Businessuite News24
SUPERPLUS FOOD STORES What does Michael Lee Chin have to do with the future of the Supermarket Chain controlled by this brother Wayne Chen?
“Are you closing down or what, how the shelves dem so empty?” remarked an irate shopper in the Superplus Liguanea branch, confronting one of the store attendants walking through the supermarket. “Is the same way the one down half way tree look” remarked another shopper passing by. A casual stroll through the Kingston located Superplus stores by this writer, revealed much truth in the comments and observations by the two shoppers.
According to one industry watcher, there are unconfirmed reports that the privately held and controlled Wayne Chen led Superplus chain is having problems making payments to suppliers who have now apparently cut off supplies hence the scanty shelves. But how this could be, with reported annual sales of over JA$11B Superplus should be awash in cash. “That how it appears on the surface, the supermarket business is a very thin margin business, ranging from 2-3% and so they may be generating a lot of cash, but very little profit” was how one financial analyst summed up the situation.
This begged the question. Is the supermarket business a good business to be in at this time or quite frankly at anytime? Which led us to ask a very obvious question? Would Michael Lee-Chin invest in the supermarket business?
Given his publicly stated investment views and posture the answer would and should be a resounding NO.
Michael Lee-Chin established investment philosophy is “buying few excellent businesses in long-term growth sectors and holding these businesses for the long term in order to help investors prosper by preserving and growing their capital and minimizing taxes.”
Lee Chins Investment Philosophy
• Use other people’s money
• Find a role model
• Invest in a few businesses you understand
• Stay committed to your investment philosophy
Given this posture would he have advised his siblings to invest in the supermarket business.
More questions. To what extent if he is, is Michael advising his brother Wayne on the merits of investing in the supermarket business? Is he telling Wayne to cut and run or hold for the long term?
Or better still does Lee Chin view the supermarket business as a good investment and is putting his money where his mouth is.
If you were a billionaire and a savvy successful investor with brothers and other family members in the supermarket business and they were having a hard time making money would you bail them out, would you put your own money in, but then you don’t use your own money, you use other people’s money. What would you do?
There are cynics who would suggest that Michael and companies under his control are already major investors or backers of the supermarket group. But would Michael really throw good money after bad or is it that he sees it as a good investment.
These are all relevant questions, as the answer will give a clearer picture on the way forward for Wayne Chen and the SuperPlus Chain of supermarkets.
If you don’t already know Wayne Chen is the younger brother of billionaire Michael Lee-Chen and while heading and running the Super Plus chain, overseas a number of his bigger brother business. He is the Chairman of NCB Insurance Company Limited, West Indies Trust Company Limited and CVM Communications Group, a Director of National Commercial Bank Jamaica, NCB (Cayman) Limited, AIC (Barbados) Limited and the Christiana Town Centre Limited.
Chen stripping the group
Wayne Chen
Wayne Chen announced in October last year that He was contracting the supermarket chain and would close a fifth store in Montego Bay but would expand others. Chen has been stripping the group of its loss-making stores indicating that the business was attempting to grow revenues by concentrating more on services like its cambio operations. Chen said that grocery had become the “loss leader” for the supermarket chain, but gave no specifics on the other business segments that were underperforming. Five stores have been culled from the group, and of the remaining 25, the majority, 22, are controlled by brothers Wayne and Richard Chen, while the others are held by other family members.
More than a decade ago, supermarket owners, hurting from market fragmentation and weak consumer spending, began a process of conglomeration with the hope of restoring profitability to their operations.
Progressive Grocers leads the charge
Back in 2003 there was a merging and acquisition frenzy going on in the supermarket sector with the consortium, Progressive Grocers acquiring four supermarkets in rural Jamaica, bringing to 18 the number in the chain, and helping to reinforce the oligopolistic market that has been developing within this industry.
The five-member grouping acquired a number of Jamaica’s independent supermarkets to become the second largest chain after SuperPlus Foods Stores, which operated at the time 27 outlets. GraceKennedy’s Hi-Lo had 15 shops. Together the three groupings controlled the lion’s share of the Jamaican market.
