Spur Tree grows exports, consolidates ahead of planned IPO
Sauce and spice maker Spur Tree says there is no firm date yet for its intended stock market listing, but its management continues to consolidate the business and is building capacity to meet what it says is growing demand for its products in...
Sauce and spice maker Spur Tree says there is no firm date yet for its intended stock market listing, but its management continues to consolidate the business and is building capacity to meet what it says is growing demand for its products in Jamaica and overseas.
The company has been targeting November to raise funds on the equities market via an initial public offering of shares.
“We are putting together a prospectus to go to market. We are talking with the broker and the lawyer,” CEO Albert Bailey told the Financial Gleaner on Thursday without disclosing who the brokerage and legal service providers are.
The resilience of the condiments business even in the face of the ongoing COVID-19 pandemic and its value to investors while holding the potential for raising cash needed for further expansion are among the reasons being cited for Spur Tree’s move to list.
Rather than seeing a downturn, Bailey said, the business has been experiencing significant sales growth both in the local and export markets during the pandemic.
“Food is very buoyant at this point in time. Food might be affected from the standpoint of restaurants, but more people are preparing meals at home and our all-in-one seasonings and our entire production are geared towards meeting that growing need. Our products are easy to use. We like to say: ‘Just add meat’,” said Bailey of the rationale for the sales uptick amid a general pandemic-induced economic downturn.
With the sales growth, Spur Tree is looking to expand its production capacity and product line with the acquisition of a canned ackee processing plant in Danvers Pen, St Thomas in which it’s been a joint venture partner for five years. Sources said Friday that Spur Tree has now taken over the Danvers Pen operation called Exotic Products Limited, which Bailey was unavailable to confirm.
A new processing facility is also being built at Holland Estate agro-park in St Elizabeth with Spur Tree as a minority partner, and in which some of the company’s directors are said to hold shares individually.
Bailey declined to give details of both activities, on Thursday, citing work currently under way to evaluate the various operations and to package the information as part of the prospectus for listing on the junior market of the Jamaica Stock Exchange.
The processing of mash for producing wet seasonings and sauces is expected to be outsourced to the St Elizabeth factory when it comes on stream by month-end, freeing up more space at Spur Tree’s Garmex Complex processing facility at Marcus Garvey Drive in Kingston for the production of more finished products.
One building at the Garmex Complex with a 15,000 square feet capacity is said to now be devoted to the storage of some 250 pounds of scallion, thyme and pepper into mash at any point in time. Bailey said the pre-processing and storage of mash to supply raw materials for the finished goods factory for between three and six months has been a constant feature of Spur Tree’s operations. This provides supplies even during periods of scarcity often occasioned by periods of drought and heavy rainfall.
“In terms of the perishable raw materials, we have always done a lot of planning that has reduced the impact of price increases and seasonal unavailability,” he noted.
Part of the Spur Tree volumes growth is attributed to its arrangement with trading company Rerum Trading that has created and marketed the spin-off Valu Tree lines of products since earlier this year.
“We are some eight months into that arrangement. It’s a new venture, and as with new ventures, it is taking some time to get the kind of traction that we hope to get, but we have been selling a good quantity of products though that arrangement,” Bailey pointed out.
Earlier this year Spur Tree inked a partnership agreement with Rerum Trading to market the products under the low-priced basic foods Valu Tree brand, locally and overseas. The goal was to penetrate what was determined to be large and lucrative market for budget food brands even as the Spur Tree brand continues to be a major player in the more premium categories of the prepared foods market.
Rerum CEO Omar Newell told the Financial Gleaner in March that his company was looking to take full ownership of the Valu Tree brand within three years with Spur Tree continuing to be a major supplier of products.
Another partnership that has been pushing the Spur Tree-branded products in the overseas marketplace is the 10-year old relationship with National Baking Company under which National distributes the products in the United Kingdom.
“The collaboration with National has been going well from we were part of that company’s ‘Bold Ones’ initiatives,” said Bailey.
Under the Bold Ones programme, National gives promotional and distribution support to young, innovative, forward-looking Jamaican business ventures deemed to have great potential.
“That relationship has been growing and the two companies are now in talks about expanding the line of products for the UK market, in addition to all the seasonings, as well as the festival mix, ackee and callaloo that were added this year,” Bailey said.
Spur Tree is said to have additional new products in the pipeline but their release has been delayed as the company irons out kinks related to the sourcing of glass jars and bottles from the Far East.
The challenges pertain to the rising cost of freight, which is said to have escalated by more than 400 per cent since the pandemic. The booking of space on the vessels of shipping lines to transport the glass containers has also become problematic as a result of the increased demand for freight service.
Bailey said that while plastic containers sourced in Jamaica are used for some products, others require glass containers for preservation of their shelf life, which usually spans two years.