CPJ hunting more retail locations
Speciality food distributor Caribbean Producers Jamaica Limited, CPJ, is actively hunting new locations in a bid to diversify income streams, according to Executive Chairman Mark Hart.
The company, which transitioned from the junior market to the main market of the Jamaica Stock Exchange back in June 2021, has outlets in Jamaica – Kingston, Drax Hall, St Ann and Montego Bay – as well as in St Lucia.
Hart, who is also doubling as interim CEO for CPJ, says he wants to have a CPJ Market retail store in every resort area, with the next likely place being Negril, but was mum on the budget for the retail expansion.
Maintaining Montego Bay as a hub that serves a network of sales points, he said, has proven to be lucrative.
“If you have a small hotel or restaurant and you know there is a local place that you can pick up supplies in a convenient way, then you will opt for it, and that is what we’ve been seeing with Drax Hall. It’s translating to customer satisfaction and additional business for the company,” the chairman said of the diversification strategy.
Supply chain issues caused by the pandemic and sustained under war in eastern Europe pushed import-dependent companies like CPJ to stock up on supplies to counteract stockouts.
But Caribbean Producers is now grappling with the unintended consequences of bulking up its inventory. Hart now says the high levels of inventory carried by CPJ have been impacting its profit margins.
“When we ordered product, we didn’t know when it was going to be delivered. Sometimes we ordered on a schedule and it didn’t come; then all of a sudden everything came at once. The whole thing was very messy,” he said.
Hart noted that inventory moved from the traditional pre-pandemic level of about US$25 million to about US$35 million. Baked into this, he said, was the fact that goods were bought at higher prices but had to be sold into the trade at lower prices, due to a change in prevailing market conditions.
As such, despite “an incremental increase in total operating revenue”, which moved from US$33 million in December 2021 to US$38.3 million as at December 2022, CPJ margins slimmed. That plus foreign exchange pressures led to an erosion of bottom line profit.
“We had three per cent less margin earned for the quarter, and that alone was a difference of US$1.1 million,” Hart said. As for the forex impact, the company reported a gain of US$700,000 in the December 2021 quarter, but none in the current period.
“Those two alone when added together would account for the difference,” Hart added, in explaining the steep 53 per cent drop in profit from US$3.74 million in December 2021 period to US$1.74 million in December 2022.
CPJ is now trying to claw its way back through diversification, expansion of its retail footprint, boosting sales staff, and extracting benefits from its business-to-business, B2B, and business to customer, B2C, platforms, the chairman noted.
The B2B and B2C platforms facilitates direct interface with clients and could be seen as cutting out sales staff.
“We’ve had to reinforce that it is just a tool to enhance the sales person’s role, taking them away from the more mundane functions so that they can build relationships, providing greater levels of service to the customers,” Hart said.
In all, the company has added about 50 workers amid recovery of the tourism sector and a resurgence of sales. In the December quarter CPJ’s sales revenue climbed from US$33 million to US$38 million. The company does not disaggregate its retail sales.
Hart also told the Financial Gleaner that CPJ has compensated employees who had held strain by taking salary cuts during the pandemic.
In the meantime, as business picks up, Caribbean Producers is looking towards June as the period for its margins and inventory issues to normalise.