The acquisitions would give the Progressive Grocers even greater critical mass in procurement, to go up against SuperPlus, the industry’s behemoth that had also been on an expansion binge. The concept of the Progressive Grocers is to create an alliance that could jointly purchase goods to spread administrative cost in the management of this process, as well as marketing, and to create bargaining clout in procurement. Sources say, for example, that the group was also seeking to set up a central warehouse, a move that would allow it to further spread overhead cost.
At the time Hi-Lo had acquired six groceries and wholesales to control a total of 15 stores with plans to open another five stores later that year – one in Mandeville and Spanish Town, with the other three were supposed to be under construction. John Mahfood, former GraceKennedy chief operating officer in charge of retailing and projects at the time said that Hi-Lo would be adding between 5 and 6 stores per year over the next five years, bringing the total number to about 40. This has not materialised.
Not to be undone, Super Plus, with 27 stores at the time, also announced plans to open three more in Kingston.
Come 2006 Supermarket operators were crying out “We’re not making any money”. The tide had turned and the future looked dim.
So what went wrong?
Operating within an oligopolistic market – dominated by four major groups – Jamaica’s supermarkets were now bleeding red ink. This, the owners said, was the result of skyrocketing utility and other operating costs, interest burden on the debt associated with expansion, weak demand, and their inability to pass on costs to the increasingly price-sensitive consumer.
“Right now it is murder,” was how Wayne Chen characterised the business environment. “We are making a small profit, but we now have to be looking at liquidating non-core assets to cut our finance charges.”
In 2005/06 SuperPlus is reported to have recorded gross sales of $11 billion – making the group by far Jamaica’s largest retailer. Such critical mass was part of the business plan – to better spread overhead, give the group procurement clout, and improve its gross profit margin – all of which have been achieved. However, according to Chen, the steep increases in fixed and semi-fixed costs over the last two years have eaten away at the group’s net profit.
For example, there has been about a seventy per cent increase in the cost of electricity across the group over the past year. “Light bill at our Trafalgar Road location has moved from 800,000 to $1.4 million per month,” Chen told the Business Observer. In a business where red ink is all around, SuperPlus with its very small profit was, relatively speaking, holding its own.
GraceKennedy’s supermarket subsidiary, Hi-Lo, was reported to have lost $80 million that year. Hi-Lo’s electricity bill soared to $10 million per month, a 66 per cent increase on the $6 million previously. Security costs jumped by 20 per cent to $60 million. “Increase in costs, lower level in disposable income, compounded with a more competitive market make it challenging for companies,” noted Mahfood.
Hi-Lo by this time closed down two of its Kingston supermarkets – its branch at Tropical Plaza in 2004, and its Hagley Park Road store in 2005 reducing the Kingston branches to four, and the total number of stores islandwide to 13.
Ken Loshusan, operator of John R Wong Supermarket in New Kingston and Loshusan Supermarket Barbican Circle in Kingston, said his supermarkets were also not making any money. “How can you make money when light bill, rent etc. are all over a million dollars? We’re barely breaking even right now. We’re just creating employment, that’s it,” said Loshusan.
According to published reports, on average, the pre-taxation margin of supermarkets in the Progressive Group was about 20 per cent. However, increasing operational costs had eaten away at their margins, thus forcing most of the members into at best, break-even performance. “By the time we pay expenses, pay taxes we are left with nothing,” he complains. “If we raise (margins) half per cent, people will raise hell. All the expenses have skyrocketed. By the time we pay (expenses) we are left with nothing.”
In 2007 Progressive Grocers 28-member consortium comprised the second largest grouping of local supermarkets,
Chen commenting on the situation said that given the constraints faced by the industry in passing on costs to customers, there will be fallout within the industry.”We are gonna see some shakeout in the industry,” he declared.
“Sooner or later, some companies will have to drop out. By the end of the year, I expect some players to drop out.” Commented one operator.
Gassan Azan, the operator of MegaMart store and supermarket, said he too was experiencing sluggishness in the supermarket business, but that other non-supermarket items sold by his chain were helping to counter the fallout.
Like the other supermarkets, a major challenge at MegaMart was coping with the high electricity costs. For example, at MegaMart’s Waterloo Road, Kingston location, electricity cost had jumped from $1.1 million per month last year, to $1.7 million per month that year. At the other MegaMart store in Portmore, St Catherine, electricity cost had moved from $1.1 million per month to $1.8 million.
