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Juciful licensed to Trinidadian firm for a decade - Citrus Growers' acquisition finalised in J$1b deal

Published:Friday | February 8, 2013 | 12:00 AM
A display of Juciful juices and Dairy Farmers milk products. - File photos

 Avia Collinder, Business Writer

Jamaica Citrus Growers' Association (JCGA) has licensed the Juciful brand to Jamaica Beverages in exchange for two per cent of annual sales of juices bearing the popular label.

The side deal wraps up the acquisition of Jamaica Citrus Growers Limited (JCGL) by the Trinidadian company SM Jaleel, which took possession of the company's assets nine months ago.

SM Jaleel used its local subsidiary, Jamaica Beverages Limited (JBL), for the acquisition. The deal, which is valued at J$1 billion, gives JBL ownership of a manufacturing plant, and seven acres of orchards and other property, and the 'Dairy Farmers' brand of milk products, all put up for sale by the Development Bank of Jamaica to recover loans made to the failed JCGL.

The citrus company was owned by JCGA before it was taken over by the development bank, which placed it in receivership, but JCGA retained ownership of the Juciful brand which was held under a separate vehicle.

An undisclosed portion of the J$1 billion will be ploughed back into the business to upgrade the JCGL assets, said acting general manager of JBL, Paul Shoucair, at Wednesday's press event to announce that the acquisition had been finalised.

SM Jaleel/JBL is also putting up US$100,000 (J$9.4m) as donation towards construction of a citrus nursery and greenhouse to be developed by JCGA for the sale of seedlings to citrus farmers.

"It will be constructed on lands leased from JBL," said JCGA technical director Dr Percy Miller.

"The benefit to farmers is the receipt of subsidised seedlings - 20 per cent of market price - to restock their farms," said Miller.

JCGA, which is a grouping of private citrus producers and processors, has also leased one of four cottage on the property for use as its headquarters at concessionary rates. Shoucair says the four cottages sit on 2.2 acres of land.

Right of first refusal

The Juciful brand has been licensed to JBL initially for 10 years, after which the contract is renewable. If at any time JCGA decides to sell the brand, JBL has the right of first refusal.

The agreement to sell JCGL to JBL was reached back in early 2012 and the company took possession of the assets in May of that year. The negotiations for rights to the Juciful brand were finalised much later.

Shoucair said that when JBL took over the management of operations of the Bog Walk complex even while still doing its due diligence, it was a show of commitment to the investment plan.

"The final agreement was completed in December 2012 with a total investment of J$1 billion over the first year - inclusive of the purchase of the property, as well as the cost of upgrading equipment at the plant and overall renovation of the facilities," he said Wednesday at a press briefing on the closing of the deal.

The Bog Walk plant is located on seven acres of land, but the complex includes an additional seven-acre property that, Shoucair noted, could be used for future expansion.

"Since we have acquired the plant and taken over operations we have rebuilt all the filling machines and juice extractors, bringing them back to industry standards," he said.

The upgraded areas include the concentrate plant, which runs for six months a year during the orange and grapefruit season - that is, from November to May; the feed mill plant, which is in operation for six months a year, and is the section where the pulp from the citrus is converted to animal feed; the chill juice plant; milk-processing plant, which produces whole milk and flavoured milk products.

"It is very important to also remember that a major part of the product portfolio manufactured at the Bog Walk plant is the Dairy Farmers 100 per cent cow's milk. In the age of UHT brands, we are very proud to have such a brand in the Jamaica Beverages Limited product line and look forward to bolstering the island's dairy industry with the systematic distribution to the market of the Dairy Farmers brand," Shoucair said.

JCGA's Miller said the debt owed to the DBJ at the time it placed JCGL in receivership was J$120 million, and that total debt owed to all creditors amounted to just over J$300 million.

Not all JCGL assets have been sold in this current deal. Not included, said Miller, are cold storage and warehouse facilities at Newport West in Kingston, spanning six lots; a 130-acre property at Springvale; and other property in Kingston Gardens, which originally housed the JCGA headquarters but is currently rented and occupied by the Police Civilian Oversight Authority.

JBL only acquired the assets at Bog Walk.

Process unfinished

"The receivership process is not yet over. We are yet to receive a proper accounting of what assets sold were paid for and how debts will be settled," said Miller.

"We have not been told what they got for the plant. The biggest creditor was the DBJ. The receiver will also take their commission," he said.

The receiver for JCGL is John Lee, a partner at PricewaterhouseCoopers Jamaica.

Miller also told the Financial Gleaner that the two per cent royalty negotiated for Juciful is less than the 2.9 per cent earned by the association when JCGL was its own subsidiary.

He noted, however, that market share for Juciful has fallen significantly in recent years.

The brand has lost ground to labels such as Tru-Juice and Homestyle, but Miller said JBL plans to reclaim the 60 per cent market share that Juciful once held, and has a medium-term plan to start exporting concentrate to Caribbean and United Kingdom

"We plan to be an earner of foreign exchange," Shoucair said, confirming the export plan.

"This, in addition to being the sole and exclusive supplier of 100 per cent grapefruit juice to the manufacturers of the Ting brand which, as you know, boasts 100 per cent Jamaican grapefruit," he said.

The JCGL factory is currently operating at 20 per cent of capacity, according to JBL board member Donovan Walker, who said the investment in the nursery for the provision of seedlings was a strategic move to support increased production and greater utilisation of the plant.

In 2012, the factory processed 140,000 boxes of citrus, even though the plant, which is supplied directly by about 7,000 farmers, has a capacity for one million boxes.

"The acquisition of the plant saved the 2012 citrus crop, which would have otherwise seen tonnes of oranges and grapefruits rotting in the fields," Shoucair said.

He told the Financial Gleaner that JBL has no plan to import concentrate, but would rely instead on increased fresh supplies from local farmers.

Since the acquisition, the plant has added 48 jobs, representing a 30 per cent growth of its workforce, with more hirings to come.

"As our market share increases, we will be adding more contract van sales representatives, more staff at the plant, more merchandisers, more distributors and more contract truck drivers to our team," said the JBL boss.

JBL and now JCGL are the only two local businesses known to be owned by SM Jaleel & Company, itself manufacturers of non-alcoholic drinks, established in 1924.

JBL's products include a range of carbonated soft drinks, exotic fruit juices, purified and flavoured water, energy drinks and other flavoured beverages, including Fruta, Busta and Chubby.