crnm assessment of caricom agri-food distribution services€¦ · uwi university of the west...

CARIBBEAN REGIONAL NEGOTIATING MACHINERY

AN ASSESSMENT OF THE AGRI-FOOD DISTRIBUTION SERVICES INDUSTRY IN CARICOM

Final Draft

PREPARED BY: Robert Best and Lawrence Placide

West Indian Projects Ltd Trinidad and Tobago

November 2006

FUNDED BY: Inter-American Development Bank/Multilateral Investment Fund

TABLE OF CONTENTS

ACKNOWLEDGEMENT ........................................................................................vi

ACRONYMS ….. ................................................................................................... vii

INDUSTRY TERMS ............................................................................................ viii

INTRODUTION AND METHODOLOGY ........................................................... xii

EXECUTIVE SUMMARY ....................................................................................xvi 1. AGRI-FOOD DISTRIBUTION SERVICES INDUSTRY - DEFINITION & ROLE

IN THE ECONOMY 1 Introduction...........................................................................................................................1 Agri-Food Distribution Services Industry ..........................................................................1 Food Retail Sub-sector ........................................................................................................4 Food Service Sub-sector ......................................................................................................5 Food Wholesale Sub-sector .................................................................................................6 Structure of Consumer Markets .........................................................................................7 Traditional Retail Market ....................................................................................................8 Modern Retail Markets ........................................................................................................8 Emerging Retail Markets .....................................................................................................9 Policy Definition for Food Distribution Services ............................................................11 Importance of the Food Distribution Services Industry ...............................................15 Conclusion ..........................................................................................................................19 2. INTERNATIONAL FOOD DISTRIBUTION SERVICES INDUSTRY TRENDS .....21 Introduction.........................................................................................................................21 Global Food Retail Markets...............................................................................................21 Global Food Retail Sector ..................................................................................................24 Global Food Retail Trends .................................................................................................30 Developed Country Food Retailer Trends......................................................................30 Developing Country Food Retailer Trends: Latin America ...........................................32 Developing Country Food Retailer Trends: Africa ........................................................34 Global Quick Service Restaurant Industry ......................................................................35 Leading Global QSR Chains...........................................................................................35 Fast Food Industry Sub-sectors ......................................................................................43 Mainstream Sub-sectors............................................................................................44 Caribbean Sub-sector ................................................................................................46 Global Quick Service Restaurant Industry Trends .........................................................49 Global Food Distribution Service Regulatory Environment…………………………..50 Developed Countries ………………...………………………………………………...50

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Developing Countries ……………………………………………………………...….51 Conclusion ...........................................................................................................................51 3. CARICOM FOOD DISTRIBUTION SERVICE INDUSTRY.......................................53 Introduction...........................................................................................................................53 Contribution of Food Distribution Service Industry to the CARICOM Economy ......53 Trade and Production.....................................................................................................56 Household Budgetary Data.............................................................................................58 Field Interviews with Industry Leaders and Specialist...................................................58 CARICOM Food Distribution Services Industry Size ....................................................58 Key Trends Driving Food Retail Market Changes ..........................................................60 Per Capita Income ..........................................................................................................60 Population.......................................................................................................................61 Demographics .................................................................................................................61 Conclusion ...........................................................................................................................64 4. CARICOM FOOD RETAIL SUB-SECTOR ...................................................................66 Introduction.........................................................................................................................66 Food Retail Service Sector .................................................................................................66 More Traditional Food Retail Sectors ............................................................................68 More Modern Food Retail Sector ...................................................................................72 Emerging Food Retail Sectors ........................................................................................80 Key CARICOM Food Retailers.........................................................................................84 CARICOM Food Retail Industry Competitiveness Trends............................................88 CARICOM Restrictions on Trade ....................................................................................98 Conclusion ...........................................................................................................................99 5. CARICOM FOOD SERVICES SECTOR......................................................................101 Introduction.......................................................................................................................101 Food Service/Quick Service Restaurant Sector .............................................................101 CARICOM QRS Sub-sectors...........................................................................................105 Key CARICOM QRS Involved in Services Trade.........................................................112 CARICOM QSR Industry & Competitiveness Trends .................................................118 CARICOM Restrictions on Trade ..................................................................................127 Conclusion .........................................................................................................................128 6. CARICOM FOOD WHOLESALE SECTOR ...............................................................130 Introduction.......................................................................................................................130 Food Import/Wholesale Sector …………………………………………………….......130 CARICOM QSR Industry & Competitiveness Trends .................................................133 CARICOM Restrictions on Trade ..................................................................................140 Conclusion .........................................................................................................................140 7. FOOD DISTRIBUTION SERVICES INDUSTRY DEVELOPMENT STRATEGY Introduction.......................................................................................................................142 Business Activity ………………...………………………………………………...….142

