Starbucks would drop two cafes in Jamaica which will target tourists primarily at least initially, according to Coffee dealers who spoke to Jamaicamocha .
The talk is that the Sangster International Airport in Montego Bay
could see a location followed quickly by another, at a new business
hotel under construction in Kingston. (Let’s avoid names for the moment.)
Of course, last month the Gleaner reported that Starbucks is considering entering the island along with other Caribbean territories in the medium term.
It just so happens that the busy Montego Bay airport which currently
doesn’t have any store slots available will see 25 per cent of the
stores come up for contract renewal this year, according to media reports.
Sources say that’s where the Starbucks franchisee will snatch up a vacancy and outbid an
existing operator. But it might not even have to come to a bidding
war, as the franchisee already supplies the airport with food
and beverage. (I have already said too much.)
Who are the two private sector players seeking to acquire the
Starbucks franchise in Jamaica–They are both in hospitality sector, the
Will Starbucks increase the coffee culture? Will Starbucks improve a
cup of local coffee? Or would it simply increase the price? Let’s see. Not all cafe players are upbeat about the prospects especially those who earn from the tourist market.
Marley Coffee which sells commodity and luxury Jamaica blue mountain beans will partner with The Broncos NFL team to cobrand coffee.
“Marley Coffee is played to announce a limited edition Mile High Blend in partnership with the Denver Broncos,” Marley tweeted.
The company which is on track to break even this fiscal year based on sustained sales growth.
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.
MarleyCoffee aims to double its sales to $20 million for it year ending January 2016, financials state.
The company already witnessed a 2/3rds growth in sales from $6 to $10 million for its just completed year.
However the company continues to burn through cash and recorded losses that totaled $9.3 million or 38% higher losses year on year.
The price of Jamaica Blue Mountain (JBM) coffee jumped 40 per cent in real terms in a year based which worries Marley Coffee.
Coffee remains scarce based on a confluence of factors now led by summer drought which killed beans.
“We are committed to ensuring our supply chain and providing our customers JBM. We are diligently working to secure more JBM as the market we created for it continues to expand. There still is a high demand for JBM in North America, but limited supply and rising costs may hurt sales,” stated Marley Coffee to its investors this month in filings to the US Securities and Exchange Commission.
The sale of JBM beans largely gives the brand prestige, as the majority of Marley Coffee sales are from cheaper coffee growing regions outside of Jamaica.The company bought US$290,000 worth of JBM over nine-months ending October or two-thirds less than a year ago, financials state.
“We are currently working to address the supply issues and while we believe we will be in a far better position in Fiscal 2015 with respect to JBM availability,” noted the company.
Over nine-months the company recorded a US$7.8 million net loss from US$6.7 million in coffee sales or three times higher losses than a year earlier. Part of the losses are the result of payments to executives at Marley Coffee which surpassed US$1 million over three-months.
Marley Coffee based in Denver, USA, recently gained distribution in over 5,000 stores in North America, with plans to enter 10,000 stores.
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.