FRESH from what is turning out to be its best year yet, in terms of product sales, Spur Tree Spices is now training its sights on expanding its footprint in Canada and the Caribbean as part of geographically diversifying and deepening its revenue stream while it gets ready to introduce new products to the market.

Spur Tree Spices disclosed in recently released financials that for the nine months from January to September this year its sales topped $1.06 billion. That was not only 58.6 per cent higher than the $672 million it was for the comparable nine months period a year ago but has also surpassed, even though slightly, the total sales for all of last year. Revenues at Spur Tree Spices for all of 2022 was $1.02 billion.

On the profit side though, things did not turn out as expected. At $67.6 million, it was 43 per cent lower than the $118.6 million profit Spur Tree Spices reported at the same stage last year. It means the company is only generating 6 cents profit from every $1 of goods sold, roughly a third of the 17.6 cents profit it reported last year for every $1 of sales.

“That’s mainly because we had to pay up to four times more for some raw materials due to the prolonged drought,” Albert Bailey, CEO of Spur Tree Spices pointed out in an interview with the Jamaica Observer. He said the company would normally store enough raw material to cover production for four months when supplies are usually short, but strong demand for its spices and sauces resulted in that being depleted quicker than planned and at the point in time when the input prices were through the roof. If the company was to continue producing, Bailey said it had to secure the raw materials at the higher prices. But lessons have been learnt and mitigation efforts are being implemented.

“We are expanding the number of suppliers that we are working with and we have expanded our capacity to store more inventory, because coming out of this challenge, we realised that we need to store more than four months worth of raw materials, so we are moving to increase that to about six to nine months of raw material storage,” he asserted. The target is to increase raw material supplies by 1.5 million pounds.

Securing those supplies will be critical for Spur Tree Spices as it pushes its products into new markets. The chairman, Metry Seaga, has given the company a challenge to enter markets in Africa, but that ambition seems a way off at the moment, with consumers closer to home being immediately preferred. In the late summer, the company signed a deal with Atlanta, Georgia-based, BAK Foods to produce wet seasonings under a white label arrangement. That deal is expected to boost Spur Tree Spices’ revenues “by a few million US dollars each year”, Boris Smith, the CEO of BAK Foods told the Business Observer in an interview this past August. BAK Foods is a distribution company which supplies over 600 Jamaican restaurants across 12 states in the United States.

“But, in addition to that, we have also inked a deal with Grace Foods Canada to be our distributor in Canada, and so that has impacted our third-quarter revenue position, and also, as you know, Mohan is originally from Guyana, it’s a market that we have not significantly pursued before, but with the opportunities there, it is something that we are now focusing on, and through contacts and relationships we have been able to identify a distributor in Guyana who we will be working with, so we also have a container going out to Guyana soon.” Mohan is in reference to Harrinarine “Mohan” Jagnarine, the founder and largest shareholder in Spur Tree Spices.

For the Canadian market, the deal with Grace Foods was sought after Spur Tree Spices felt its former distributor was not representing the brand “in a holistic manner”. Already, the company’s products are in retail outlets such as Loblaw’s and Sobeys, Canada’s first and second biggest retail supermarket chains. But Bailey said he wants the products to go beyond those outlets and expand further into the Canadian market and believes the Grace Foods partnership is ideal to accomplish the aim.

“It’s more than just being a distributor in Canada, and they are in a similar line of business and the products are similar, and their products are excellent,” Don Wehby, CEO of GraceKennedy told the Business Observer about the deal. GraceKennedy is the third largest shareholder in Spur Tree Spices, with 10.7959 per cent of the company, and is the parent company of Grace Foods Canada. “We have to look at the strategic opportunities that may come up based on us being the third largest shareholder,” Wehby continued, though he quickly retorted, “I can’t comment on that,” when asked if GraceKennedy has any immediate plans to take a bigger stake in Spur Tree Spices.

For Guyana, a deal has been signed with SLS International Trading to distribute the products in that country. That deal means Spur Tree Spices will now have a consistent presence in a third regional market – Jamaica, its home base, and the Cayman Islands are the other territories in which the company’s products are distributed. Shipments of products have gone to countries such as Barbados and Trinidad and Tobago, but those have been one-off and the company lacks a consistent presence in those markets.

However, Bailey said he wants to change that reality in the new year. Last year, the company signed a deal with Massy Distributors to push the products locally and in the region. Spur Tree Spices indicated that it is now ready to leverage the terms of that agreement to get into more Caribbean countries.

“There is a pending meeting with Massy Distributors to explore the opportunities that we have already agreed on in the Caribbean, because that is an area that we want to give greater focus in 2024,” Bailey pointed out.

Asked to outline more, he continued: “The discussion with Massy is to follow their footprint in the Caribbean. So the first thing is to get that distribution company to carry Spur Tree [products] in their stores and then go beyond those stores to other opportunities in each territory.” Massy operates stores in Guyana, Trinidad and Tobago, Barbados, St Vincent and the Grenadines, and St Lucia. Since Spur Tree Spices only recently signed a deal for its products to be distributed in Guyana, it is not clear as yet how that will affect the discussions with Massy about its Guyana stores retailing Spur Tree Spices’ products.

Expanding on the opportunities beyond its stores, Bailey said, will be key for its growth in the region.

“About 40 per cent of our seasonings are going to food service providers, both here and in the States,” he noted. “We will start with the retail side of the Massy footprint, getting our products in their stores, but we also want them to target beyond that to get the products into hotels and food service operators.”

Still, geographically diversifying its presence or deepening its penetration in existing markets are not the only growth strategy the company is pursuing. Earlier this year, Bailey announced that Spur Tree Spices wanted to transition from being a seasoning and sauces producer into a fully fledged food company. Its acquisition of Canco Limited and Exotic Products, which gave it a dominant piece of the canned ackee and callaloo market, was just the start of the transition. Bailey, earlier this year, told the Business Observer that in 2022 the company spent months developing a slew of new products which are to be launched in 2023, and as the year quickly draws to a close, he said some of those products will be launched, though he declined to identify what products will be rolled out. In previous interviews, Spur Tree Spices identified products such as canned coconut milk, coconut cream, and a host of dried products, dips, condiments, and ready-to-eat meals as products to be launched.

“We are aggressively diversifying our product offerings to mitigate risks associated with supply chain disruptions and reduce dependency on single product lines,” the company said in notes accompanying its financials. “Our revenue flow will be less vulnerable and our cost impact will be less vulnerable because of this diversification strategy.”

Spur Tree Spices earns about 75 per cent of its revenues from its spices and sauces business. Its canned products business, which includes ackee and callaloo, make up the rest of the company’s earnings.

Bailey said the Canco and Exotic Products subsidiaries have now turned the corner after not having a good second quarter as the investments made in them start to pay off. Its board also met on Monday and agreed to pay a dividend, the second one it is paying since it became a public company last year January. It paid a dividend payment of $0.0175 per share on December 20, 2022.