Below is the story on one of the nominees for this year’s Jamaica Observer Business Leader Award. All the nominees are drawn from the list of entrepreneurs who have listed their companies on the Junior Stock Exchange. The Business Leader Award presentation takes place on Sunday, December 7, 2014 at the Jamaica Pegasus Hotel.

As a high school student, Christopher Clarke is likely to have understood the opportunities and potential pitfalls that lay ahead of Carol Webster Clarke when she traded a full-time job for the opportunity to pursue her entrepreneurial dream.

The mother of two instantly found a winning formula in her Devon House ice-cream and economic security for her family.

The premium brand became the most sought-after Sunday afternoon treat in all of Kingston, and remains as pleasing to the palates of today’s new generation of ice-cream lovers as it was to their parents nearly 30 years ago.

If Christopher harboured any ambition of stamping his own mark on the business world, his mother’s culinary innovation would indeed be a hard act to follow.

But in 2006, the son decided to take a closer look at her operation. He was undertaking a broad review of the local ice-cream market and, among other things, commissioned a survey to guide his decisions. He began to ask questions and to challenge long-held assumptions about consumer behaviour.

The queries raised by the mechanical engineer, who had recently completed an MBA in finance, were not just pointed, they were galvanising. The answers that came back inevitably led to the formation of Caribbean Cream ‘Kremi’ Ltd.

By design, the new ice-cream outfit departed in some important ways from the mission and business model that had brought success to its progenitor.

“We did a market study,” Christopher lets on. “We realised that even though Devon House ice cream was a household name, in terms of volume of sale it was a relatively small per cent of the ice cream consumed.”

A year earlier — in 2005 — Carol’s company, Scoops Un-Limited, installed an ice-cream mix plant at its Derrymore Road, Kingston factory. The investment enabled the processing of much wider quality range ice creams than what was possible when the primary raw material had to be sourced from third-party suppliers.

“The mixing plant was the inspiration,” explains Christopher. “It changed our ability to do the more affordable mix. I thought it was something we could do right away.”

The survey also confirmed the intuition of the young entrepreneur: that there were opportunities within a discrete market segment that fell somewhere between the premium brand that Devon House represented and entry-level homemade offerings.

Unlocking the value represented by the large number of consumers who had been shut out of the premium ice-cream market meant that a way had to be found to deliver the product to their doorstep at optimum price point and reasonable quality.

Carol provided the seed capital for the venture in which she and her younger son Matthew (now a medical doctor practising in the USA) took a minority stake. Christopher, the majority shareholder, was the energy and creative muscle behind the project. All three hold board seats — with Carol as chairman, Christopher CEO, and Matthew non-executive director.

Caribbean Cream Ltd began production with five employees and output capacity of 50 gallons of ice cream per hour.

“We gave samples to the mobile vendors who liked it and they kept coming back,” beams Christopher, in revealing his early approach to marketing. “It was good promotion for us as word got around and we started to feel the demand.”

The chief executive officer says that it took the competition about three to four years to come to terms with the presence of a new player within their market and the real threat that Kremi represented.

“About four to five years ago, the competition started to notice us,” he says. “They gave us a crack and enabled us to get into the market.”

Nestlé was among the big brands that dominated the industry when Kremi was an unknown name to all but a few ice-cream lovers. The competitor’s presence in the market was scaled back after its production base was re-domiciled from the region to the United States, a move that reportedly created challenges for supply reliability.

The indigenous brand, Crazy Jim, was and remains a formidable competitor.

The crack that the once-sleeping giants left unattended quickly turned into a fissure, because today, when Jamaicans feel for a cone or container of ice cream, roughly half of them will reach for the Kremi brand.

Caribbean Cream produces 30,000 gallons of ice cream each week. The firm has a workforce of 120, mostly located at the building that houses its factory, offices and primary warehouse on South Road in Kencot, Kingston.

The operation utilises three depots, two in Kingston — Suthermere Road and Savannah Plaza — and the other in Montego Bay, on Lower Bevin Avenue.

Eighty per cent of the Kremi ice cream that Jamaicans consume is bought from motorbike vendors — a group of over 200 independent buyers who source the products from either the factory or depots before making their way to school gates, office parking lots, church yards, sporting games, or just about anywhere that potential ice-cream lovers may gather.

Shopkeepers also buy the product — in most instances in three-gallon and 1.5-gallon containers to scoop into cones and cups for individual consumption.

They have a choice of over 20 different flavours, though it is the consumers who ultimately decide which ones get kicked off the menu each quarter when the company reviews the selling profile.

“Each quarter we replace the least popular flavour with something else,” Christopher explains.

