We have come to the half way mark of fiscal 18/19 and I would like to take a moment to thank each of you for your commitment to this organization, particularly as the economic environment continues to impact our performance. We are still trailing slightly behind our topline projection by approximately 2%, and the bottom line is unfortunately substantially less than last year’s figure, as well as our budgeted figure. The lower profitability is not only as a result of lower sales but also due to the higher cost of foreign exchange as a result of us having to settle invoices in EUROs versus USD.
Although for a brief period in the early part of the second quarter we managed to access enough USD to settle invoices, the situation deteriorated as the quarter progressed. We are once again in a position where we struggle on a weekly basis to source the necessary funds to pay suppliers as well as reduce our loan balance. The ratio of the supply of EUROs compared to USD remains high, and the additional cost when we settle in EUROs affects us considerably. Unfortunately we expect that this situation will persist for the upcoming months.
The performances of the Divisions continue to be mixed. The Food and Grocery Division has maintained their expenses well, however, the lower top line and lower margins have adversely affected their bottom line. The food business is especially competitive and in order to maintain our market share the Division has been forced to lower prices. This trend will persist until the economy improves and consumer confidence is restored.
You may have noticed that we recently started distribution of GraNuts and you will see other offerings coming out soon. These new products will replace a few of the categories which opened for us, as Kraft Heinz made the decision to partner with Massy throughout the entire English speaking Caribbean a few years ago and decided to include Trinidad & Tobago this year. We are particularly excited that GraNuts brings to us a massive opportunity, as the snack category is vast and the range and quality of their products are exceptional! The same supplier has brought us BON ice cream which has hit the ground running and we are in the process of trying to catch up to the brand’s potential in the market. The supplier recently visited and has agreed to advance our plans as a result of the overwhelmingly positive response to the products. BON represents the “best value money can buy” in the ice cream and novelties category.
The Food Service Division, although much smaller than the other three Divisions, has shown exponential growth and is finally delivering value and a decent profit. We have recently added Australian Goat and Beef out of Uruguay to our expanding portfolio. Our cheese is also developing nicely and we now proudly supply mozzarella to most of the top pizza restaurants in the Country. Hayden is now looking at building out his human resources as we slowly develop the business in this very difficult and dynamic industry. Kudos to Hayden and his team!
The Premium Beverages Division is in a very similar position to that of Food and Grocery, in that the top line is down when compared with last year. The cost of foreign exchange is also impacting them considerably. Contraband imports continue to plague us and the higher import duty introduced in 2016 only served to worsen the situation in the country. The incentive to these illicit traders is greater now and it appears that the network is well established with legitimate importers such as Brydens struggling to compete with such importers who, not only avoid the taxes, but also have very low cost operations compared to us. The Government of Guyana recently introduced the ‘tax stamp’ concept as that Country suffers with Contraband imports especially from the neighbouring Country of Suriname. The tax stamps are purchased by legitimate importers and these have to be affixed to duty paid bottles for the domestic market. If officials find product without the tax stamps it is obvious that the product was smuggled, and they have the right to seize such product. It is our understanding that our Government may be considering this measure, which has been in effect for many years in countries around. If such a system is implemented, and more importantly managed well, legitimate importers like ourselves will benefit immediately.
The Retail stores have had mixed results as well. The Mucurapo Road and Maraval locations of The Naughty Grape are doing well, while the Arima and Chaguanas locations are behind plan. We recently hosted a team meeting at Head Office where we emphasized the need to ‘delight’ our customers in order to drive loyalty. It is my hope that this bears fruit as we operate in a very crowded space where customers have many options. CRU Winebar is growing from strength to strength. Ashmeed and his team have really settled well and the customer experience is front and center. I recently received a huge compliment from one of our top local Chefs who said he absolutely loves the place and had a great experience when he visited. To have him, and other popular Chefs frequent CRU speaks to the quality of our offering, and I am extremely proud of the team! I really encourage all group staff to visit CRU and take advantage of the staff discount on the already reasonable prices.
SkyWay continues to face a tough environment at Piarco as the Airport has many outlets selling the very same products that we carry namely Liquor, Fragrances, Confectionery and Tobacco. This continues to impact our top line which has declined against the same period last year. We are currently building out our second location and hope to open it by December in order to enjoy the Christmas traffic.
The Hardware & Housewares Division has enjoyed another impressive quarter. It appears that the introduction of four new sales persons allowed for greater focus on the extensive portfolio of products and is paying dividends. The expenses are being managed carefully and the top line growth has translated to improved profitability. I hope to see this Division continue on this path for the coming years, where we see their lines with big potential realize these opportunities. Kudos to Andrew and his team!
As we approach the very important October to December period, I would like to take this opportunity to thank all the Support Departments particularly the DC and Logistics teams for their efforts during this busy season. Their dedication and commitment does not go unrecognized and we are grateful for the efforts to ensure our products arrive and are dispatched with efficiency.
In closing, I wish to again express my deepest appreciation to all of you and ask that you continue to live by the Company’s values and help us return to growth!