Sausage, patties drive gains for GK amid lockdown
Food and financial services conglomerate GraceKennedy Limited bucked what has been one of the toughest six months for businesses worldwide, to close on the upside with a $5 billion boost in revenues to $56.5 billion.
The results were partly attributable to what Group CEO Don Wehby said were record sales of the Grace Vienna sausage, Grace patties, and the conglomerate’s focus on digital technologies in its remittance business since the global outbreak of COVID-19.
The revenue gain fed double-digit earnings growth for GraceKennedy, with profit at half-year topping $3 billion, up 34 per cent from $2.27 billion at HY 2019.
“We’ve never seen sales that high for our Vienna sausages. It’s unbelievable,” Wehby declared in an interview with the Financial Gleaner about the financial results.
“We had to be running our factory basically around the clock to try and keep up with the demand,” he said.
The first quarter ending March edged the second in terms of revenue, at $28.85 billion compared to $27.7 billion, but the June quarter had the edge on profits at $1.6 billion or $1.44 per share compared to $1.45 billion or $1.33 per share in the March period.
The overall $5 billion of increased revenue over six months is nearly as much as GraceKennedy added to its revenue base in all of 2019 and puts the conglomerate on track to outperform the record $103 billion of top-line income reached in that year.
Wehby said the double-digit increase in demand stemmed from more individuals preparing home-made meals due to the closure of many restaurants worldwide during the pandemic. The canned sausages are also an affordable and easy-to-prepare food for children, who, since March, have been out of school.
“I think that has helped our food division,” Wehby said.
Internationally, Grace Foods USA LLC, which is the supplier of Grace patties, also saw increases in demand for the meat-filled pastries from retail chains Walmart and Shoprite. GraceKennedy, which entered the patty market as a manufacturer and a distributor of frozen patties in 2017, has, over the years, reported steady increases in the sale of the spicy beef, mild beef, and curry chicken varieties.
The conglomerate is now in the process of developing vegetable patties that should hit the market before the year ends under its ‘better for you products’ initiative.
“We are looking at introducing a veggie patty that is now in our innovation unit. We are almost there in terms of having it released on the market, but the other patties are doing so well we have to ensure the launch of the veggie patty is timed carefully,” Wehby said.
Grace patties are manufactured in Florida through Majesty Foods, maker of both patties and empanadas, in which the Jamaican conglomerate holds a 49 per cent stake.
GK’s food trading division produced profit before tax of $1.8 billion for the six months ending June. On the financial side of the operation, banking and investments contributed $263.7 million to pre-tax profit, insurance contributed $491.7 million, and money services $1.8 billion.
While the pandemic has resulted in gains in food, it has taken a bite out of other aspects of the group’s operations to which GK has responded by doubling down on measures seen as driving efficiencies and which are already showing positive results.
“At the end of March, remittances from our main corridor, New York, were down 15 per cent, compared to a 35 per cent decline at the start of the pandemic. The improved performance was mainly from our digital strategy,” said Wehby.
“In July, remittances are up 15 per cent, with digital transactions growing just under 200 per cent,” he said.
Post-quarter, the conglomerate announced that it has put together a committee led by Wehby to devise and execute a more robust digital strategy across the group in line with the shift towards e-commerce and online transactions that the pandemic has sparked. GK also named a top executive, Steven Whittingham, to head up a digital- transformation team. Whittingham will report to Wehby’s committee.
Recently, GK also commissioned its first on-site liquefied natural gas plant at its meat-processing factory in Westmoreland, which should save on the cost of electricity.
This week, Wehby indicated that there is more to come.
“We are doing a really deep study of the cost structure of the GK group. We introduced something called ‘Project Eagle’, and we also have an ongoing exercise happening where we look at our business processes in foods and financial services to see how we can make our operations more efficient. Aside from that, we are also realising the benefits of the restructuring we did,” he said, referring to the exercise that emanated from a consultancy two years ago.