Up until recently, the owners of Caribbean Cream took a passive approach to supermarket sales, but according to the CEO, all that changed in April when Wisynco was brought on board as the Kremi distributor within that retail network.

“We have always been in the supermarkets but were not aggressive,” he acknowledges. “We rebranded in April, changed out packages and are now serious about this segment of the market. Wisynco is our distributor for this segment.”

Though Kremi is known primarily for its ice cream it is also the local distributor for the Flavorite brand of Trinidad-made frozen novelties — an arrangement that dates back to 2007.

It is now carving out a niche within the ice cream cake sub-market, a segment that is growing in popularity among Jamaican consumers.

Caribbean Cream financials provide another perspective on the pace at which the Kremi brand has been growing and the scale of the operation after only eight years.

So, for example, during the 12 months that ended February 28, 2014, the company had sales of $855 million. This is 27 per cent higher than the $675 million in revenue that was generated the previous year. In 2014, gross profit was $201 million, while $40 million was netted.

The company is in the middle of a two-year $300 million upgrade that began last year June. Even before the project is completed, its impact will be felt in improved efficiency and expanded output capacity.

The technical team are now working to cut over from the use of Freon cooling systems to ammonia within the next few days, a move that is expected to drive down the firm’s growing electricity bill. Last year’s $62 million energy cost was second only to raw material expenses.

When the blast-freeze room is fully operational it will take two hours to harden the ice cream rather than the two days it now requires under the current process.

The infrastructure that is required to deliver a product as seemingly simple as a scoop of ice cream into the hands of a consumer is surprisingly complex. This multi-stage process requires specialised equipment for mixing, pasteurisation, homogenisation, stabilisation, equipment to add the flavours, and for packaging and freezing.

Then there is the fully staffed laboratory where regular tests are done to ensure not just the absence of contamination but that the product has the consistency that consumers have come to expect of the Kremi brand.

Growing Caribbean Cream Ltd into the industry leader over its relatively short history required significant investments and bank funding.

“To leap to the next stage of expansion we took out loans with Scotiabank and Development Bank of Jamaica,” says Christopher. “We felt that we had reached a point where we did not want any more loans.”

As a source of funding, the Junior Stock Exchange was designed for companies that find themselves in the circumstance that Caribbean Cream faced after a few years of heavy investment and rapid growth.

Moreover, if the owners listed at least 20 per cent of their shares, the firm would pay no tax on its profit during its first five years operating as a public entity, and would pay tax on only 50 per cent of its profit during the succeeding five years.

But to make the important step, Carol had to first overcome deep-seated concerns about having to now account to third-party owners for actions that previously required no form of consultation or public accountability.

“I was reluctant,” she notes. “I am from the old school and this was uncharted territory for me. You now have to be accountable to people for the way you spend their money. It’s a huge responsibility.”

Christopher says he did not share those concerns and that once he read that Stafford and Marilyn Burrowes had made the decision to list Dolphin Cove, “I thought this would be a good idea for us”.

Interestingly, prior to listing, Marilyn Burrowes shared Carol’s concerns and was eventually persuaded by her husband to take the plunge. Like Christopher and Carol, Stafford and Marilyn are joint nominees for this year’s Jamaica Observer Business Leader Award.

“I realised that I was in one place and Chris was in another, and it took a bit of time for me to come around,” says Carol, in an uncanny echo of the Dolphin Cove experience.

Chris says that he, too, understood the magnitude of the decision but that the upside was too positive to ignore.

“It’s a big change,” he notes. “When you are a public entity you have to justify your call at a public forum, and you now have to do quarterly reporting. It’s a different way of doing business.”

Between April 25 and May 10 last year, Caribbean Cream went to the market seeking $75 million. The company was listed on the Junior Stock Exchange on May 17.

Christopher swears that the listing experience has surpassed his most optimistic expectations.

“I expected to get the cash and to be forced to comply with rules that we should be following regardless,” he declares. “But I did not expect that sourcing funding would become so easy. The banks are now willing to lend us so much more money. We can get credit from anybody we do business with abroad. The listing has been good for our corporate name as many people now want to open depots for us.”

An added benefit, he notes, is the expanded boardroom: “The board expertise is a valuable asset. The board is very active and the directors provide guidance in and out of the boardroom.”

The CEO sees challenges ahead, given Jamaica’s fiscal constraints, but is convinced that products that distinguish themselves by quality and economic value will continue to do well.

“The environment is very tough,” he acknowledges. “But we see our product as a good entertainment option, as an experience that our consumers will want to have and as long as we continue to provide good value for money, we will be okay.”

Moses Jackson is the founder of the Business Leader Award programme and chairman of the Award Selection Committee. He may be reached at moseshbsjackson@yahoo.com