Brands owned by the Serious Foods
Jamaica Producers Group (JP) has placed the United Kingdom subsidiary that accounts for more than 70 per cent of its sales into administration - a sort of bankruptcy protection - but says that it wants to sell Serious Foods as a going concern.
With its impending full exit from Serious Foods, Producers' sole UK presence will be shipping logistics company, Ram, which specialises in handling cargo to the Caribbean.
The Serious Foods group has six subsidiaries, following the 2008 sale of Serious Desserts Limited.
Up for sale
On sale are Sunjuice Limited, Serious Food Distribution Limited, Serious Soup Limited, and Simply Organic Limited, plus the brands they own, according to Hall.
The group also includes Astrol Properties Limited, which is wholly owned by JP, and Frobishers Juices Limited, in which the conglomerate has 65 per cent control.
JP, with the green light from a British court, handed control of Serious Foods to administrators PricewaterhouseCoopers on Wednesday, in its latest effort to halt the haemorrhage at the subsidiary, which for the first three quarters of 2008 lost J$1.4 billion, or J$200 million more than JP's net loss of J$1.2 billion.
In December, JP announced it would slash 200 jobs, or 40 per cent of workforce, at Serious Foods, but at the time the firm was placed in administration 127 of those had gone.
Aggressive action
The job cuts apparently failed to cauterise the flow of red ink, pushing the Producers' board to more serious action.
"When we looked at the trading environment, the devaluation of the British £, the recession in the United Kingdom (that was) causing a drag in revenue in the premium side of the market, and the fact that the business was already having difficulty, we decided to take aggressive action in the current environment and avoid further losses in the business," JP's CEO, Jeffrey Hall, told the Financial Gleaner.
"It was a very difficult decision, but we think it was the right one in this economic environment," Hall said.
Launched in 1978 in an effort by JP to get into the British market from freshly squeezed juices, Serious Foods, from its bases in Slough, Wales and the English midland city of Birmingham, expanded to be market leader in the UK for smoothies, controlling 50 per cent of the market.
It also produced and marketed organic foods, fresh soups, ready-to-eat meals and desserts.
For the first eight months of last year, the combined sales of four entities that fall under Serious Foods recorded sales of £69 million, or over J$8 billion, which translates to around 85 per cent of JP's overall turnover of $9.75 billion for the period.
However, rising cost of energy and other raw materials in a soft market was exacerbated by the fact that JP was locked into fixed-price contracts with UK supermarkets to which it supplied products.
Producers has been attempting to extricate itself from these deals, but seemingly without success.
Serious Foods has liabilities of around £10 million (J$1.2 billion), but no immediate value has been placed on its assets, which include four manufacturing plants fitted with bottling lines and two distribution plants, as as well as inventory worth £1.4 million (J$169 million).
Best option
As the losses of the UK subsidiary mounted, threatening the viability of the entire group, JP's board, headed by Charlie Johnston, the grandson of Producers' founder, felt that the best option was to place Serious Foods into administration - a device roughly analogous to Chapter 11 bankruptcy in the United States that allows company breathing room from creditors to restructure.
When a company opts for administration its affairs fall to the control of a court-appointed manager.
Courts agree to this action when it is clear that the firm is unlikely to be able to service its debts in a timely manner, but that the interests of the creditors are better served if it is maintained as a going concern. Such orders remain in force until discharged by the court.
Jeffrey Hall, the JP boss, said that the aim is to sell the company, but that no specific buyer has yet been identified. Producers, however, is talking to industry players.
The absence of the Serious Foods millstone, he argued, would allow producers to focus on its remaining business - growing bananas in Honduras, manufacturing banana, plantain and cassava chips in the Jamaica and the Dominican Republic, and producing juices and smoothies in Holland, where it last year bought the company Hoogesteger.
JP ended banana production last year following the destruction of its plantations by hurricane in four successive years.
"We will continue to focus on our other businesses," Hall said. "We still have other platforms, knowledge and expertise in the juice and smoothies business (and) our tropical snacks business in the Caribbean."
"(We) also continue to have a successful logistic business based in the United Kingdom," he said. "No other of JP businesses will be in any way affected by this administration."
sabrina.gordon@gleanerjm.com
Jeffrey Hall, managing director of Jamaica Producers Group. - File