Down but not out

Flavorite’s unaudited financial report ended June 30 placed the company’s total assets at $82 million with total equity and liabilities at $82 million. Profit after tax was $1.36 million compared to $2.39 million at the end of June 2010.

In his half year 2011 Consolidated Report statement, Flavorite chairman Godfrey Bain said, “We continue to suffer from the competition of cheap, low quality, foreign imports - the consumer being misled by the expectation of better quality based solely on a purchase decision that anything foreign is better.”

In particular, Bain noted one brand of ice cream from Iowa, which he considers very low quality, is imported at a very low price in spite of high transportation costs. He said, among other things, US dairy policy allows the company to access raw materials at low prices and therefore sell at reduced prices.

On the other hand, this country does not have any dairy policies nor does it produce dairy products or sugar, making it necessary for local ice cream manufacturers to import.

“We have no problem with people having a choice. If you want to buy Haagen-Dazs or Breyers or any of those, that’s fine because they are competing on quality. However, when that choice is being influenced by unfair pricing, that’s where the problem lies,” said Bain.

In addition to “unfair competition,” Bain also attributed reduced sales and profitability to the general slow down of the global economy. He said people have less disposable income and this has hit Flavorite’s subsidiaries in Barbados and St Lucia especially.

Bain explained, because of the number of imports, he does not expect the local industry to grow dramatically. However, he feels confident the second half results will greatly improve as some of the expenses in the first half, such as the re-certification of ISO 9000, are not likely to reoccur later in the year.

“In spite of the half year results, the company is healthy and poised for further growth in the short term,” he said.

Bain also noted various challenges in dealing with ice cream. For example, the products require special handling and special delivery vehicles that keep the ice cream at minus 24 degrees Celsius.

“Electricity costs are high and are increasing. We noted the Regulated Industries Commission is reviewing, once again, the electricity power supply. If they increase rates that will only add to our overhead,” he said.

There is also the problem of the occasional power outage. The company therefore has to maintain generators or risk losing a significant amount of product. Of course, this too has a cost.

Flavorite also uses a large amount of water which is essential to its manufacturing process. Just in the past six months it was necessary for the company to purchase $85,000 in water because their supply from the Water and Sewerage Authority was insufficient to support their processes.

Dry ice, solid carbon dioxide, is also an important support raw material, especially for the ice cream carts that brings Flavorite products to the nation’s homes. Flavorite is dependant on Industrial Gases Ltd (IGL) for dry ice. IGL in turn, depends on its supplier of carbon dioxide whose factory, according to Bain, is sometimes out of commission. This affects the production of dry ice and therefore Flavorite.

“On several occasions this year, our cart men, who depend on that job for a living, couldn’t get dry ice and so couldn’t sell,” he explained.

Bain also said, while local ice cream manufacturers have excellent quality products, many retail outlets don’t carry large quantities of local brands which puts them at a disadvantage.

All theses challenges contribute to making their product less competitive.

Nevertheless, Flavorite has been expanding regionally and is developing “good markets” throughout Caricom including Suriname and Belize. “We are doing good business there,” Bain said. “The margins are thinner because there is competition and there are transportation costs but I’m happy to say, so far, we have been reasonably successful.”

The company is also taking initiatives in terms of sales, distribution and production arrangements which will allow them to expand domestically. These include moves to self sufficiency in terms of storage and the recycling of water.

Flavorite will also be launching “Island Naturals” in October/November. These new products will include local flavours of ice cream such as coconut, soursop and tamarind.

“While we greatly respect other local ice cream manufacturers (who usually concentrate on local fruit flavours), as one of the larger ice cream manufacturers of mainstream international flavours, we thought it was time to start inhabiting a space in the market that we previously were not,” explained Bain.

According to Bain, Flavorite is also hoping to expand its Original Dairy Bar franchise which, at the moment, is available at six locations including St James, Shoppes of Maraval, Valsayn, San Juan, Montrose in Chaguanas and at the airport in Piarco. He pointed out that, while the ice cream is manufactured by Flavorite, the company uses The Original Dairy Bar’s propriety formulas. The ice cream is therefore not Flavorite ice cream.

“Sometimes location is everything,” said Bain. “Unlike some of the others who have locations in the malls and cineplexes, Dairy Bar is more community-based. We feel the product is priced in a way that is affordable to the customer who wants to sit in a nice ambiance without paying imported ice cream prices.”

Bain noted however, that there are many new ice cream parlours and, when a customer goes out to eat ice cream, the chances of them eating more at home is remote. As a result, other ice cream sales have been flat.

Still, Flavorite is not only about ice cream. The company has a very strong community programme in its annual “National Spelling Bee Competition” for Standard Three children.

Every week, from September to June, the company takes their play park out to a different community in the country, including Tobago. The children receive giveaways, are entertained and it’s educational as well. The Spelling Bee finals are usually held at Queen’s Hall in St Ann’s in June. This September, the competition will start in Toco at the Toco Community Centre.

Flavorite also sponsors a Manners Programme on several radio stations on mornings during the school term to give children insight on how to conduct themselves in certain situations.

“Even though it’s corporate in nature, we are not trying to derive an advertising benefit. It’s a community effort and it’s all for the children,” said Bain. “Imported products do the same thing in their communities abroad but not here. And we are not the only local company to have programmes such as this. It just goes to show that support of local industries is important. In that way, everybody does something for the benefit of Trinidad and Tobago.”