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Case for Food Distribution Industry Policy ...................................................................143 Constraints.........................................................................................................................145 Improving Industry Competitiveness .............................................................................146 Industry Organization and Associations and Participation .........................................152 Future Work......................................................................................................................153 Conclusion .........................................................................................................................155

8. RECOMMENDATIONS FOR CARICOM PARTICIPATION IN SERVICES TRADE NEGOTIATIONS ...……………………….. ......................................................157

Introduction.......................................................................................................................157 Global Trade Restrictions ................................................................................................157 CARICOM Participation in International Trade Negotiations ...................................159 Sensitivity of the Sector ....................................................................................................159 Considerations in Making Commitments on Food Distribution Services ...................161 Possible Offensive Interests of CARICOM ....................................................................163

World Trade Organization............................................................................................164 Dominican Republic......................................................................................................165

Central America............................................................................................................168 Canada and the USA.....................................................................................................170 European Union............................................................................................................170 Possible Defensive Interests of CARICOM ....................................................................171 Recommendations For WTO ...........................................................................................172 Recommendations For Regional Negotiations ...............................................................175 The Dominican Republic...............................................................................................175 European Union (EU)...................................................................................................176 Canada and the United States.......................................................................................178 Future Work......................................................................................................................178 Conclusion .........................................................................................................................178 BIBLIOGRAPHY..............................................................................................................A2 APPENDICES

1. TERMS OF REFERENCE ........................................................................................A7 INTERVIEW CHECK LIST....................................................................................A12 LIST OF PERSONS CONSULTED – INDUSTRY................................................A17 LIST OF PERSONS CONSULTED – PUBLIC SECTOR....................................A20 LIST OF WEBSITES REVIEWED.........................................................................A22 2. CARICOM AGRI-FOOD CONSUMER STATISTICS ........................................A27 3. CARICOM AGRI-FOOD PRODUCTS TRADE STATISTICS...........................A32 4. CARICOM FOOD DISTRIBUTION SERVICES INDUSTRY MEMBERS......A38

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ACKNOWLEDGEMENT The authors greatly acknowledge the opportunity provided by the Caribbean Regional Negotiating Machinery and the Inter-American Development Bank - Multilateral Investment Fund to conduct this study. We thank the many CARICOM food distribution services industry members and public sector officials for the invaluable time spent in consultations providing information on the industry and government policy for the sector.

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ACRONYMS BAH Bahamas BAHA Belize Agricultural Health Authority BDS Barbados BEL Belize CACM Central American Common Market CAFTA Central American Free Trade Area CAHSA Caribbean Health and Food Safety

Agency CARICOM Caribbean Community CARIFORUM Caribbean Forum includes

CARICOM and the DR CDB Caribbean Development Bank CET Common External Tariff COTED Council for Trade and Economic

Development CRNM Caribbean Regional Negotiating

Machinery CSM&E CARICOM Single Market and

Economy CSO Central Statistical Office DOM Dominica ECU European Currency ERS Economic Research Service of the US

Department of Agriculture EU European Union FAO Food and Agriculture Organization FAS Foreign Agricultural Service of the

USDA FDA Food and Drug Administration of the

USA FSIS Food Safety Inspection Service of the

US Department of Agriculture FSR Full Service Restaurant FTAA Free Trade of the Americas GATT General Agreement on Tariffs and

Trade GDA Grenada GDP Gross Domestic Product GMO Genetically Modified Organisms GORTT Government of the Republic of

