Friday, June 27, 2008

Producers Group buys Dutch juice company

Published: Friday June 27, 2008

Continuing refashioning from a company known primarily for growing and distributing bananas to a serious player in Europe's specialist juice market, Jamaica Producers Group this week spent €9.2 million (J$950 million) to acquire a Dutch juice and smoothie manufacturer, Hoogesteger Fresh Specialist BV — a move thatit hopes will give it an important toe-hold on the continent.

"We think it's a good investment," said JP's managing director, Jeffrey Hall.

"This acquisition further underlines the strategy of Jamaica Producers of seeking profitable growth in the premium juice and smoothie category."

Prior to its acquisition by JP, Hoogesteger was controlled by the Dutch dairy group, Feisland Foods and, significantly, also has a presence in neighbouring Belgium.

JP already produces juices and smoothies in Britain through Sunjuice and Serious Foods subsidiaries, but like with Hoogesteger, most of this, is for private supermarket labels.

Plans to squeeze synergies

Hall said the latest acquisition would operate as a separate business unit, but suggested that JP had plans to squeeze synergies out of the United Kingdom and Holland operations, particularly in areas of product development, business coordination and supply-chain management.

Producers Group used to be synonymous with bananas.

It grew the fruit in Jamaica, transported it to England on its own ships, ripened it at its own facilities and then distributed it across the UK.

But as competitors from Latin America challenged the preferential markets that former colonies in Africa, Caribbean and the Pacific enjoyed in the European Union (EU) market, JP began to search for other niches in the fresh and processed foods and juice markets.

It bought juice manufacturing companies in the UK and developed a reputation for providing premium products.

Yet this week's acquisition is comes at a difficult period for JP and particularly its fresh and processed foods division that last year posted pre-tax losses of $711 million.

The banana business had $97 million in pre-tax losses in 2007.

The problem in the fresh and processed food division was major contributor to the group's net loss of $479 million in 2007, coming for the previous year's profit of $2.5 billion.

Chairman Charles Johnson told shareholders in his annual report that the juice and smoothie business "was buffeted by significant increases in raw material commodity prices — principally citrus", which could not be passed along to its customers,. who mostly trade under house labels.

Charles offered three strategies for improvement:

Cost containment;

Strategic alliances with leading juice and smoothie brands; and

Developing marketing opportunities outside the UK.

The Hoogesteger acquisition, it seems, is a part of the realisation of the latter of the strategies.


"It is representative of our commitment to focus on this category across Europe," said Hall.

Holland, he pointed out, had among the best-performing markets in the EU and it was one in which the smoothie market was least developed, providing opportunity for growth.

It was not immediately clear whether the acqusition is entirely internally financed or if JP will ultimately have to take on debt for a deal, which Hall projected would add $3.3 billion in revenue to the group.

"The business we are acquiring has sufficient cash and working capital to continue the operation," he said.

Susan Gordon
Jamaica Gleaner

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