GK sizing up export opportunities through Nestlé partnership
The deal struck between food marketing company Nestlé Jamaica and GraceKennedy member company Dairy Industries Jamaica Limited should bring in an additional $20 million in annualised revenue to the group, in addition to opening up a new market segment for its Swiss-owned partner.
Dairy Industries is a joint venture between GraceKennedy Limited and Fonterra of New Zealand, through which they will produce processed cheese, yoghurt, and powdered whole milk. Its production of an 80-gramme powdered milk sachet – and a 120g sachet soon to be added to the line – the Nestlé Everyday brand has brought competition to Lasco LaSoy and Anchor powdered milk. Nestle Jamaica also plans to add a 120g packet to the Everyday line.
For a conglomerate now earning $100 billion-plus in revenue and over $5 billion in annual profit, the earnings under the milk contract seem relatively small. But Wehby says those funds go straight to profit, and that there is more to come from the partnership.
The arrangement also expands GraceKennedy’s partnership network, aligning with its own goals for a wider wingspan in the global consumer arena.
“That $20 million is going straight to the bottom line because Nestlé is going to be producing all the raw materials and packaging. It’s the start of a relationship, we are hoping that at some point we will be able to process and export the product for them,” he told the Financial Gleaner on Tuesday.
“We are looking at strategies of how to increase production capacity in our local manufacturing plants, and this is fairly new to GraceKennedy but we are going to be manufacturing other brands. We are also looking at all the products that we buy overseas to see how we can relocate them to our local manufacturing plant,” he said.
GraceKennedy operates six manufacturing plants, locally; and Grace Foods UK, as well as a stake in patty and empanada maker Majesty Foods in overseas markets.
Wehby initially spoke to the revenue expectations from the contract manufacturing arrangement for Nestle Everyday during an investor briefing of GK’s third-quarter financial results on Monday.
Dairy Industries began producing the powdered milk in March.
“As part of GraceKennedy vision, we clearly stated that as a global consumer group we want to leverage our relationship with international partners. We continue to look for opportunities in this regard,” Wehby said.
Over nine months ending September, GK reported a 12 per cent improvement in revenue to $83 billion, from which it earned profit of $4.9 billion, putting the conglomerate on track to outperform last year’s annual earnings.
Still, the food and financial business is hungry for even more growth and is looking to a mix of mergers and acquisitions across its food and financial services divisions, as well as digital transformation, a programme that is meant to better align the group with its markets, customers and partners.
“Without saying too much, we are actively working on 12 transactions and I feel very positive that we will be executing on some mergers and acquisitions not only in Jamaica, but the international market,” Wehby said.
On the digital side, the conglomerate is targeting the opening of its second GK One cashless outlet on the University of the West Indies campus by first quarter 2021. The first of the cashless outlet is located on GraceKennedy’s corporate building in Kingston, and provides financial and money services, including loan applications, the opening of bank accounts, insurance, bill payment, remittances, consumer loans and electronic cambio services.
Transactions will be by debit or credit cards only.
Once open, GK ONE UWI will become the 16th outlet in the GK ONE chain of one-stop financial services stores, and follows on the opening of the GK ONE location in Port Maria, St Mary.