Salada researching new luxury coffee products
Coffee processor Salada Foods Jamaica Limited is considering a luxury line of Jamaica Blue Mountain or JBM products, in part to offset the uncertainty that will arise from cess charges and shortages of lowland coffee that affect its flagship Mountain Peak brand.
“We have excess JBM that we are trying to find ways and means to turn into products that we can sell and market. So our research and development department is looking into that,” said Salada Chairman Patrick Williams at the company’s annual general meeting in New Kingston on Wednesday.
Mountain Peak is an instant or powdered coffee blended from beans that are 90 per cent sourced from Mexico. The other 10 per cent that’s made up of local coffee does not include luxury beans from the Jamaica Blue Mountains, but Jamaica lowland coffee.
But now, Salada has luxury beans at its disposal, having inked a deal with the Jamaica Government to buy roughly 25,000 boxes or 220,000 pounds of JBM coffee from farmers. Williams said that around 8,750 boxes or 77,000 pounds of the beans would be top-grade JBM. Consequently, Salada needs a market for that coffee.
The company hinted about plans to channel roasted coffee products in the supermarkets, the hospitality sector and gift shops. Salada General Manager Dianna Blake Bennett said that gift shops prefer JBM products over its flagship Mountain Peak instant coffee.
Williams said that Salada increased the import content of its Mountain Peak product over the years due to the lack of lowland coffee. By June this year, however, Salada will be required to decrease the overseas content in its products from 90 to 70 per cent, and concurrently raising the local content from 10 per cent to 30 per cent, according to government guidelines.
But the coffee company is still uncertain whether it will be able to source sufficient lowland beans to meet that increased requirement. Secondly, it doesn’t want to use the JBM in Mountain Peak, as it would affect the profile, pricing and profitability of the product.
“Our local content is 10 per cent, but we received a letter that by June of this year it has to be increased to 30 per cent. That is going to impact the integrity of the taste profile. We cannot get enough lowland coffee to maintain the prices that we have,” Williams told the company’s shareholders. “It will affect taste profile, pricing and profits,” he said.
The Jamaica Government started imposing a cess on imports last year. Salada, which celebrated a milestone of $1 billion in annual revenue in its last financial year, expects the cess on imports to cost the company $81 million for the 2019 financial year, plus $19 million more for the cess on exports.
Williams said the bulk of the cess to be paid by the coffee industry will fall on Salada.
“It will be over $100 million in cess on raw materials that we will be paying, expenses that we didn’t have a year ago,” the chairman said. “There are ongoing discussion on how we can mitigate those rates.”
Jamaica Blue Mountain coffee grown at high elevation, is best suited for luxury products based on the complex taste profile and high cost of the beans, while lowland coffee, grown at low elevation, are used for value products such as Mountain Peak.
Although lowland beans are cheaper, they are in relatively scarce supply.