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The Jamaican Teas story

HERBAL teas ready to be brewed straight out of a box in tea bags is a phenomenon Jamaicans have got used to chiefly in the last decade as much as bottled water in the last 20 years. Before, brewing what Jamaicans call “bush tea” would be done with freshly picked herbs, but the dried variety displayed daily on supermarket shelves with various brand names, owe much of their success in Jamaica to one company, Jamaican Teas. Here is the story behind a brand which spawned many others with great success.


John Mahfood, the group CEO of Jamaican Teas, in his usually accommodative way, was welcoming when this reporter told him that the story of his company is one I want to tell. Mahfood, for the most part, needs little invitation to tell the story.

“It started in 1967, with a company called Tetley Tea,” Mahfood recounts as he went beyond the genesis of Jamaican Teas to the start of the company that would eventually become his own. Tetley Tea is a company that was started in Yorkshire in the United Kingdom in 1837, when brothers, Joseph and Edward Tetley started a company to sell salt and added tea to the mix a few years after. They introduced tea bags to Britain in 1953 after seeing it in the United States in 1939. The concept of tea bags was, however, itself an accidental discovery in 1909 when a New York merchant called Thomas Sullivan sent out samples of tea in small silken bags. Some customers put the whole bag in the pot to brew the tea — and it worked.

A decade later in the 1960s when the Jamaican Government was encouraging foreign companies to set up manufacturing businesses in Jamaica, Tetley Tea was one of the companies which took up the offer, especially given that the incentives to set up locally included “allowing them to have, basically a monopoly,” according to Mahfood.

“If you had set up a factory in Jamaica in the 60s, nobody could import that item into Jamaica.” That Mahfood argued was the genesis not only of Tetley in Jamaica, but also of many other manufacturing companies such as Goodyear, Nestle, Carreras, Gillette, Ricketts and Coleman, etc.

“Hundreds of companies were started at that time and it grew to the point where manufacturing in Jamaica was a very big part of our GDP (gross domestic product), 20 per cent, it had reached at one time,” the Jamaican Teas CEO continued.

Mahfood said these companies flourished until the late 80s into the early 90s when “the Government was forced to change that regime by international lending agenices to open the economy up to competition. And that created a disaster, because the decision to do that was an overnight decision. The manufacturing companies in Jamaica were not prepared for international competition and neither were they exporting. They only supplied their goods to the local market and as a result of that, they were not efficient, they were charging too much and making good profit, so they did not have that incentive to export. And so when all of these companies faced international competition overnight, they mostly went by the wayside,” he recalled.

During that period, very few companies survived. Tetley, which dominated the tea market in Jamaica at that time, was one of those which were badly impacted.

“In 1996, my father and I had the opportunity to buy the company and at that time it was very small. It had one tea packing machine and it was faced with international competition and so on. However, my vision was that, we would launch a new line of teas that were herbal teas based on the ‘bush tea’ on which Jamaicans grew up. So we launched our peppermint and ginger and cerassie and bissy and all of those teas we launched them in a tea bag and that had not happened before anywhere.” Jamaican Teas markets its products under the Caribbean Dreams label.

“The other thing we said we would do is to focus on exporting. At first it was difficult to introduce people to these teas, because number one, they weren’t accustomed to buying them in a supermarket, and number two, there is nothing better than a freshly picked peppermint. The dried peppermint leave, crushed and put in a tea bag is not as nice as the fresh thing and that was a bit of the challenge. But over time, people became accustomed to it and they liked the convenience,” he said.

But at the time the company was bought in 1996, its size meant Mahfood and his father could not depend on it. The son took a job at GraceKennedy in that same year, leaving the management of the business to his father.

“I joined GraceKennedy in 1996 at the same time that we bought the company and my father ran the business from 1996 to about 2007. I left GraceKennedy in 2006. From 2006 onwards we were together. My first responsibility at GraceKennedy was exports. I was responsible for GraceKennedy’s export business and that is what drove my experience and desire to focus on exporting and the fact that when I was at GraceKennedy, we would try to develop the export business for the factories that GraceKennedy owns,” he said.

