Food nourishes GK revenue and fattens bottom line
Published:Friday | October 25, 2013 | 12:00 AM
Avia Collinder, Business Reporter
GraceKennedy Limited is on pace for a new record in revenue, and much of the growth is driven by the food segment.
At half-year ending June, food contributed 67.4 per cent to total revenue. In the two years prior, the half-year contributions averaged 66 per cent.
The more outstanding returns relate to profits, where the average contribution to pretax earnings rose to 31.65 per cent, up from an average of 27 per cent in the comparative 2011 and 2012 periods.
Group CEO Don Wehby says the snacks, beverages, and fresh vegetable categories are now the primary growth areas for the GK Food Division.
He attributes the gains to logistical efficiencies arising from the group's distribution facility - now three years in operation - which has allowed it to expand its sales channels in the domestic market.
"This has added to the level of growth seen in our main distribution companies in Jamaica," Wehby said.
GraceKennedy made J$32.7 billion in revenue at half-year, putting it eight per cent ahead of sales in the same period last year and on track to outdo the J$58 billion of total revenue collected by the food and financial conglomerate in 2012.
Food profit rocketed to J$741 million at half-year, compared to J$499 million in the prior period.
Profit for the conglomerate climbed to J$2.3 billion, well above the J$1.8 billion made at HY2012. Food made the biggest gain but all but two segments grew profit. The exceptions were 'insurance' and 'banking and investment' - not unexpectedly given the fallout from the Government of Jamaica's debt swap in February.
GraceKennedy is one of the largest food manufacturers in the Caribbean with more than 50 per cent of the food sold under the Grace brand produced in factories in Jamaica, said Wehby.
Jamaica is the conglomerate's chief source of revenue but Wehby has been leading a strategy of geographic market diversification, which aims to rebalance the streams.
Its most recent push includes African markets such as Ghana, but Wehby also says GK's continued outreach to supermarket multiples such as Tesco and Sainsbury's has resulted in significant growth in revenue in the United Kingdom over the last three years.
GK Foods is subdivided into three regional categories.
International East is focused on manufacturing, marketing and distribution of Grace and other brands in the UK, Europe and Africa, as well as the distribution of strategic partner brands in the UK and Europe.
recession challenge
International West handles marketing and distribution in North America, the Caribbean and Belize.
The third, Domestic, is focused on manufacturing, marketing and distribution of Grace brands and select international brands in Jamaica, as well as food retail through the Hi-Lo chain of supermarkets.
Wehby says each food sub-division is challenged by the recessionary economy, reduced consumer access to cash, and constant increases in commodity and raw material prices.
"We are responding by maintaining competitive pricing on our products, delivering more value through cost reductions in packaging, ingredients and operational efficiencies, new products that are relevant to the consumers' situation and maintaining
the high quality of our products so the consumer gets distinct value when purchasing Grace," he said.
The GK boss declined to state the savings from the distribution centre, which he said consolidated nine warehouse operations into one complex at Bernard Lodge, St Catherine.
"The new distribution centre stores all our inventory in optimal conditions which has reduced stock losses, increased order-processing speed and the service levels to our customers," said the GK CEO.
"We have also realised reductions in our security, energy and handling costs. Savings have been essentially as planned," he said.
The distribution centre is now managed by a Jamaican firm called Logistical Distribution & Services Limited, which Wehby said was hired in 2011. The contract was formerly held by Landstar of Florida.
Growth areas being targeted for foods in 2014 are the US West Coast and West Africa expansion in Ghana and Nigeria, he said.