Trinidad and Tobago GUY Guyana HACCP Hazard Analysis and Critical Control

Point HMR Home Meal Replacement

HS Harmonized System (Harmonized Commodity and Coding System)

IDB Inter American Development Bank JAM Jamaica MALMR Ministry of Agriculture Land and

Marine Resources MERCOSUR Mercado Comun del Sur (Southern

Common Market) NAFTA Northern American Free Trade

Area NTBs Non-Tariff Barriers (WTO) NTC Non-Tariff Concerns OECS Organization of Eastern Caribbean

States OIE International Organization of

Epizootics QR Quantitative Restrictions QSR Quick Service Restaurant

S&D Special and Differential Treatment of the WTO

SITC Standard International Trade Classification

SKN St Kitts and Nevis SKU SLU

Stock Keeping Unit St Lucia

SP Special Products SPS Sanitary and Phyto Sanitary

Agreement (WTO/FTAA) SSG Special Safeguard Provision SSM Special Safeguard Mechanism SUR Suriname SVG St Vincent and the Grenadines

TBT Technical Barriers to Trade Agreement of the WTO

T&T Trinidad and Tobago

TRQ Tariff Rate Quota

UR/URA Uruguay Round Agreement

USA United States of America

USDA United States Department of Agriculture

UWI University of the West Indies

WTO World Trade Organization

Assessment of the Agri-food Distribution Services Industry in CARICOM

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INDUSTRY TERMS A. Agro Food Industry Terms Product Category - A group of products of similar nature or fulfilling a similar consumer need e.g. fresh produce or soft drinks.

Category Management – A distributor/supplier process of managing categories as strategic business units, producing enhanced business results by focusing on delivering consumer value.

Grocery - A food store selling over 30 percent food for which food is a important part of the store business strategy.

Independent Food Retailer/Restaurant – Stores which are stand-alone and do not belong to a chain.

Like For Like Growth/Same Store Growth – Annual sales growth through stores that have been open for one year. A measure of performance of a fixed body of stores which is not formally standardized and has no official definition.

Market – A division of retailing, devoted primarily to the sale of a singular range of goods i.e., grocery, clothing, electronics, pharmacy.

Multiple – For the purpose of this study, a food retailer or restaurant operator with more than two supermarkets.

Premium Pricing – A proposition characterised by offering value by pursuing the highest possible quality across all elements of the store rather than the lowest possible process; it includes elements such as product innovation, customer service, improved food ranges, and high-income products – health/organic. Low levels of promotional activity, high specification interior, and close to affluent neighbourhoods.

Product – A subdivision of a category an individual item or SKU.

Stock Keeping Unit (SKU) – A product on the inventory of a food retailer, including similar products different sizes or types of packaging.

Sector – A subdivision of a market devoted primarily to the sale of a similar store format e.g. convenience, discounting, and supermarkets.

Supply chain – A product specific subset of the agro food system which is a systems in which a produce moves from: (i) farmer and first stage processors who sort, grade, pack and do the initial processing (upstream in the chain); (ii) to the distributor including assemblers and wholesalers to the downstream segments: (iii) the second stage processor or food manufacturer (unless the product is a fresh product) to the retailer (such as a supermarket or food service operation) and then (iv) the consumer.


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B. Traditional Caribbean Food Retail Formats

Conventional Supermarket – The original self service supermarket format, normally between 10,000 and 15,000 SF in sales area but can range from 6,000–40,000 SF, carrying 8,000–18,000 stock keeping units (SKUs), with 5–20 check outs in some CARICOM states. These stores offer a full line of groceries, meat, and produce and often offer services such as a deli, bakery and food service. More recently lotto, money transfer and banking services can also be found. Conventional stores will average 60 percent of sales from grocery items, 12.5 percent from the sale of meats, 10 percent from GM/HBC, 7.5 percent from frozen food, 5 percent from produce, 5 percent from bakery products, deli services and other services.

Food Stores – The self-service small corner grocery store, normally between 3,000–7,500 SF carrying 3,000–8,000 SKUs with 2–5 check outs that carries a limited selection of staples, budget brands, convenience items, and a few lines of frozen meat and non-food items. These stores are strictly speaking a supermarket and are also called groceries in some countries.

