CPJ uncorks new income streams to stem losses
Buffeted by losses occasioned by the sharp downturn in business as a result of the COVID-19 pandemic, Caribbean Producers Jamaica, CPJ, a major seller of food, wines and other beverages to hotels in the Caribbean, is looking to new revenue streams and a beefing up of its retail business to stem the flow of red ink and prepare for the expected rebound in tourism, which is already beginning to show promise.
The CPJ management says it is looking to triple revenue from its St Lucia operations over the next three years, driven by the opening up of supermarkets in that country – a new area of business for the company that is listed on the Jamaica Stock Exchange, JSE. It is also eyeing at least one acquisition in its home market of Jamaica that is said to have potential for adding new products to CPJ’s current line of mainly wines, other liquors, seafood, cheeses and processed meat.
Since 2018, the distributor has operated a retail store in St Lucia but is looking to grow its retail revenues by entering the grocery market to augment its core activity of wholesale distribution. Already, the company has expanded its St Lucia store, with the vastly bigger facility producing additional revenue since May this year, CPJ Co-Chairman Tom Tyler told the Mayberry investor forum on June 30.
Two more locations are to come on stream in the eastern Caribbean country - in the capital, Castries and in the northern part of the island.
Tyler did not specify if all three locations will be full-service supermarkets or if some would be kept as outlets for CPJ’s core products only.
“With this expansion, I think we could do US$50 million between our distribution and our three retail stores in three years’ time,” Tyler, a major shareholder in the business, said when asked about the revenue forecast from that country.
CPJ earned US$15.8 million in revenue from St Lucia in 2019, ahead of the pandemic, which cut annual income from that country to US$13.7 million in 2020.
The strategy in Jamaica involves building out its current retail space in Montego Bay to drive that area of the business in the resort city. But acquiring a new line of business is not being ruled out. In fact, it is a distinct possibility, says CPJ’s management.
“We have an acquisition in Jamaica that we are toying with. We found something that could be a great fit for CPJ. We are exploring that right now. It would enhance our current line of products,” Tyler said, stopping short of giving details.
In his comments at the online forum, Chairman and interim CEO Mark Hart went to the heart of the retail strategy, which has involved shedding over 100 staff.
“There’s more focused selling in our retail portfolio. We are getting better margins, and we have developed a nice team of sales managers and associates,” Hart, also a major CPJ shareholder, said.
The Montego Bay expansion from 1,200 to 6,000 square feet of retail space, will cater to what is regarded as the boutique travel segment of the market.
“It will be done by October or November this year (and) is going to be what is called, a chef’s market store. We are going to be able to expand our products to small restaurants, villas and so on, to buy small amounts. It will help us a lot,” Tyler explained.
For Hart, it is all about efficiency.
“I think that we have taken out close to US$600,000 a year (in costs), between reshaping the company, more efficiency, better management of our inventory and supply chain. I think we can go back to a similar level of activity, and gross profit earned, with a lot less cost. So that will naturally lead to higher profit,” according to the chairman.
Revenue and profit declines have been the order of the day for CPJ’s overall business since last year, upending a strong pre-pandemic growth momentum for the company. In the first pandemic-affected quarter of March 2020, CPJ recorded a loss of US$520,000, moving from a profit of US$150,000 a quarter earlier. Revenue also fell from US$28 million to US$26.4 million in the March quarter last year.
The three months to December 2019 were the best for the distributor since it listed on the JSE some 10 years ago. In that quarter, sales topped US$32 million.
For its third quarter ending March 2021, CPJ indicated that the company had started to see a return to normal business. The company reported third-quarter sales from January to the end of March of US$12.7 million, and US$37.1 million over nine months for the financial year, less than half the US$86 million it earned in the nine months to March 2020. The bulk of the revenue for the quarter, or US$30 million, came from Jamaica and US$7.4 million from St Lucia.
In 2020, revenue totalled US$91.7 million, down from US$109.7 million in 2019.