Susan Gordon, Business Reporter

Ripe bananas produced by the Jamaica Producers Group on display at the company's office on June 7, 2007. - Rudolph Brown/Chief Photographer

Jamaica Producers Group has put in a new man to steer the re-organisation of its juice and smoothies business in Britain, and says it is ready to pull out of uneconomic supply contracts with UK supermarkets as part of an aggressive strategy to stem, and ultimately reverse, the more than $1billion the group has lost in the past 18 months.

The announcement of John Bates as managing director of the UK-based Serious Foods and the intention to renegotiate or end the draining contracts are contained in a statement to shareholders by JP's chairman Charles Johnston, in which he reported a second quarter loss of $321.55 million.

That brought the company's first-half loss to $634.24 million, and followed the $479 million JP wracked up in 2007, which it largely blamed on the hurricane in Jamaica, as well as the rising costs for fruits it uses to make juices and smoothies and its spiralling energy bill.

The company largely blamed its poor performance on the continuing flow of red ink during this year's first half, with Johnston zeroing down the effect on the fixed-price contracts JP's Serious Foods subsidiary has with British supermarkets to blend and bottle fruit juices.

Unprecedented increases

"The unprecedented increases in raw material and energy costs have reduced gross margins and rendered many of these contracts uneconomic," Johnston told shareholders.

This contributed substantially to the $752 million first-half loss - on revenue of $5.27 billion - by the group's fresh and processed foods division. Serious Food Company, which oversees the manufacture of juice and smoothies and desserts, is the division's major business and the one that is being given greatest attention.

For instance, Bates, who Johnston said has over 15 years of leadership in Britain's UK-chilled foods business, was brought in at the end of June to lead the on-the-ground re-engineering.

Among his first tasks would have been to be part of the sale of the group's dessert manufacturing business, as well as, the 'Serious' brand for £2.75 million. One result of this is that there will have to be a rebranding of products previously sold under the Serious Foods label.

"The divestment of this business reflects our decision to exit non-core operating units that are loss-making," said Johnston.

Essentially, JP, which started life primarily as a banana growing and trading business - it still has farms in Jamaica and Honduras - now sees its core businesses as juices and smoothies.

In fact, in July JP announced that it had spent €9.2 million to buy Holland's largest fresh juice and smoothies manufacturer, A L Hoogesteger Fresh Specialist B.V.

While Hoogesteger will operate as a stand-alone business, JP expects that it will be able to exploit synergies with Sunjuice, the UK juice firm, in areas of procurement and product development.

But among Bates' more immediate tasks as part of the reorganisation of the UK business will be to restructure those uneconomic supermarket supply contracts or end them.

"Where we are not able to reach an agreement with certain customers to trade on profitable terms, we will exit the unprofitable accounts prior to the end of this year and scale back to a profitable core," Johnston said.

In his annual report for 2007, Johnston had told shareholders that he was confident that JP's management had "an appropriate turn-around plan".

He still holds that view, but has warned that it will take time. Said he: "Shareholders should be aware that the nature of our losses is such that an immediate turnaround to profitability is unlikely, even as we undertake our key turnaround initiatives with a heightened sense of urgency and attention to shareholder value."