Counter Shops – These stores normally between 750–2,000 SF with no cash register offering a limited assortment of basic staples, often repacked in the store from bulk packaging, very little refrigeration and little or no fresh product. Goods are sold over-the-counter to the public and family members operate the store. They are also called neighbourhood shops, corner shops, and even sometimes groceries.

Mom & Pop Store – Normally 250–750 SF shop located in a room in a home or attached to a home and operated by family members providing convenience foods and non food items, snacks, beverages and cigarettes to the immediate neighbourhood. Operates extended hours.

Superstore – A larger version of the conventional supermarket with at least 25,000–40,000 square feet in store area and 20,000–25,000 items. Superstores offer a full food range, supplementary services and an expanded selection of non-foods (at least 10 percent GM/HBC)

Convenience Store (with gas) – A small, higher-margin store that offers an edited selection of staple groceries, non-foods, convenience food items and impulse lines, i.e., ready-to-heat and ready-to-eat foods. The convenience store with gas format includes only convenience stores that sell gasoline, e.g., Texaco Star Mart, Tiger Mart, and NPs Quick Shoppe

Convenience Store (without gas) – Small, higher-margin convenience stores that do not sell gas and offer an edited selection of staple groceries, non-foods, and other convenience food items, i.e., ready-to-heat and ready-to-eat foods. Stores such as 7-Eleven without gasoline pumps are included. They are less than 3,000 SF and open for long hours selling the products.

Specialty Food Retailers - Traditionally food has been purchased from the following specialty food retailers, whose importance in the retail market depends on the stage of development: -

Traditional Fresh/Wet Market – A collection of small retailers or a mix of wholesalers and retailers selling perishables such as fruit, vegetables, roots/starches, condiments, meat and fish

Fresh Produce Shop – A shop which specializes in fruit and vegetables


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Butcher/Meat Shop – A vendor or shop specializing in meat. Also called pluck shops or pluck & gut shops.

Fishmonger/Fish Shop – A vendor or shop that sells seafood.

Dairy Parlor – A shop that sells milk and or dairy products including ice cream.

Bakery – A shop that sells bread and pastry products including ice cream. C. Non-Traditional Food Retail Formats

Wholesale Club – A membership retail/wholesale hybrid with a varied selection and limited variety of products presented in a warehouse-type environment. These 50,000–120,000 square-foot stores have 60–70 percent GM/HBC and a grocery line dedicated to large sizes and bulk sales. Memberships include both business accounts and consumer groups, e.g., Sam’s Club, Costco, and BJ’s.

Super Centres – A large food/drug combination store and mass merchandiser under a single roof. The super centres offer a wide variety of food, as well as non-food merchandise. These stores average more than 170,000 square feet and typically devote as much as 40 percent of the space to grocery items, e.g., Wal-Mart, Kmart, and Super Target.

Super Warehouse – A high-volume, hybrid format of a superstore and a warehouse store. Super warehouse stores typically offer a full range of service departments, quality perishables, and reduced prices.

Super Warehouse/Hypermarket – These are destination stores with a high-volume, hybrid format of a superstore and warehouse store. Super warehouses typically offer a full range of food with quality perishables and with a full range of service departments and non food items at reduced prices. May range in size from 40,000–100,000+ SF.

Limited-Assortment Store – A “bare-bones,” low-priced grocery store that provides very limited services and carries fewer than 2,000 items with limited–if any–perishables, e.g., Aldi and Sav-A-Lot.

D. Food Service Formats

Full-Service Restaurants – Feature waiting staff, more varied menus, and perhaps other amenities such as ceramic dishware, non-disposable utensils, and alcohol service. These may be associated with a hotel or be stand-alone/independent restaurants.

Quick Service Restaurants – Feature convenience as the main selling point. They have no wait staff, menus tend to be limited, and dining amenities are sparse. Important dimensions of convenience include speedy delivery of food for consumption in store at establishments located close to the consumer, or on the go via take away or drive through facilities, or delivery to the consumer’s home/office.


