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Marley Coffee market expansion comes at costly price

Published:Wednesday | January 2, 2013 | 12:00 AM
Marley Coffee Bike Cafe

Jammin Java, which trades as Marley Coffee, tripled sales in its third-quarter ending October over year-earlier levels, but the cost of securing new distribution channels led it to record a net loss of some US$944,000.

The loss grew five per cent larger than a year ago, but sales are up 346 per cent to US$536,000 over the period.

The growth relates in part to new products, including Marley Coffee-branded vending solutions and K-cups or single-serve brew coffee pods. K-cups are described as one of the fastest growth markets for coffee globally.

But the cost of securing its coffee channels, including retailers and Marley Coffee-branded bike cafés have outpaced core revenues which topped US$1 million over the period, the company states.

"The principal reasons for the increased net loss are sales of the company's products have not caught up with the expenses involved in connection with putting in place the company's multichannel distribution and sales plan; compensation expenses necessary to incentivise management; selling expenses incurred in connection with raising necessary working capital; and professional fees, including those necessary to comply with rules and regulations applicable to a US public reporting company," said the accompanying the financials signed by chief executive Brent Toevs and president Anh Tran.

These costs sent the company into negative working capital of US$299,000; however, Jammin received loans worth US$4 million in November to finance its operations for the year.

credit agreement

Toevs and Tran indicated that the company received a credit agreement valued up to US$2 million from TCA Global Credit Master Fund, while another agreement with Fairhills Capital Management allows the coffee distributor to sell up to US$2 million worth of its common stock to the firm.

Jammin Java released its quarterly data last week to shareholders and the US Securities and Exchange Commission.

Marley Coffee believes that the key to its growth lies in multichannel distribution and sales strategy.

"Since August 2011, we introduced a wide variety of coffee products through multiple distribution channels using the Marley Coffee brand name. The main channels of revenue for the Company are now and are expected to continue to be United States and international grocery retail, online retail, office coffee services (OCS), food service, vending and automated retailing," the company noted.

Within these channels, the coffee company transitioned from providing the larger 12-ounce whole-bean bags of coffee to a mix of products, including packages of 2.5 ounces upwards.

The company, listed on the US Over-The-Counter exchange, has an accumulated deficit of some US$5.6 million.

"Today, the company offers Marley Coffee Organic Ground and Marley Coffee Jamaica Blue Mountain Ground coffees; compostable Single-Serve Pods for Bunn and other pod-based home and office brewers; Marley Coffee RealCup; compatible cartridges for use in most models of Keurig's popular K-Cup brewing system; and 2.5 oz frac packs and 2lb bags mainly used for food service," noted Toevs and Tran.

Marley Coffee continues to expand its product placement with grocery retailers and distributors globally.