Salada Coffee complains of JBM prices

A respected local coffee brand SALADA Foods Jamaica Limited complained of Jamaica coffee price increases.

The increases slashed its gross margins by more than one-quarter, the company stated. It’s the latest processor to complain about the over 30 per cent price hike in one year, and 250 per cent hike over two years, towards $11,000 per box of coffee cherry. However the price rise is due to a severe supply shortage based on drought, disease, farm decay and now fire. Concurrently, large overseas buyers are demanding more coffee from Jamaica. On the micro-level farmers are demanding more per box due to the impact of currency depreciation on farm costs, and also the cost to protect the coffee against disease and theft. Two years ago processors paid roughly $3,000 for a box of coffee cherry to farmers.

“Profits continue to be adversely affected by the increases in price of coffee beans realised in the first quarter and the performance of its subsidiaries Mountain Peak Food Processors Ltd and Pimora Company Ltd,” stated Salada in a notice prefacing the financials signed jointly by Chairman Patrick Williams and Director Aubyn Hill. “The gross margin for the six months was 27.5 per cent, a reduction of 27 per cent when compared with the same period in the prior year. This resulted from the higher cost of coffee bean now being processed.”

Salada made $37-million profit before tax in the March quarter 2015 on $220 million in revenues, or 184 per cent higher profit year-on-year.

Just this week, large coffee processor Mavis Bank Coffee Factory Ltd makers of Jablum indicated that fire damaged at least $200 million worth of farms thus far. Last week US-based Marley Coffee cautioned its investors that the supply shortage of Jamaica Blue Mountain coffee could affect its sales going forward.

In recent times, Salada has faced increased local coffee competition in both the instant and brewed markets. Salada in its previous quarter hinted that it would seek to launch new coffee products this year. However, its latest March financials failed to add information on product development.

Last year, large coffee company Mavis Bank Coffee Factory Ltd launched True Brew, an instant coffee. It also launched Jablum Caribbean Blend, a mixture of beans from Jamaica and the Caribbean. In 2012, it also launched a high-end product called Jablum Gold.

Marley Coffee High Grades but…

 

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Marley Coffee offers one of the coolest brands from the Jamaica Blue Mountains. This coffee rocks with reggae chocolateness and R&B low acidity. Its led by Rohan Marley, the son of reggae legend Bob Marley, with operations in the US and Jamaica.

Its listed on the OTC Market in the US as Jammin Java and considered a penny stock with thin capitalisation. The team at Marley Coffee however want to change that but are faced with financial hurdles.

For instance, April quarterly sales more than doubled year on year which has  puts it on track to surpass the US$10 million annualised target for this financial year.

Despite the rapid sales jump, its net loss quadrupled to US$1.9 million during the three months to April. The company blamed the losses on its widening US distribution.

“The principal reason for the increase in net loss was the US$1.9 million increase in total operating expenses from the growth of the company and its staffing needs offset by the US$473,950 increase in total other income,” said company filings to the Securities and Exchange Commission (SEC).

Losses mean very little to coffee lovers who just want the perfect brew. Marley Coffee offers that, but even that has challenges based on the limited supplies of Jamaica Blue Mountain coffee.

The shortage is based on factors outside the company’s control led by the coffee rust disease. During the April quarter the company purchased just  US$65,000 worth of Jamaica Blue Mountain coffee. which accounted for a small fraction off its US$2.1 million in quarterly sales. Comparatively, the company bought one-third more Jamaican coffee a year earlier.

In fiscal 2014, Marley Coffee established a national grocery distribution network, increased its brand awareness and strengthened its international presence, including its entry into two of the largest chains in the US, Safeway and Kroger.