“Do you know how much more goods you have to sell to pay for the increase in light bill?” asked Azan. The two MegaMart stores had combined sales of $3.5 billion, but so far that year, sales have been flat, said Azan.
Moreover, according to Azan, the profit was generated mainly from the non-supermarket items which earned a much higher gross margin, and primarily at the Kingston store. “As a strategy, to achieve profitability what we have been doing is to push our non-food items,” he explained.
Chen cited several factors which he said accounted for the sluggishness in consumer spend at the island’s supermarkets. Among them: the tens of billions being spent each year on cellular phone usage. “The source of the money is not finite and it has to come from somewhere,” he said.
He also cited the increase in consumer electricity and fuel costs which divert consumer spending away from supermarket items, the slow-down in construction and its impact on purchasing power among working class Jamaicans. Chen also noted that the anti-crime measure ‘Operation King Fish’ had also curtailed criminal activities and their ability to fund consumption in the way they once did.
The SuperPlus boss says his stores have felt the impact of these factors.”Most stores in the chain are flat in Jamaican dollar terms, and some stores are down,” he told the Business Observer. “Some of the new ones continue to grow but at the expense at the older stores.”
But according to Chen, SuperPlus has been taking steps to improve its cash flow and financial position in light of the soft market.
“In some instances we are cutting back on wholesaling because of the margins,” he said. “We are looking at all of our resources that are not being utilized with a view to liquidating them to cut our bank finance cost. We are seeking to share the cost of running the business over a wider revenue base.”
A victim of its own success
Wayne Chen is obviously doing everything he can to diversify income streams and squeeze more margins out of the operation; these include building more money transfer facilities, ATMs, cambios, and pharmacies in its stores of which it now had five.
“The main push is to look at fixed cost. We have no control over rent so we need to offer more within the stores to defray them.”
It’s clear that the aggressive investment in new locations has not produced the desired results. SuperPlus’ success at growing into the largest retailer in Jamaica – in 2003, surpassing furniture retailer Courts – less than 10 years after the chain, which was started by Gloria Chen in the 1960s, and had been anchored in southern Jamaica, morphed into the well-organised corporate structure is today a victim of its own success.
Wayne Chen had declared his intention to aggressively grow the firm’s store count and roll out up to 400 additional items under the SuperPlus brand – moving the range to about 700 and, importantly, giving SuperPlus greater control over stocks and the ability to squeeze more profit in a business famous for its thin margins.
In recently published press reports Wayne Chen said he would not refuse a good offer for the islandwide family-owned supermarket chain, but says he has not put the company up for sale. Asked outright whether that meant SuperPlus was hunting a buyer, Chen dismissed it, but did not discount it as a future possibility. “Not at all,” he told the Financial Gleaner. “Not in the short term. We are right-sizing the company now,” he added.
Rumours however persist that Wayne is actively looking for a buyer for the reportedly money losing supermarket chain. But denials are in order until the ink has dried on the contract and the cheque handed over. Plans for an IPO must now be off the table given the current state of affairs and from all indications 2009 is going to be a very challenging one. Margins will be put under far more pressure and more red ink will flow throughout the sector.
And so we are back to Michael Lee Chin. Why? Well if we know for certain Michael’s views and investments in SuperPlus then we will know where it’s going.
Additional sources: Jamaica Observer
https://businessuiteonline.com/index.php/2018/10/09/the-walkbout-homestay-experience-coming-january-2019/
It might not seem like roughly a quarter-century since the digital smartphone made an irrevocable impact on all our lives (whether you currently have one or not), but over the course of those years, cell phones have moved from being glorified field radios to nearly everyone’s go-to device; in business and in personal life, the smartphone is THE accessory, replacing analog watch, camera, game console, phone book and day-runner (remember those?).
And the function consolidation shows no signs of abating, as new feature-rich phones continue to be released to an ever-hungry public.