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Caterers – Prepare food in one location for serving in a separate location. These operations prepare and serve meals and snacks as an adjunct, supportive service in institutional and educational settings, such as schools, nursing homes, child daycare centers, and hospitals

Cafeterias – Smaller food stores that prepare, serve, and sell food to the general public for a profit.

Street Food Vendors – Small itinerant operators, often individuals who prepare and serve food from temporary locations in the street.


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INTRODUCTION AND METHODOLOGY The Caribbean Community (CARICOM) is involved in negotiations on trade in services with a number of negotiating partners. The most important ongoing negotiation seeks to develop a new reciprocal arrangement with the European Union (EU). Linked intricately to this is the completion of the Free Trade Area with the Dominican Republic through inclusion of commitments on access for trade in services and investment. On the horizon are possible negotiations between CARICOM and the United States and Canada. Furthermore, the moribund World Trade Organization (WTO) negotiations also must be kept in view given the possibility, however unlikely, of resuscitation. Distribution services are likely to be a key part of all these negotiations. At the same time, information on the distribution services sector in the Caribbean is limited, and this constrains effective CARICOM participation. The agri-food distribution services sector is particularly important to CARICOM. The Food Distribution Service industry in CARICOM has over 17,000 firms, employing 112,000 people and generating sales of US$ 5.6 billion per annum. It plays an important role in delivery of food consumer choice and prices. It is one of the largest components of the services sector, is vital for national development and has important linkages with other key export sectors such as agricultural production, food manufacturing, and tourism. Furthermore, it holds the possibility for generating trade in services and goods and producing new foreign exchange revenues for Caribbean economies. As a result, the Caribbean Regional Negotiating Machinery (CRNM) commissioned this Assessment of the Agri-food Distribution Services Industry in CARICOM with funding from the Inter-American Development Bank. The aim of the project is to obtain information on this industry, to register the views of industry members and government officials on the opportunities and challenges of trade in agri-food distribution services, and to analyze issues relevant to the region’s international trade negotiations. In pursuing this aim, the study seeks first to define the industry and understand the global food distribution sector for the purpose of establishing industry benchmarks and identifying trends and competitiveness improvement strategies. This information facilitates, by way of comparison, the understanding of the sector in CARICOM. Some assessment is made of the economic value of the sector to the region as well as other indicators of performance as a precursor to assessing the extent to which the sector is adopting appropriate international competitiveness strategies. Factors constraining competitiveness of the sector are also considered as is the extent to which exporting of services have become a viable business strategy for firms in the sector together with the extent to which export capabilities vary from sub-sector to sub-sector. The linkages between the distribution sector and other sectors of the economy are also discussed as are the challenges and opportunities presented by the CSME to service providers. The review is intended to lead to recommendations for improving the competitiveness of the regional food distribution sector, domestic policy action in support of the sector, and strategies for negotiations in trade in services. The existing export activity is assessed, as is the likely impact of ongoing international services negotiations. Recommendations are put forward for


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CARICOM participation in those negotiations with particular reference to distribution services in terms of offensive and defensive interests. The full terms of reference can be found in Appendix 1-A. The main challenge presented by this study was obtaining industry data, understanding the experiences and interests in trade in services of the industry members, and understanding of the regulatory framework for the sector in CARICOM. The data challenge begins with the official statistical resources in the region and this has proved to be a constraint on the outcome, but also extends to the private sector, which has been largely very cautious to reveal information which can impact on competitive activity in the small markets in which they operate. As a result, the researchers have had to make estimates to provide some perspective on the relative sizes of the firms in the sector. As far as the regulatory framework is concerned, the project’s concentration has been on identifying measures that could be considered to be restrictions on trade rather than non-discriminatory measures such as, for example, those relating to building approvals, zoning, planning restrictions, hours of operation, weights and measures and laws to protect the health and welfare of the citizens of the Caribbean Community. The methodology used has been to combine desk research with field research based on interviews with private sector executives and government officials. The interview check lists utilized by the consultants during the interviews are presented at Appendix 1-B. Official data sources have been used where available, but data on the number of establishments, employment and sales in the sector are derived largely from the experience and judgment of a limited selection of key industry members about the markets in which they operate. This approach recognizes the shortcomings of government databases in the region, and of the limitations of a process which interviews a small number of key industry leaders, yet seeks, within the limits of available resources, to develop a picture of the industry where none existed before. The number of establishments, employment and sales within the region are estimates derived using the following process: -

• The number of stores in each distribution channel for food retail and for each sub-sector in the quick service restaurant sector were estimated based on interviews with industry players. Key firms were identified.

