Jamaica
News - Real Estate - Agriculture
Source: The Jamaica Observer, February 28,
2007
John
O Minott - taking the family business to the next level
As a third generation shareholder and heir
apparent to Jamaica's largest coffee planting and processing company, 37
year-old John Oliver Minott Jnr faces a unique challenge.
The task of taking to the next level Jamaica
Standard Products - the firm founded in 1942 by his grandfather Leslie Minott,
and shaped into its present form largely at the hands of his father John
'Jackie' Minott - rests squarely on his shoulders.
But John O, as he is popularly known, is only too
aware that Jamaica Standard now operates in a business environment that is
fundamentally dissimilar to the relatively virgin market that his granddad
Leslie would have found when he set out to do business two generations ago.
There is, therefore, no template to guide the
future development of the company.
Instead, John O must learn to coexist with 10 or
so aggressive competitors in an industry that, over the past several decades,
has been a virtual graveyard for would-be investors.
Minott believes he understands what it will
take to build marketing and balance sheet resilience to enable the company to
withstand the uncertainties of the local market.
This strategy of which he is co-architect,
involves creating backward and forward integration, and developing critical mass
to drive down unit costs, and to squeeze margins at all stages throughout the
production chain.
"We now have the most completely
integrated coffee processing company in Jamaica," notes Minott. "We
take the process from the farm straight to the retail shop."
Jamaica Standard Products is a conglomeration of
two large coffee estates, a modern processing factory, packaging production,
retail outlets and marketing and delivery services.
The company has invested an estimated $200
million over the past decade in acquiring farms, retooling and in expanding its
factory. It now has annual sales of $300 million.
The larger of the two farms, Baronhall Estate,
located at over 2,000 feet above sea level in the hilly district of Cave Valley
in St Ann, is Jamaica's largest coffee farm. The farm is 325 acres spread across
the 1,200-acre property that the Minotts bought from the Carreras Group in 1988.
Baronhall Estate produces some 25,000 boxes of
coffee beans each year. The plan is to increase annual output to 35,000 boxes.
This plantation is credited with the coffee brand
that bears its name.
Jamaica High Mountain coffee, the Wallenford
Blue Mountain coffee, and a more recent addition, Brewers Choice, complete the
brand names under which Jamaica Standard produces coffee.
But the expansion that began in the late 1980s
and accelerated into the 1990s and which transformed the company from the
single-brand - Jamaica High Mountain coffee - that was left by granddad Leslie
Minott, was not without its challenges.
"We did expansion in the 1990s when
interest rates were high," notes Minott. "It crippled us, and we have
taken years to recover. The cost of money hurt us heavily, even though EX-IM
Bank and NIBJ helped."
To reverse the big drag that this decade-long
leverage expansion has had on the balance sheet, Minott has been exploring
several options.
One, he says, is the possibility of a public
listing "as soon as we feel that we are ready". The cash infusion
would allow the owners to de-leverage the company's balance sheet and reduce its
gearing debt.
However, the more immediate strategy is to expand
the company's own retail network where margins are strongest; and to find a
formula to bring greater efficiency to the notoriously labour intensive farm
operation.
"The business is very labour intensive
and we have to look at ways to address this," notes Minott.
This businessman is not afraid of challenges, or
of making difficult decisions.
For example, he recalls the dilemma that faced
the company shortly after he joined as general manager in 1991.
"The tile business was at a
crossroads," he explains. "There was a gradual introduction of ceramic
tiles in Jamaica and there was a shift in the market taste towards
ceramics."
The Minotts had for years operated a cement,
and later terrazzo tile factory at their Williamsfield property.
"When we saw people laying ceramics over
their terrazzo tiles we concluded that it was time to get out of the
business," laments Minott.
During that period of uncertainty, several
options were explored, including the possibility of upgrading the terrazzo
machines, but in the end "we both thought that it was not a good investment
so we closed it down in 1993".
That decision allowed the Minotts to sharpen
their focus on their coffee business.
"We started to concentrate on the
roasting of coffee," he says.
Other major changes were to come as the Minotts
moved to tighten their grip on the local market for coffee and coffee products.
For example, Jamaica Standard had a contract
with the Kingston-based distribution firm Hand Arnold for the islandwide
distribution of its coffee.
Jamaica Standard wanted a deeper penetration of
its growing line into rural Jamaica than the distributorship arrangement could
guarantee.
Under the new dispensation, the
distributorship contract came up for review.
"We had started to add variety in terms of
packaging options and needed easier coverage throughout the island,"
explains Minott.
During that period, Jamaica Standard also
packaged coffee under the Grace label.
The market was becoming increasingly competitive,
and the Minotts developed a multi-faceted response to this new dynamic.
First, the company improved and added variety
to its packaging. Then the arrangement with Grace came up for review.