Dane Spencer, of Smart Mobile Solutions
No surprise then, that a gaggle of entrepreneurs, execs, media and influencers thronged the Digicel store in Tropical Plaza for Samsung’s latest salvo in the smartphone market “arms race” – the S25 line, comprising the base model, S25+ and the topline S25 Ultra, all boasting advanced artificial intelligence (AI) capabilities in addition to the expected bells and whistles (3 different types of camera; powerful new chipset; vital body function monitor etc). Emcee Debbie Bissoon kept things moving with her usual aplomb.
Dane Spencer, of Smart Mobile Solutions, in Jamaica, spoke to this ongoing function consolidation as a key driver of sales and market share. “The convergence of multiple apps on a single handy device means I can truly access and respond to information from anywhere,” he said, providing a personal demonstration on his own S25. “That means whether you’re in corporate or in business for yourself, you can make better decisions, faster.”
Jaszmin Martinez, the Dominican Republic-based Corporate Marketing Manager for Samsung amplified Spencer’s points on market share, adding, “Samsung has a significant presence in the Jamaican market, and one which has grown year on year, so it’s a very important market for us,” she said. According to Stat Counter, Samsung enjoys roughly 52% of the Jamaican smartphone market.
Stephen Murad of Digicel reminisced briefly about the head-spinning growth the company experienced in its early days and all the momentous changes that had taken place in the cell phone market since its launch in 2001. The cell phone, he said, was no longer just a device that you talked through, but increasingly, one you talked with (referring to the AI capabilities) and a constant companion. “The markets’ need for data is never-ending” he said, as folks of all ages have been spending more and more time with their phones.
The company has, however, taken note of those factors and the associated dangers of this manner of closeness with our devices, and has recently launched, though the Digicel Foundation, the Safer Internet Together (SIT) project. In partnership with other corporate entities (JPS Macmillan Education and Sunshine Snacks) and public agencies, the mobile carrier intends to advocate for safer, more responsible internet usage among students in 150 educational institutions.
But, as evidenced even from the interest in the store on launch night, a considerable number of Jamaicans plan to spend lots of time with their S25s.
The new device arrives almost, on cue, in a very dynamic and recently volatile, global smartphone market. After nearly three years of decline, the smartphone market had posted a creditable 7%, according to figures from Canalys Research. The hammer looked set to hit this year with the US President’s all-out trade war, and with the trade conflicts with China ongoing, smartphone sales may buckle under inflationary pressures.
Indeed, the stated Jamaican list price for the S25 entry model (J$136K + tax) is an eminently competitive tag, no doubt influenced by an awareness of the general market conditions (while not cheap, its entirely in line with what one would expect to pay for a similarly equipped competitor model). Indeed, the two lucky guests at the launch who each won one of the S25s on offer are no doubt putting their devices through their respective paces.
The ongoing evolution of life, both in the business and personal spheres, demand devices that can keep pace with dynamics of our multi-active, instantly communicating world, and at a competitive price point. Samsung, with its new flagship series, is looking to deliver -and reap handsomely – on all of those expectations.
Michael A. D. Edwards
Businessuite News24
Powering the Future: CARILEC and Green Solutions International SKN Launch Electric Vehicle Training in St. Kitts
Photo: Prime Minister, Dr. the Most Hon. Andrew Holness right) speaks with designer, Vintage Chic, Shanna Campbell about her handmade pieces, during the opening ceremony for Expo Jamaica 2025 at the National Indoor Sports Centre in St. Andrew on April 3.
Photo: Prime Minister, Dr. the Most Hon. Andrew Holness left), samples a coffee carrot ginger brew from Beyond 5 Beverages given to him Managing Director of the company, Damain Drummond right) during the opening ceremony for Expo Jamaica 2025, at the National Indoor Sports Centre in St. Andrew on April 3.
Prime Minister, Dr. the Most Hon. Andrew Holness has committed to ensuring that the policies and initiatives of the Government remain aligned with entrepreneurs, thereby creating an enabling environment that fosters investment. “To our manufacturers and exporters… your effort represents the heart of our economic progress, your resilience, innovation, and entrepreneurial courage has carried Brand Jamaica to every corner of the globe.
“As Prime Minister, I commit to ensuring our policies and initiatives remain aligned with your ambitions, creating an enabling environment that fosters investment, innovation and global competitiveness. Together we will strengthen our local economy and solidify Jamaica’s position on the international stage,” Dr. Holness said.
