Jul 2008 Financial News

Grace Kennedy creating $2b distribution hub

Jul 23, 2008

Grace Kennedy Limited, the big Jamaican conglomerate, is constructing a J$2-billion facility off the Spanish Town bypass in St Catherine that will bring a large segment of its food distribution and cold storage into a single complex, senior officials confirmed.

The distribution hub, being built by contractor Frederick Moe and financed from internal resources, is to be completed by October 2009.

"Yes, we are going to be building a distribution centre which will incorporate some cold and chill storage," GK Foods Chief Executive Officer, Erwin Burton, confirmed to Wednesday Business last week.

Greater efficiency

This facility will apparently allow Grace Kennedy to consolidate a number of warehouses, thereby providing for greater efficiency through economies of scale. It is also likely to enhance inventory management.

Burton said the facility will be a state-of-the art distribution centre that will operate as a distribution point for all of Grace Kennedy’s food brands and would incorporate group subsidiaries such as Grace Foods International (GFI), Grace Foods and Services (GFS), World Brand Services and Hi-Lo warehousing.

Sources say Moe, the contractor hired by Grace Kennedy, began construction on a $400-million building at the complex less than three weeks ago.

Substantial

The $2-billion centre is substantial even for Grace Kennedy, which last year reported making capital investment of $700 million - its second-largest spend on projects in five years - of which about a quarter of a billion dollars was pumped into plant and equipment that fall within GK Foods' portfolio.

But with more than $8 billion of cash to play with, the conglomerate, whose sales last year topped $48 billion for a new record, can more than afford to finance the distribution centre from internal resources, as Burton said it would.

The facility, though not expected to be operational for one and a half to two years, seems to complement plans by Grace Kennedy to position itself, by year 2020, as a 'global consumer group' that builds value on customer service, brand loyalty, and an "aggressive" push for new markets, both organically through new product development as well as the acquisition of businesses.

Jamaica, the United States, United Kingdom, Canada and Belize are GK Foods' chief markets.

But its products are sold in several other countries, which now include India, where GK Foods announced it gained a toehold last October through exports of Grace Coconut Water.

The plan for the distribution centre comes at a time when the company is adding new products, and on the heels of sales growth in various markets last year, including but not confined to Antigua, up 20 per cent; Guyana, 23 per cent, Bahamas 33 per cent and Trinidad where sales more than doubled.

Warehouses

Currently, Grace Kennedy’s warehouses are at different locations in the Kingston industrial zone: GFI is at Newport West; GFS warehouse is at another location downtown Kingston and its World Brand warehouse is on Spanish Town Road.

Wednesday Business understands that Hi-Lo, which is said to have the No 3 spot in the grocery market behind Super Plus and the Progressive consortium, no longer has a central warehouse and that each of the supermarket outlets sources its own goods.


Source:
Jamaica Gleaner
Wednesday 23rd July, 2008
http://www.jamaica-gleaner.com/gleaner/20080723/business/business1.html