Jamaican Teas turns around

AMAICAN Teas has rebounded strongly from the negative effects of the pandemic with its latest audited financial statements for the 2021 financial year showing net profit of $586.18 million, reversing the net loss of $69.72 million recorded in 2020.


Pre-tax profit for the year ended September 30, 2021 amounted to $741.05 million relative to the pre-tax loss of $135.44 million booked the previous year. For the September 2021 fourth quarter, pre-tax profit amounted to $79.34 million, down from the $177.34 million posted in 2020.

Tax charge for 2021 amounted to $154.86 million in contrast to a credit of $65.72 million in 2020. For the year ended September 2021, net profit attributable to shareholders rose to $392.94 million, up from the $222.40 million booked in 2020.

For the September fourth quarter, net profit attributable to shareholders totaled $78.45 million, a 40 per cent decline relative to the $131.65 million reported in the prior comparable quarter in 2020.

Jamaican Teas reported a 3 per cent increase in revenues to $2.27 billion, coming from the 2020 booking of $2.20 billion. For the September quarter, revenues amounted to $520.36 million, down from $782.88 million in 2020.

Cost of sales increased by 7 per cent to $1.72 billion, up from $1.61 billion in 2020. There was marked improvement in other income of $163.48 million versus $78.54 million in the prior year.

 

Managing administrative expenses

Administrative expenses increased by 5 per cent to $245.41 million relative to $228.16 million for 2020. Sales and marketing costs contracted by 29 per cent to $36.82 million, down from the $51.73 million posted in 2020.

For the last quarter, administrative expenses and sales and marketing costs closed at $57.91 million, down from $66.79 million in 2020, and $9.71 million, down from the 2020 booking of $9.91 million, respectively.

Finance cost for the year amounted to $37.71 million relative to $31.75 million reported in 2020, while finance costs for the quarter closed at $11.79 million, up from $7.78 million in 2020. As at September 30, 2021 the company's total assets amounted to $4.08 billion, a 16 per cent increase when compared to the $3.52 billion reported as at September 2020.

This increase was attributable to 34 per cent growth in investment from $1.60 billion in 2020 to $2.14 billion for the period under review.

Commenting on the year's performance, the management of Jamaican Teas noted, “In response to the continued uncertainties management continues to adopt several measures, specifically around financial risk management. Some of these measures include reorganising the investment segment to reduce investment in industries assessed as being sensitive to the pandemic, and diversifying the investment portfolio to invest in listed equities outside of Jamaica across thriving industries.”

J'can Teas exits low-income housing, looks downtown for cheap properties

J'can Teas exits low-income housing, looks downtown for cheap properties

Jamaican Teas CEO John Mahfood says the group, which operates a real estate arm, will never again pursue a low-income housing development, in the face of losses on its Orchid Estate project in St Thomas.


The development, done by subsidiary H. Mahfood and Sons Limited, suffered delays in securing titles and other approvals, but was finally completed last November.

The late receipt of splinter titles and property tax certificates contributed to losses on the project, Mahfood said at Jamaican Teas' annual general meeting on Wednesday, but he did not disclose the extent of the overruns. It meant that Mahfood and Sons was locked into prices that later proved inadequate to cover costs, he added.

Acting Chairman of Jamaican Teas John Jackson also blamed delays on the late distribution of mortgage loans by the National Housing Trust to buyers of the Orchid Units. The agency would not pay out the funds until all documentation and titles were available, which Jackson described as a "culture of rubber-stamping".

 

Under-income homes

Mahfood said he would "never again do another low income project" - especially in circumstances where the property is outside of Kingston - but would leave such ventures for companies that were "larger and more efficient".

Instead, Mahfood and Sons will be focusing on upper-income developments, such as its $250-million project at Ports View Road in upscale Manor Park, on which construction will begin this year.

"We will start in another couple months. It will be 18 super studios," Mahfood told the Financial Gleaner.

Jamaican Teas, meanwhile, is also looking to acquire what the CEO describes as under-

valued property in downtown Kingston to convert into warehouses for rental.