The Prime Minister was speaking during the opening ceremony for Expo Jamaica 2025 at the National Indoor Sports Centre in St. Andrew on April 3.
Dr. Holness said Expo Jamaica is a vivid showcase of Jamaica’s boundless potential, “so as we advance global partnerships and create impactful local results, let us reaffirm our collective determination to build a prosperous, productive Jamaica that leaves no one behind”.
“Expo Jamaica exemplifies how far Jamaica has come. Over 250 exhibitors showcasing more than 5000 products and services alongside 884 registered local and international buyers from 25 countries. This clearly reflects Jamaica’s growing global influence and appeal,” he said.
He added that the event has grown tremendously, now standing as the largest trade exhibition in the English-speaking Caribbean.
Meanwhile, Dr. Holness said Jamaica today boasts its strongest economy since independence.
“Whether you measure Jamaica’s economic performance and stability by the unemployment rate, the inflation rate, the debt-to-GDP (gross domestic product) ratio or Net International Reserves (NIR), by every critical metric, our economy undeniable demonstrates economic stability and resilience,” he said.
He added that growth is another central pillar to economic stability and resilience.
“For Jamaica to realise its fullest potential, our growth rate must accelerate from one to two percent towards a more ambitious target of four to five per cent. Central to achieving this are initiatives which this Government has launched, and we call them ASPIRE, that is our comprehensive growth strategy,” he said.
ASPIRE stands for: Access to Economic Opportunity for All (Inclusive Growth); Safety and Security; People (Human Capital Development); Infrastructure Development; Reform of the Bureaucracy (Ease, Speed, and Cost of Doing Business); Economic Diversification/New Industries.
He further added that inclusivity and equity are paramount to the Government’s growth agenda.
Meanwhile, Minister of Industry, Investment and Commerce, Senator the Hon. Aubyn Hill said the administration continues to position Jamaica as an investment destination for financial services, logistics, skilled labour, high value services and premium products.
“This expo is Jamaica’s open invitation to the world… The Andrew Holness administration has made it our mission to make Jamaica a very attractive place in this region in which to do business. Our macroeconomic numbers tell a clear story,” he said
Other speakers at the function included President, Jamaica Promotions Corporation (JAMPRO), Shullette Cox, and Chairman, Expo Jamaica, Aswad Morgan.
This year’s event is being held from Thursday (April 3) to Sunday (April 6) at the National Arena and the National Indoor Sports Centre in Kingston.
The four-day tradeshow, under the theme ‘Global Partnership, Local Impact: Advancing Jamaica’s Reach’, is organised by the Jamaica Manufacturers and Exporters Association Limited (JMEA) and JAMPRO.
By: CHRIS PATTERSON, JIS
Businessuite News24
Government Engages with US Trade Representative on New Tariff Regime
“There are opportunities that must be had. There are prospects to be uncovered, and so I urge my manufacturers, my businesspeople, before you start to look at the negative, also look for the opportunities. Don’t just sit down and complain about all the things that’s going on and all the things that’s going bad, expecting that Government is going to solve all the problems for you. Be the entrepreneur; be the one who is the risk-taker, and be the one who is looking for the opportunity,” Dr. Holness said.
Prime Minister, Dr. the Most Hon. Andrew Holness, says the Government is actively engaging with the United States (US) Trade Representative and other relevant authorities “to seek urgent clarification” on the new US tariff regime.
Speaking at the opening of EXPO Jamaica 2025 at the National Indoor Sports Centre in Kingston, on April 3, he said the United States Government recently announced a 10 per cent baseline tariff on imports from all countries, set to take effect on April 5, 2025, which introduces a significant shift in global trade policy, “one that could impact Jamaica’s market access to our largest trading partner”.
Dr. Holness informed that Jamaica, like other CARICOM nations, has traded with the US under the Caribbean Basin Initiative (CBI), which provides non-reciprocal duty-free access for a wide range of products to the US market.
“Today, nearly 90 per cent of Jamaican exports to the United States enter under these preferential terms; however, the new US tariff regime, rooted in a broader policy of reciprocal trade balancing, has raised serious concerns about the future of these preferential arrangements,” he said.