The big marketing move followed:
"At that point we made the decision to do
our own distribution," says Minott. "We had to establish our own sales
department - we hired sales reps beginning in 1994, and merchandisers - who did
the shelves at the supermarkets."
By then the company had added the Baronhall
brand, which it wanted to push.
The Minotts invested in delivery trucks and
vans to enable this new marketing programme.
"Part of the focus in the 1990s was to
expand the acres and add new brands and improve the packaging," says Minott.
"We also developed a coffee liqueur called Baronhall Estate - launched in
1992. We also went into the manufacturing of sauces and spices in 1998 under the
same Baronhall Farms."
Now, the company produces five sauces,
including jerk, a red pepper sauce called 'Hell Hot', and marinade - for table
top and food preparation. It also produces dried products such as jerk
seasoning, all spice pimento, curry powder, and cinnamon powder.
"We are now into wet products, but these are
made by a company called Tijule in Palmer's Cross under our label," says
Minott. "It is our formulation. We do the labelling and distribution."
Again, to facilitate the expansion in their
product range and coffee output, the Minotts invested millions of dollars in a
12,000 square foot factory on their land at Williamsfield. It replaced the 3,000
square foot facility.
The company also invested in packaging equipment
and a roaster, "the heartbeat of a coffee factory".
Jamaica's most modern, and vertically
integrated coffee planting and manufacturing operation was in the making.
"We are the only fully integrated coffee
company in Jamaica," declares Minott. "We are involved in the full
range from the seedling to the cup."
The main emphasis at the factory is on quality
and consistency, bolstered by the ISO certification that the firm attained in
1998. "This is the only coffee factory in Jamaica to do so," beams
Minott with an unmistakable sense of pride. "I spearheaded that
operation."
Minott believes that ISO certification has been
good for Jamaica Standard because "it gives the employees in the
organisation a better sense of purpose and structure".
This company is a large employer of labour -
over 200 full-time employees spread across its two farms, factory, headquarters
and three retail shops.
Up to 400 temporary labourers work on the farms
during the peak of the reaping season.
While the high labour content at the estates
represents a major operational cost factor, it is these labourers who enable the
farms to produce the quality products that are now a favourite in Japan, Europe,
and North America.
Explains Minott: "Unlike in South and
Central America, the berries at our farms are carefully picked, based on
maturity to produce a consistent, strong, and superior flavour."
In contrast, the process is automated in the
lower-costs markets, where the machines are less discriminating in the berries
they pluck.
At Baronhall Estate, there are dozens of
labourers, both casual and skilled, among them spray men, those employed for
nursery bushing, pruning, and fertilising - all tending to the coffee.
"There is a lot of love and care that go
into making a cup of coffee," quips Minott.
About 60 per cent of the output from the factory
is exported, mostly in the form of so-called green berries, which are placed in
wooden barrels and shipped to Japan, which accounts for 80 per cent of the
export market.
Each barrel costs US$50 and has a capacity of
70 kilos of berries.
"The premium exportable grades go into the
barrel," explains Minott. "The balance is placed into bags and taken
to Williamsfield for roasting for export and the local market. We export about
60 per cent of the green coffee beans of which 80 per cent goes to Japan and the
rest to Canada, USA, and Europe."
The exporting of coffee is a rigorous process
in which the Coffee Industry Board serves as a quality control intermediary - a
long established structure that is intended to maintain consistency of quality
and so protect the reputation of this premium export industry.
As part of this process, exporters like Minott
are required to provide the board with information on the importer, once the
product is delivered to the board's warehouse on Marcus Garvey Drive in
Kingston.
The coffee board inspects the product and does
the documentation.
"The process and documentation can be
tedious, but we understand why these procedures are in place," says Minott.
More recently, the Minotts moved to stake out
a position in the Blue Mountain segment of the coffee market with the
acquisition of a 123-acre property called Bluebaron in 2004.
Located at Spring Hill in Portland, some 2,000
feet above sea level, 60 acres have already been planted in coffee. The plan
calls for an increase in the acreage under cultivation to 100 within two years.
"This farm will help guarantee supply of
Blue Mountain coffee beans," he explains. "It will enable us to get
into this end of the market without the problems associated with unreliable
supplies."
The Bluebaron estate is now in the replanting
mode, following Hurricane Ivan in 2004. The projection for next season is for a
three-fold increase over the 2,000 boxes of coffee that were reaped this season.
According to Minott, one of the critical
measures of the efficiency of farms is the number of boxes per acre that is
produced.
The aim of Jamaica's coffee industry is to
produce 100 boxes of berries per acre. It is not clear if there is any farm in
Jamaica that has attained this level of productivity.
Minott says that average national production
is between 65 and 70 boxes, and that his farms are "performing above
average".
Another approach that the company has been using
to generate higher margins is to expand the gift basket line of its business.
