Sun | Nov 29, 2020

Market lukewarm to CFF sugar reducer FlavourFit

Published:Friday | September 11, 2020 | 12:07 AMKarena Bennett - Business Reporter
Howard Mitchell, chairman of Caribbean Flavours & Fragrances Limited.
File Howard Mitchell, chairman of Caribbean Flavours & Fragrances Limited.

Caribbean Flavours and Fragrances Limited, CFF, which trades in food and beverage flavourings and personal care products, added a sugar-reduction substitute to its product line-up, aiming to capitalise on the trend towards more healthy lifestyles in Jamaican and international markets.

But so far, the investment has not delivered the desired results. That’s what Chairman Howard Mitchell is expected to tell shareholders at their upcoming annual general meeting, based on his statement in the company’s newly released annual report.

Last year, CFF reported net profit of $31.50 million on revenue of $462 million, results that reflect its weakest performance since listing on the Jamaica Stock Exchange in October 2013.

During that financial period, the company retooled and upgraded its manufacturing plant for increased efficiency, secured the Safe Quality Foods Certification and rolled out new products, including the sugar-reduction substitute FlavourFit to local and regional manufacturers, following directives from the Ministry of Finance last year that manufacturers were to reduce the sugar content in beverages they sell and market in Jamaica or face higher taxes.

CFF, whose core business is the production of flavourings for commercial food companies, at the time invited more than 20 manufacturers to discuss reformulating their products with less sugar without losing the taste profile. The manufacturers already supported CFF’s business for flavours, but were just being introduced to FlavourFit, which was produced without artificial sugar.

Mitchell told the Financial Gleaner on Thursday that the investment made in FlavourFit was in the millions of dollars and mainly involved increased inventory, additions to lab equipment and lab technology, and upgrading the skills of an employee and a new recruit to do the product formulation.

“The drive for reduced sugar was quite a big promotion and we took the position that this is a good thing to do, that it’s the wave of the future. At the same time, we expected the conformity with the new rules to be a little boarder and more widespread than it has been. But, unfortunately, that didn’t happen,” he said.

“We know that a lot of things have happened this year, so much of that policy initiative for nutrition has somewhat fallen down on the agenda, but we have confidence that over time that product will do well, especially with the priority for public health now,” he added.

The response from beverage manufacturers in Jamaica has been “lukewarm”, the company said in its annual report, but it is reporting at the same time that it has made a breakthrough in Suriname.

Caribbean Flavours has been supplying new products to the Surinamese market as well as other flavours to newly acquired customers engaged in beverage manufacturing within the region.

“While the financial benefits were not derived in this financial year, the board of directors is satisfied that the execution of many of the strategic initiatives have paved the way for substantial growth in the future,” the chairman noted in the annual report.

“We are encouraged by our customers’ response and remain patient and confident that in time, the orders will come,” he said.

Those results, according to Mitchell, should materialise over the short to medium term.

In the meantime, in response to the pandemic, CFF is looking to drive up revenue through the development and supply of sanitisers. Sales of the company’s disinfectant and hand soaps have also increased with the outbreak of the virus.

The company’s earnings have weathered the virus, so far, with revenue climbing at half-year ending June from $226 million to $310 million, while profit has risen from $35 million, or 39 cents per share, to $43 million, or 48 cents per share.

More than half of this year’s profit, $29 million, was made in the April-June period, when Jamaica’s economic activity was at a low point due to shutdowns to contain the spread of COVID-19.

The CFF stock, which has been trading at an average of $13 per share over the past three months, jumped to around $18 following its disclosure of plans for a 10-for-one stock split to make the shares more accessible for trading by junior stock market investors. The flavour company is targeting September 23 as the effective date for the split.