The Prime Minister noted that the Government has not yet received formal notification on the precise implementation procedures, including whether these new tariffs will override existing CBI provisions.
“We are also conducting a detailed technical assessment, in collaboration with relevant ministries and agencies, to fully understand the scope of these tariffs and their implications for Jamaica’s trade and industrial policy,” he said.
He pointed out that the developments do not reflect any erosion in the long-standing and strong bilateral relationship between Jamaica and the United States; rather, it reflects a broader recalibration of US trade policy that is global in scope.
“Still, we will use every available diplomatic channel, including working with our CARICOM brothers and sisters and utilising the Office of Trade Negotiations, to seek to preserve the position our exporters have secured over decades of deepening trade ties with the United States,” Dr. Holness said.
He noted that preliminary analysis indicates that some of the country’s top exports may fall under exempted product categories “and we are working to confirm and where possible, to expand these exemptions”.
“Again, I must emphasise that clarity is still needed on several matters. Furthermore, there may also be opportunities to be found and we must, therefore, be proactive and prospective,” the Prime Minister said.
He added that the Government will continue to advocate for manufacturers and exporters to ensure their interests are protected in any new global trade architecture.
“So, to our manufacturers and exporters, we understand the uncertainty this announcement has created and we are with you every step of the way. You are not only integral to our economic strategy, you are national champions of our resilience and ingenuity,” Dr. Holness said.
Meanwhile, he said the Administration will continue working to ensure the country secures its economic independence, even as it remains alert and responsive to evolving global trade dynamics that affect manufacturers and exporters.
“Yes, it is uncertain times, but we have done the necessary work. We have built the relationships; we have placed ourselves in strategic positions to be heard and to be heard from and to be consulted. When these changes are going to happen, we know that they could have long-term impact; we started planning long ago,” the Prime Minister said.
“You have a Government that is thinking very carefully, very strategically. I play chess, not draughts… . Maybe a decade ago, the word disruptive would have been an inherently bad thing. In today’s world, you require disruption of systems for there to be innovation and new opportunities. So, whilst we see the downside of the disruptive global order that we have now, we are not going to sit by and wait,” he added.
The Prime Minister urged manufacturers and exporters to explore new opportunities, noting that the Government will work with them.
“There are opportunities that must be had. There are prospects to be uncovered, and so I urge my manufacturers, my businesspeople, before you start to look at the negative, also look for the opportunities. Don’t just sit down and complain about all the things that’s going on and all the things that’s going bad, expecting that Government is going to solve all the problems for you. Be the entrepreneur; be the one who is the risk-taker, and be the one who is looking for the opportunity,” Dr. Holness said.
By: Chris Patterson, JIS
Sygnus Real Estate Finance Strategically Increases Stake In One Belmont From 70% To 86%
Express Catering’s Outlook Is For An Excellent Summer Season
Knutsford Express Charts Strategic Course Amid Profit Decline and Operational Investments
Businessuite 2023 Top 100 Caribbean Companies – US$ Revenue
Jeffrey Hall Is Set To Be One Of The Most Powerful Men In Corporate Jamaica And The Caribbean. So, Who Is He?
Which Company Has The More Sustainable Business Model….Edufocal or ICREATE and Why?
-
Businessuite News242 weeks agoPowering the Future: CARILEC and Green Solutions International SKN Launch Electric Vehicle Training in St. Kitts
-
Artificial Intelligence2 weeks agoThe Samsung 25 Line: For The Time Of Your Life And The “Life Of Your Time”
-
Businessuite Markets4 weeks agoScotiabank Group Jamaica Continues To Perform Well
-
Businessuite Markets4 weeks agoJamaica Broilers Group Faces Major Financial Setback as US Operations Struggle; Stephen Levy Resigns
-
Businessuite Markets4 weeks agoListing GraceKennedy Financial Group on the JSE
-
Businessuite Markets4 days agoSygnus Real Estate Finance Strategically Increases Stake In One Belmont From 70% To 86%
-
Businessuite News243 weeks ago
Government Engages with US Trade Representative on New Tariff Regime
-
BNC33 weeks agoTaking Stock LIVE – Fontana’s Next Move; What’s going on with Jamaica Broilers?