Ice-cream maker Flavorite Foods Ltd (FFL) is looking to deepen its regional footprint through the Guyana and Suriname markets, expand into other markets and introduce new products. The Boundary Road, San Juan-based FFL makes lollies, such as Hola Kola and Likka Stik, Supreme ice-cream and Nutty Royale, Naturals Homemade ice-cream, Island Naturals Fruit bars and many others. Louis Stefan Monteil, 40, has big plans for Flavorite, of which he was appointed as chief executive officer from May 1. In a May 4 interview at FFL's Boundary Road, San Juan-based office, Monteil said Guyana's economy has had double-digit growth within the last four years. That means the average Guyanese has more disposable income to buy things like ice-cream. The World Bank's Global Economic Prospects (GEP) mid-year 2011 report said Guyana's gross domestic product will grow by 5.1 per cent in 2012 with greater growth of 5.6 per cent projected for 2013.
Monteil said while Guyana and Suriname are lucrative markets, the Latin American market is not attractive for FFL as it is "very difficult." Due to the volumes of ice-cream products some Latin American countries produce, Monteil said FFL may not be able to compete. "Our products cannot compete price-wise. In other words, we don't have the pockets to compete marketing-wise in those kinds of countries."
Its distribution subsidiaries in Barbados and St Lucia: FFL (Barbados) Ltd and Flavorite Foods (St Lucia) Ltd, experienced sales growth. "It (the Barbados and St Lucia subsidiaries) gives us more exposure in those markets to compete with other brands. They are both pilot projects which seem to be somewhat successful. "We've had double-digit growth (Barbados and St Lucia subsidiaries) in the last three or four years in two markets where presence was very limited. In subsidiaries now, we have a wider range and our wingspan has gotten a lot bigger. "The way ice-cream is consumed in Jamaica is a lot different to how it is consumed anywhere else. It is mostly done by push carts with bulk selling through these depots throughout the island.
"We do envision trying to get into the grocery trade there. Our ice-cream distributor there has grown the business in terms of our novelties. Jamaica has a lot of potential for us. There are no tariffs and duties going into that market." Explaining how the Jamaican ice-cream market works, Monteil-whose father Andre Monteil is the former CL Financial Group financial director-said novelty ice-cream, which are single-serving items bought from vendors for immediate consumption-is sold in T&T from carts. In Jamaica, cartmen serve scoop ice-cream. "It is very hard to build a brand in Jamaica through this channel. It is very competitive-the major player would be Nestlé. In Jamaica, many people don't know it's Nestlé ice-cream they are eating because of the way ice-cream is distributed. It is served in plain cardboard boxes with a bag. The flavours sold are different to T&T's.
Acquiring Romike Ltd
Much is changing at Flavorite Foods.
The T&T Stock Exchange-listed company, whose shares are now trading at $8.25, has not been in the public eye much. That scenario changed in 2012. The younger Monteil took over its management after CEO Godfrey Bain officially retired on April 30, 2012. Bain will continue to serve on the board as a non-executive chairman.
In February, Flavorite informed the T&T Stock Exchange it had acquired all of the shares of Romike Ltd, located at the corner of Boundary Road and Churchill Roosevelt Highway, San Juan. The company's 2011 annual report stated Carolyn John, the managing director of government-bailed out Colonial Life Company (Clico), and Hayden Ameerali, former chief operations officer of CL Financial subsidiary HCL, "resigned for personal reasons."
Monteil said Romike is "very successful" and has a "good reputation" and its owner was ready to retire and sell. Romike is a successful frozen meat, chilled and dry goods distribution company. Flavorite's 2011 annual report stated that Romike's 2011 sales were $55 million, and its net profit before tax was $3 million. Monteil said even though Romike has changed owners, its staff would be retained. Asked for the cost of acquiring Romike, Monteil said: "Can I refrain from answering that question?" However, based on the Business Guardian's calculations of FFL's Q1 2012 results, FFL paid just above $10 million for Romike. FFL reported a $296,000 loss, according to unaudited first quarter 2012 consolidated reports. For the similar period in 2011, the company recorded a profit of $133,083. The 2011 audited report said Flavorite's assets are worth $92 million. Other acquisitions: January 2008, Flavorite bought 60 per cent of T&T-registered Original Foods Ltd, a retail ice-cream shop. August 2010, it bought out the remaining 40 per cent. In 2009, Flavorite incorporated Sundaes Ltd to operate ice-cream parlours throughout the Caribbean.
Commenting on the overall performance, Monteil said: "The first quarter, we were marginally down and that is because of the Romike acquisition. That is what I can say right now. "I want to maintain our dominance in the local market. I want to grow market share. I want to diversify into other lines-Romike was one. We have some ideas about going into other businesses." To Monteil, ice-cream means fun and family, so getting into entertainment would be "a natural fit." Expanding into new markets or deepening its footprint in existing markets requires a budget, for which Monteil said his accountant and board have limited him to between $2 million and $3 million, which he described as "pocket change." Going into new markets is not easy. To treat with a more competitive environment and be more productive, FFL bought $5 million in plant and machinery.
Competition exists at home. The absence of tariffs means any kind of ice-cream can be imported. Consumers have more choice on how to spend their disposable income. Monteil is optimistic about a resolution to the problem which former CEO Bain described in successive annual reports as the "price points of the cheap imports." Monteil projects a $9 million profit for Flavorite in 2012.
State of emergency hits sales
Like many other businesses, FFL was "drastically affected" by last year's three-month-long state of emergency. "Some of our subsidiaries, like Original Foods Ltd, the Dairy Bars and the Cold Stone Creamery franchises, suffered during the curfew period. There were substantial losses. Working hours were cut short drastically, people weren't able to come out to purchase ice-cream. We are now getting back into the flow of things. People patterns had changed over those three or four months. It was a big blow. "We lost quite a bit of money-millions-in the vicinity of $3 to $4 million. There are challenges which we face that international people do not face. "Local hiccups, such as water shortages, labour problems, port problems, all these add to contributing factors of increased cost of production, which international companies don't have to compete with. The playing field is not level, but we are still able to hold our own. Competition is good as well. At the end of the day, Flavorite can stand to the test and taste of international brands." There are four Cold Stone Creamery outlets: Trincity, Movietowne, West Mall and Price Plaza in Chaguanas. A fifth is to open at Gulf City, La Romaine.
Labour constraints
Finding labour is very difficult for FFL. Monteil said this problem is not unique to Flavorite, but affects many industries. He said FFL employs a staff of 250. Asked if the National Training Agency can assist in training people to work in manufacturing, he said FFL needs "on-the-ground-level" labour, of which there seems to be a shortage. "When you speak to different manufacturing companies, most of us are operating within 60 per cent to 70 per cent of our full capacity because of the shortage of labour. Hiring workers from within Caricom is not an option. "Workers up the islands, they don't have the same work ethic that we do, no disrespect to them, but T&T (nationals) are a little more aggressive, a little more first world than they are."
CET
Regarding the common external tariff (CET), Monteil said large manufacturers did not lobby for the imposition of a 75 per cent CET on ice-creams, but supported small ice-cream manufacturers who have been waiting a year for approval. "We supported them, but the smaller business manufacturers of ice-cream were the ones that made the lobby, which we supported them because we support local manufacture. It was on the agenda, but I don't think it got approved. Since then the minister has made note he is trying to support local manufacturing in any way possible." How does the CET-free imported ice-cream affect local ice-cream makers? "It is a problem. These companies are bringing in products at a price we can't compete at. Fortunately, we have met with the leading grocery chains and have tried to find ways and means to compete to make the playing field a little level."