• Several leading food retailers and quick service restaurants were asked to estimate: (a) the market share of their distribution channel or QSR sub-category; (b) the market share of other distribution channels or QSR sub-categories; (c) their own market share; and (d) the market shares of other key industry members/ channels or sub-sectors of their market.

• Wholesalers, where possible, were asked to provide their interpretation of the same information and this information was, as far as possible, cross-referenced against national statistics available.

• Leading QSRs were asked to confirm that average annual sales figures reported by a leading industry trade journal (QSR Magazine - Table 2:12) on the Annual Unit Value (AUV) per QSR store for the United States could be used as reasonable and conservative approximations of the turnover of the international brands within the region. If necessary, these were


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modified based on more specific industry feedback. Estimates were made for the AUVs of indigenous QSRs on the basis of consultations with leading industry members and the researchers estimates, and not necessarily with the firms themselves.

• Where possible, verification was sought for the estimates from key industry members and the draft report was circulated to over 30 industry leaders in at least 10 states for feedback.

Responses from the food wholesale sub-sector were less comprehensive than for the other sub-sectors. As a result, no attempt has been made to quantify firms, employees, or sales in this sub-sector. Nonetheless, a list of key industry members by country is provided in Appendix 5. The resulting profile of the food distribution services sector in CARICOM does not include all aspects of the sector. Areas of the sector not addressed in detail by the study include smaller retail formats, cafes, and bars, specialty food vendors, markets, full service restaurants, street vendors, caterers, domestic wholesalers, commission agents, and providers of logistic and maritime services. Addressing all of these areas would have warranted a much more detailed and lengthy study. Rather the focus has been on the segments of the sector which are currently or most likely to conduct trade, i.e., the supermarket, QSR and importer-distributor sub-sectors. Time and efficiency constraints meant that very few smaller industry members were interviewed. In addition, the consultants were not able to visit Saint Kitts and Nevis, Dominica, Montserrat, or Haiti. However, in some cases, desk research provided limited information on these markets, and discussions were held with their Government officials, largely at regional meetings addressing trade issues. Where possible, information from other sources was used to provide some profile of the industry in these states. In addition, while there seems to be a clear understanding by private and public sector members interviewed of trade policy for the “trade in goods”, most of the persons interviewed including some of the officials interviewed seemed to quickly extend the discussion of the “trade in agri-food distribution services” into the “trade in agri-food goods”. While these two issues are closely linked, the separation of the two was a real continuous challenge for the researchers in this project, who were focusing on creating new perspectives on the agri-food services industry. Moreover, it is noted that other researchers are completing complementary studies, which focus on issues relating to agri-food goods. These include work by Vassel Stewart1 who has studied the CARICOM agri-food transportation system and Andrew Jacque2 who has examined agri-food imports into the region in depth as a basis for identifying investment opportunities the latter including a strong focus on the analysis of imports to the region. This study has focused on food distribution services while others have focused on agri-food product distribution. Nevertheless, the consultants note that this is the first time the agri-food services sector has been subjected to a study of this type. Significant new information is 1 Stewart, Vassell and Forgenie, Mark, The Concerns of Shippers and Other Issues that Impact on the Trade and Transportation of Agricultural and Other Products Within the CARICOM Community and Beyond, CARICOM Secretariat, Guyana, Pending 2 Jacque, Andrew, Preliminary Study to Identify Potential Investment Opportunities for the CARICDOM Domestic Agriculture and Food Industries, IICA, Trinidad and Tobago, July 2006


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presented that we are hopeful will contribute to understanding the services dimension of the sector, and more importantly, impact positively on CARICOM involvement in international trade negotiations in services and to a lesser extent in trade negotiations for agricultural goods.


