Tue | Jan 16, 2018

GK eyes subsidiary in Germany - European markets targeted for expansion in 2018

Published:Thursday | January 11, 2018 | 2:56 PMAvia Collinder

Aiming to expand in Europe, Jamaican conglomerate GraceKennedy Limited (GK) is considering the acquisition of a sales and distribution business - or, alternatively, its own start-up food company - in Germany.

Group CEO Don Wehby also told the Financial Gleaner that through subsidiary, Grace Foods UK, the company is about to make a bigger push into the continent, armed with a new £6.6 million loan from Lloyds Bank Commercial Banking.

"We are unable to disclose the loan terms. However, this funding will support our plans to grow product awareness and penetration in the various markets," Wehby said on Monday.

The expansion into Germany is also being explored through the UK arm.

"We are still exploring acquiring a business or acquiring a team and establishing our own company. We plan to finalise our approach by midyear 2018," Wehby said. "If we acquire or start a new company, it will be for sales and distribution."

Grace Foods UK already serves markets in 27 of the 28 European countries, as well as Russia and the Balkan states. Its key European markets are Germany, France, Holland, Italy and Spain, Wehby said.

He added that in the short term, GraceKennedy will focus and consolidation and expansion in the key markets, "particularly in Germany", which has delivered average revenue growth of 200 per cent, he said, between 2014 and 2016.

"As a result, we are exploring a local acquisition or a start-up that could result in a new German-based Grace Foods company," the GK CEO said.

"There are unlimited opportunities when operating in the single largest free trade zone in the world and we are confident that the market potential for a Grace Foods Europe business is within reach."

Wehby declined to comment on the size of the investment earmarked for Europe but noted that GraceKennedy plans "to invest sufficiently" to grow business on the continent from annual revenue of £9 million today to £40 million in five years.

Grace Foods UK recently won a £1 million contract to supply its range of Aloe Vera products to Aldi in Spain.

In the UK, the aloe vera market was valued last year at approximately pound5.5 million "of which our Grace Aloe drink commands a significant share," he said, while noting that similar data for Spain was unavailable at this time.

"In both the UK and Spain, the Aloe Vera drink market is relatively small compared to other mainstream beverages, however as consumers explore more innovative drink solutions, particularly for greater health benefits, we are confident that the market size will grow substantially," Wehby said.

According to the group's website, the Grace Food UK's operation includes Enco Products, which distributes Caribbean brands in the UK; Funnybones Foodservice Limited, which imports and distributes American, Mexican, Mediterranean, Spanish and Cajun foods in the UK food and catering industries; and a services department, which operates the company's 120,000 square-foot complex in Welwyn Garden City, near London, together with its own production facility.

The company is also linked to a separate bottling factory in Corwen, Wales, which has been in operation since 2000.

"Corwen mainly produces our sauce range and purchases its pepper mash from Grace Agro Processors Division - GAP - based in St Elizabeth, Jamaica," Wehby said. "Our GAP operations exports approximately two to three containers of pepper mash to the UK per month and with our Europe expansion plans we will see a benefit to the GAP export volumes as well."

Wehby adds that GraceKennedy has been positioning as a group "to be more marketing-driven, which means that our marketing and innovation decisions are driven by consumer insights. This strategic focus has served us well and the benefits are evidenced by the type of demand we are seeing today in products like the Grace Aloe Vera drink which is in demand by both mainstream consumers and the Caribbean diaspora in the UK and throughout Europe."

Starting this year, the company also plans to produce the Grace Aloe Vera drink for the Jamaican market out of its Canning factory at Twickenham in St Catherine.

"Based on the results, we may explore production for export in the future" from the Canning plant, Wehby said.

avia.collinder@gleanjerjm.com