From the warehouse at Williamsfield, baskets
loaded with a variety of coffee-based products are delivered to hotels and gift
stores.
Jamaica Standard Products manufactures some of
its burlap bags used for packaging in-house, and outsources the production of
the rest to a church at Royal Flat in Manchester.
The company has been quietly building a retail
network to expand its direct access to the market, and from which it can squeeze
higher margins from its products.
The gift shops are located at:
. Sangster International Airport;
. the Coffee & Spice Shop in Ocho Rios;
. the cruise ship pier in Montego Bay; and
. a fourth is to be added soon at the plaza now under construction at Rose Hall
in Montego Bay.
Minott says that the growing competition in the
market is forcing the company to think outside of the box, and thus pushing it
in this direction.
"The green coffee market is set," he
explains. "But we have to place more emphasis on the roasted product
because there is more competition in the market for the finished product where
there is more margin."
Together, the brands produced by Jamaica Standard
make this company the number one on the shelves at supermarkets - among the
nearly dozen companies that fight for space along the isles.
"We are ranked about number three in gift
shops and in the hotels about number two," says Minott.
Even with these fairly solid numbers, Minott is
taking no chances.
"We want to get more coffee shops on the
north coast," he says. "We are strong in supermarkets in Kingston.
Jamaicans are not yet into the high end coffee, so the tourism market is the
area to go."
With this thrust towards the tourism industry,
the company secured a position in the 800-room Bahia Principé hotel in St Ann,
and will open a shop in the new mall being built in Montego Bay by a group of
local investors of Indian descent.
The Internet is also being used as a marketing
tool, and according to Minott, has already begun to show some promise.
"Through a distributor - who has a warehouse
in Florida - there is some marketing on the Internet," he says. "That
is working well. It started very slow, but now seems promising."
As Minott continues to invest in product
expansion and market penetration, he remains concerned about the uncertainty
facing the Jamaican market.
"Fortunately, coffee is protected with trade
barriers for now," he says with a sense of caution. "We can't compete
with South and Central America. We believe, however, that at some point it will
give way. We just do not know when."
However, the most immediate danger to the
industry, he says, is the current high interest rates at which companies like
his have had to borrow to expand.
"The cost of money still needs to come down
for us to get as competitive as Barbados and Trinidad," he complains.
"We are still at 12 per cent. the institutions must understand that
manufacturers have slower process to turn over their capital so they have to be
treated differently. Also, the GCT on equipment has to be funded upfront. In
essence, we are acting as an intermediary bank for the Government."
Minott, who is married to Kerry-Anne Ogilvie,
and has two children - Kelsey, 6, and Danielle, 2 - says his commitment to
Jamaica and the company is unshakable.
"I do not have anywhere going. I am here to
stay, so I am committed to Jamaica and the business," he declares.
"There is nowhere like home. We have too much of an investment at
stake."
Part of the investment that is at stake is a
trucking company called SANCOS that the enterprising entrepreneur owns.
Minott started the company six years ago - his
love for the business driven by his childhood experiences of "always
fooling around trucks, and always liking big equipment".
He now has a fleet of five tractor heads, and
does contract work with J Wray & Nephew and Caribbean Cement Company.
"I first invested in an 18-wheeler about 10
years ago and got a driver and realised that it had to start making money,"
he says. "Then I went to two, and now I have five. I don't plan for more
growth because it is time-consuming."
John O is the second of two children for his
parents, 'Jackie' and Beverley Hope Minott, retired principal of Church
Teachers' College. His sister, Hilary Annick Minott, works with the company.
"I was exposed to all aspects of business
early," says Minott of his early childhood. "I was exposed to think
about this business early and continued right to high school."
Minott says that Munro was an important aspect
of his development - with five years of boarding school exposing him to students
from varying backgrounds.
"I was not a bright kid, but above
average," he says. "The discipline at boarding school helped me a lot.
I have good friends and have maintained the friendship from boarding
school."
Jamaica Standard Products coffee brands:
. Wallenford Blue Mountain Coffee is grown in the
high elevations of the Blue Mountain. It is available in roasted beans, roasted,
and ground. It is packaged in burlap bags, boxes, crocus both sold locally and
on the export market.
. Baronhall Estate gourmet coffee is grown at
the Baronhall estate and is sold in boxes and bags both in ground and roasted
beans, both local and export. It is popular among hotels that use it in the
rooms.
. Jamaica High Mountain is the company's flagship
brand, having been started by Minott's grandfather. It is available in roasted
beans, roasted, ground, and instant. It is packaged in burlap bags for the beans
and ground; doy bags, in tin for the roasted and ground, and designer box for
the ground and beans.
. More recently a High Mountain instant coffee
was added to the list.
. Brewers Choice - a house blend - in roasted and ground was recently developed
exclusively for the local market. "It's the low-budget brand,"
says Minott.
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