Tea company plans to float supermarkets

CAMILO THAME Business Co-ordinator thamec@jamaicaobserver.com

Wednesday, February 15, 2012

JAMAICAN Teas Limited may spin off its retail operations into a separate entity and list it on the Jamaica Stock Exchange (JSE), according to John Mahfood.

The CEO of the tea manufacturer and retail operator said that his ultimate goal was to add a few more stores to the three that his company currently operates, then go public with the retail chain.

On Monday, the company added its third store to its growing chain, with the opening of a location in Savanna-la-Mar, Westmoreland, which it took over from GraceKennedy’s HiLo supermarket chain.

On Monday, the Jamaican Teas notified the JSE that it signed an agreement to purchase the assets — owned by GraceKennedy — of the former HiLo supermarket in Savanna-la -Mar and that it has leased the property from the owners.

The supermarket will operate under the Shoppers Delite banner, much like Jamaican Teas’ location in Kingston.

According to Mahfood, the Sav-La-Mar location is similar in size to the Kingston property.

“It’s a small supermarket — about 5,000 square feet,” he said. The third supermarket, in Montego Bay, is much larger, sprawling across 30,000 square feet of floor space.

However the smaller size provides a good fit for the smaller community, given the level of competition and the spending power of the residents there.

“A small store could get lost in a big chain,” added Mahfood, who said that flexible pricing across his supermarket network and individual attention at the new store could make it operate profitably, even though HiLo had to close the store.

Last year, Jamaicans Teas, which is headed by John Mahfood, also bought a 49 per cent stake in Bay City Foods Ltd, operator of a supermarket in Montego Bay, for $33 million.v

“We recorded a loss of $11.6 million after tax, as our share of the investment during the year,” said the tea maker and retail operator in its latest annual report. “We expect to see a significant turnaround in results in 2012, as sales continue to improve in line with expectations.”

On the other hand, Jamaican Teas said it recovered its investment in the Kingston Supermarket in less than 18 months.

In early 2010, Jamaican Teas (formerly Tetley Tea) spent approximately $10 million refurbishing the store located on Chancery Street in Kingston, before opening and rebranding it JRG Shoppers Delite Supermarket in March of that year.

The store started to make a monthly profit in July 2010, but incurred a small operating loss for the six months to September 2010, over which period it recorded $85.3 million in sales. During the last financial year, its sales showed consistent growth and came in at $239.9 million, even though Jamaican Teas did not disclose the profit margin.

In December 2011, the tea manufacturer and retail operator entered into an agreement to purchase the real estate and supermarket equipment at its Kingston location for $58 million, of which $42 million is being financed by a vendor’s mortgage “at a competitive interest rate”.