrangement that migrates manufacturing business formerly done in Trinidad & Tobago to Jamaica.
Berger and Penta are now both owned by ANSA Coatings International Limited (ACIL), a member of the ANSA McAL Group in Trinidad; and where both paints competed in overlapping market segments prior to Berger's ownership change, they will now target business within Jamaica more discretely, according to General Manager of Berger Paints Jamaica Barrington Graham.
ANSA Coatings acquired Lewis Berger Overseas Holdings Limited (LBOH) and its Berger Caribbean businesses in 2017. Earlier this year, the Trinidadian company placed LBOH into voluntary liquidation and started the process of transferring shares in the various Berger businesses to ANSA Coating as the new direct parent. For Jamaica, that transaction was announced in November.
Now, Graham, who was hired as general manager for Berger Paints Jamaica Limited in May of this year, says his next move is to integrate the Penta line into the Berger portfolio.
"Penta is now a full part of the Berger portfolio of products. All that Penta operation that used to be a stand-alone is going to be a fully integrated part of the Berger operations," Graham said, in confirmation of industry talk that first reached the Financial Gleaner through the hardware trade.
"We've started manufacturing some products and we continue to distribute the full range. It's an expanded range, so we're able to take to the market not just the Berger brand that we've come to know and trust over the years, but we're now offering to them, especially the value-conscious consumers, an alternative in Penta," he said in elaboration of the positioning strategy for the brands.
"We have our premium Berger brand and our value brand in the Penta range. The people who want high-quality paint but who might be operating on a tight budget, will see this as quality and, at the same time, value for money," he said.
In its last earning report for the period ending September, Berger Jamaica reported that the $127-million increase in its operating expenses year-to-date related to spending on additional storage space, improvements to the plant, and "several new strategic initiatives" that were meant to pay off in the long term.
Some of that related to the onboarding of the Penta operation, but Graham would not say how much capacity it has taken up at the plant, whether the capacity had previously sat idle at Berger's Kingston complex, and how much was being invested.
"We've picked up a gap in the market for some of the Penta products and we thought it prudent to make some production space available, because the alternative would be to bring it all the way from Trinidad," Graham said.
Berger Jamaica is the market leader in the domestic paint market and as a listed company, its earnings report offer a snapshot of how the wider market is performing. In the September quarter, Berger's sales fell two per cent to $608 million, but a wider lens on the nine-month results show a 13 per cent rise in revenue to $1.73 billion.
The company's bottom line, meanwhile, has suffered from the effects of the expenditures on works in progress and other expenses. Quarterly profit of $54 million a year ago fell to $9 million in the current period, and Berger's nine-month profit also dropped from $143 million to $43 million.
Graham is expecting some recovery in the fourth quarter - which is traditionally the peak period for retail spending - mostly because of the improvements at the plant, backed by rented warehousing and promotions to gin up sales.
"What we say is that we are a paint company and, therefore, our plant ought not to be a poor representation of what we sell. As such, we went through a complete facelift of the place to include complete painting and upgrading our front lawns," Graham said of the ongoing capital expenditure programme.
"There are a few other capex projects that are awaiting board approval and since we are part of a larger group in ANSA McAL we have to compete with fellow companies regarding capex funds," he said.
As to the current market standings in the paint market, construction industry sources and hardware merchants polled by the Financial Gleaner said Berger remains the sales leader, including the mixed paint category where competition is tight. B-H Paints, made by Brandram-Henderson, was described as running an aggressive second, with Edgechem and Sherwin-Williams jockeying for third and fourth places.
But as to the actual market share held by the players, that information was not forthcoming - neither from the industry nor Berger, even though Graham disclosed that the company already had a plan it was executing to deepen its market share in 2019.
"We know we are the leading decorative paint in the market, but we are by no means taking that with complacency. We see an opportunity for growth in the market and we are going at it on all cylinders," Graham said.
"While we want to be guarded about how much we say in the market, I can tell you that you will begin to see the results of our efforts in our 2019 performance," he said, while noting that from the steps already taken, Berger shareholders could see "a little glimmer" of the results of the strategy in the company's December fourth-quarter results.