Mahfood expects such properties to appreciate in value once the Government solves the "problem of parking in downtown Kingston".

Mahfood and Sons acquired its second Harbour Street property in 2017 for $32 million and is currently in negotiations to purchase a third on the same stretch, he said.

Mahfood's personal interest in downtown Kingston properties was sparked eight years ago.

"In about 2010, my father had a property downtown on Harbour Street and he was trying to sell it. There was no interest. It was about six or seven thousand square feet. He was trying to sell it for $5 million and nobody was interested, so I said ... rather than giving it away, I would buy it. One day, I felt, the market downtown would start to turn," he recounted.

"We had it valued last year - and it's valued at $35 million," he said.

Still, he notes that properties downtown are still generally undervalued, primarily because of a lack of parking space.

"Even though there are buildings going up, like Digicel and GraceKennedy, they are building their own parking facilities. That might be good for them, but it does not help the overall state of the market downtown," he added.

For now, the properties being acquired by Jamaican Teas, he said, can only be used for warehousing, based on their condition, but Mahfood adds that in time," maybe in 10 or 15 years", he aims to convert them to office and commercial space for restaurants, and possibly residential use.

Meanwhile, the company is also selling off some assets as it reinvests. During 2017, Jamaica Teas offloaded warehouse space on Spanish Town Road in Kingston for $160 million, with some of those proceeds poured into equity investments, and is now selling property used for its Western Union outlet in Savanna-la-Mar, Westmoreland.

Jamaican Teas posts loss despite big revenue growth

Tea and other consumer products manufacturer, Jamaican Teas Limited, which has branched out into retail, real estate and other investments, is reporting a near $70-million loss on group activities for the year ending September 30, 2020. This is despite its manufacturing arm declaring a near $258-million profit for the period. Losses on the portfolio of its spin-off investment subsidiary, QWI, continue to weigh down the group’s financial performance.


Jamaican Teas CEO John Mahfood says a $482-million fair value loss on revaluation of investments put a damper on big gains in operating revenue.

“That represents the fall in the value of shares in the QWI portfolio. We had a pretty sizeable loss for the first three quarters, but that moderated by Q4 and we ended up with a profit there. We’ve seen a turnaround in the fortunes of QWI and the shareholders there should feel better when we release those results in February,” he told the Financial Gleaner.

Jamaican Teas Group posted 70 per cent more gross revenues for financial year 2020 over 2019. Revenues totalled approximately $2.2 billion, some $904 million more than the roughly $1.3 billion for 2019. Exports was the best segment performer, contributing $860 million, or 39 per cent of revenues. This was followed by domestic sales at $546.5 million, or just under 25 per cent. Retail sales from its Bay City Foods supermarket brought in $534.47 million, or 24 per cent; while sale and rental of properties contributed $254.44 million, or 11.59 per cent, according to notes accompanying the year-end financials.

OVERSEAS MARKETS

Exports were up nearly 49 per cent year-on-year, while domestic sales were flat. Mahfood said the company is paying keen attention to its overseas markets while innovating to maintain its local market position. He is of the view that with the performance of the local market and the leadership position of Jamaican Teas’ products, the headroom for growth will have to come from overseas.

 

“We can’t rely only on Jamaica in looking for growth. We already have the position of market leader, so the real growth has to come from the overseas markets, where there is more room to grow,” Mahfood said, adding that the export push will include Trinidad & Tobago.

“Despite payment problems in that market, it is still doing well. We are aware that their economy has been hit hard by lower oil prices. We think it is an important market to keep in touch with, because in the event of a turnaround, we want to be first in line to grab the further opportunities,” he added.

Jamaican Teas announced in November that it will be expanding its factory space at Bell Road in Kingston, adding 50 per cent more production capacity.

Meanwhile, in order to boost production, Mahfood said more workers will be hired. Administration expenses were $228 million for 2020, just about $14 million more than the previous year. Expenses are projected to go up further, given the need to spend more to meet demand.

“We’re moving to put in another shift rather than rely on overtime. To do that, however, we have to put in more management to cope with the increased production and productivity requirements,” according to Mahfood.