Apr 2015 Financial News

GK Foods Chasing 20% Sales Growth In US

Apr 24, 2015

Jamaican conglomerate GraceKennedy is projecting a 20 per cent increase in sales volumes by yearend from its American subsidiary, GraceKennedy Foods USA, a plan that includes introduction of GK brands and new product lines into the Hispanic grocery market to test their crossover appeal.

GraceKennedy increased its presence in the US grocery market through acquisition of La Fe Foods Inc last July.

The Hispanic chain is making around US$75 million in annual revenue, but GK aims to drive that up to US$120 million this year, according to CEO of GraceKennedy Foods USA, Michael Ranglin.

La Fe is expected to be a substantial driver of the 20 per cent growth targeted across the conglomerate's American operations. To position for bigger sales, GraceKennedy has acquired warehouse space in Atlanta to better serve that market. Previously, La Fe served its Atlanta niche through its operations out of North Carolina.

GK Foods is using the distribution network and infrastructure acquired with the acquisition to push both GK and La Fe brands. Some GraceKennedy brands are being added to the GK Foods USA portfolio to test their reception by mainstream grocery shoppers, according to Ranglin.

The Atlanta warehouse, which became operational this month, and the GK brand are helping to "pull La Fe into new areas", he said.

"La Fe had annual revenues of around US$75 million. It had fallen off a bit but we actually expect to do over US$120 million this year in that business, in part because we are now using the infrastructure and we now selling two brands from it," he said.

The target of US$120 million would translate to under J$14 billion. The conglomerate's food trading businesses worldwide currently earns annual revenue of J$55 billion.

Ranglin, who also serves as CEO of GraceKennedy Foods North America, said the company had been exploring the prospects of tapping other ethnicities with its products for nearly five years and so moved decisively at the opportunity to buy La Fe. The acquisition cost US$26 million.

"We made a deliberate attempt to identify products in our portfolio that could cross over to the Caucasian market as well as the Hispanic market. It was one of the reasons we decided to buy into this business because we weren't making the progress that we wanted to," Ranglin said.

He said GK identified its coconut milk, coconut water, aloe and Tropical Rhythms juices as products that could cross over into the Latin market, "but what we really needed was a brand that they could identify with."

With over 1,000 products under the La Fe line, Ranglin said GK has identified the frozen food segment as an avenue for expansion, and is weighing the development of its own range of Caribbean frozen products "to better serve the market", but declined to divulge any details.

"It was a good business for La Fe ... that is where our focus is," he said.

"As we work through the promotional programmes that we will do in the US, I think we will definitely see more and more of the opportunities that are there for us," he said.

La Fe Foods, the company, was renamed GraceKennedy Foods USA at acquisition but GraceKennedy continues to use the trading name, La Fe, "so the users can relate and we will do that for a time," Ranglin said.

Through the acquisition, GK now has a presence in the US northeast, serving areas such as New Jersey, North Carolina, Florida and now Atlanta, he said.

The deal included the La Fe brand, which GK described as "the top Hispanic brand in the frozen food category in northeast USA".

La Fe Foods was established in 1968, and was said to be making up to US$80 million in revenue ahead of the acquisition.

"What we are working on is to fuse the back office and the operating divisions of sales, distribution and purchasing to source, offer and deliver products to the customers and continue the distribution of the GK brand to Caribbean segment," said Ranglin.

The US operation now has a staff of 300, including La Fe staff, and some 100 sales representatives, the GK executive said.

 

Source:
Tameka Gordon
tameka.gordon@gleanerjm.com
Jamaica Gleaner
Friday April 24, 2015

http://jamaica-gleaner.com/article/business/20150424/gk-foods-chasing-20-sales-growth-us