CBR
search

Salada told to increase local coffee in instant product

The Jamaica Agricultural Commodities Regulatory Authority  (JACRA) has restated its demand that Salada Foods Jamaica Limited (SALF) adjust its formulation of instant coffee from 10 per cent local coffee content to 30 per cent.

Salada has requested a meeting with the JACRA which has demanded it increase its use of local coffee beans in its instant coffee product.

The requirement was first made in March 2019, but Salada has been insisting that the move will cannibalise its local market which depends on output of cheaper instant coffee.

On August 18, Salada disclosed that it has again received a letter from the JACRA directing the company, pursuant to the Jamaica Agricultural Commodities Regulatory Authority Regulations 2018 Section 19, to now include 30 per cent local coffee content in the formulation of its instant coffee powder with effect on September 1, 2020.

Salada argues that increasing the use of local beans, which are more expensive, will change affect its cost of sales and change its product’s taste.

Presently, Salada uses 10 per cent local coffee, the company said.
In a release made via the Jamaica Stock Exchange this week, management stated, “Unfortunately, JACRA’s edict to change the instant coffee formula will be detrimental to the company’s cost of sales.
“It will also materially change the taste profile of its Mountain Peak Coffee brand which currently enjoys over 50 per cent market share of the instant coffee sector, and we are unsure of how receptive consumers will be to this.”

The company is still hoping to persuade the regulatory authority to change the requirement.
“Salada has requested a meeting with the Minister of MICAF and JACRA to discuss their directive and the impact it will have on Salada’s operations,” stated management in its release.

Net profit at Salada was down 69% for the nine-month period ended June 2020.

The dispute with JACRA over green bean content in local coffee is now over one year old.  In March 2019, the coffee maker and JACRA were also at loggerheads over rules for bean content in its product formulations.

The instant coffee produced for the local market is primarily made with cheap green bean imports, but JACRA has been trying to increase take-up of local green beans by Salada.

However, Jamaican coffee which is a globally recognised commodity is relatively expensive.

Local green bean sells in the region of US$25 per kilogramme compared to imported varieties which retail for less than US$5 per kilogramme.

Company CEO Diana Blake Bennett has indicated that to adopt the formulation being stipulated would be to make the company unable to compete with cheaper imports of instant coffee

Salada is already struggling under COVID conditions.  For the nine months ending June 2020, revenue for the company increased by six per cent $819.55 million compared to $769.64 million for the similar period in 2019.

However, net profit was down 69 per cent compared to the prior period, falling from $124.54 million to $32.52 million, impacted by lower operating profit and the movements in the exchange rate.

Directors said they continue to hope exports will grow and the local market will also improve.

Higher amounts of green bean produced in the local product continues to impact the business although there has been some amount of recovery since the last report, it was noted in a release made earlier in August.