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EXECUTIVE SUMMARY Role of the Food Distribution Industry The liberalization of distribution services is a key demand of major trading entities such as the United States and Europe in services trade negotiations. This study focuses on the agri-food distribution sub-sector. The agri-food distribution service sector is responsible for moving agri-food products along the supply chain through to the consumer. The agri-food industry comprises a number of interconnected and interdependent actors (farmers, processors, manufacturers, wholesalers, retailers, food service operators, and consumers). The benefits of an efficient system of distribution are well known and largely accepted. Goods are brought more effectively to the consumer. Producers of processed products receive high quality inputs in good time and in acceptable condition allowing them to add value and deliver a range of products to customers. Consumers are offered greater variety and more competitive prices and their health and safety is safeguarded. A key positive effect is the stimulation of small- and medium-sized enterprise development, the strengthening of supply chains, and export and local product development. It is generally accepted that distribution systems in developing economies tend to be plagued by inefficiency, less choice and higher costs to users, supply chain bottlenecks, and often anti-competitive behaviour by a few large operators. Liberalization is promoted by the major trading entities as a means of bringing about much-needed efficiency gains. At the same time, there are concerns that SME food distribution firms and agri-food supply chains may be adversely impacted by liberalisation. Development-related challenges discussed in international forums have relevance to the Caribbean and may be exacerbated by the small size of CARICOM economies and business operations. A structured policy response, including appropriate incentives, regulatory development, and careful international negotiations becomes even more relevant and relates as much to improving competitive environments domestically as to promoting export interests where they exist. The overall goal must be to increase the contribution made by agri-food distribution services to national and regional competitiveness. This, in turn, will increase national efficiencies and improve the operations and results of many related sectors such as agri-processing, manufacturing, and tourism. Global Industry Makes Strategic Advances In 2003 the global food market was estimated to be US$3,496 billion, which represented 42 percent of the global retail market. North America, Western Europe and Asia Pacific accounted for 75 percent of the food retail spent. Analysts predict an annual average growth of the food market of 5 percent between 2003 and 2020 driven by global population growth and growth in Gross Domestic Product (GDP) per capita. The fastest growth will be in the Middle East, Africa, and Central Asia.


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A number of global food retailing trends have been identified. These include:

• Price-oriented retail strategies – Discounters have gained market share in Europe and the United States. Traditional operations have responded by moving into lower cost items, introducing their own label ranges, entering into purchasing alliances, and rationalizing ranges to decrease overheads.

• Differentiation – Both smaller and mainstream retailers are using strategies to differentiate their offerings on the basis of quality, service or price

• Non-food items – Increasingly, supermarkets are offering non-food items to compensate for lower growth in food sales. Grocers leverage non-food sales to improve their food offers or lower their food positions to encourage increased sales on non-food items.

• Services sales – In mature markets, especially, food retailers are offering a wider range of non-food services such as financial services, petrol sales and vacation packages.

• Consolidation – Growing consolidation of the retail market is evident in both developed and developing markets and this has implications for competition.

• Supply-chain improvements – Efficient supply chains are key factors in profitability and enhance shareholder value. Global suppliers and retailers are cooperating more closely facilitated by improvements in information technology.

• Rise of supermarkets in developing countries – In developing countries, supermarkets are becoming the dominant means of food retailing, displacing small shops and transforming traditional supply chains.

A number of global quick service restaurant trends have been identified. These include:

• Menus - Consumers are becoming increasingly health conscious, sophisticated, aware of international cuisine, and the flavourful ingredients that go into their preparation. This has led QSRs to include more fresh, healthy items with international flavours to their menus. The bird flu virus is causing QSRs to review their multi brand concepts and menus to include stronger alternatives to chicken such as fish.

• Service - The modern consumer is demanding more convenience. The QSRs are also facing increased competition from quick-casual chains, many of which offer easy dine-in or take-out options. These trends will lead to continued growth in takeout, drive through, and delivery services.

• Multi-branding strategies - The leading industry firms will develop and expand their multi-brand portfolios of QSRs and invest more in multi brand locations that will provide opportunities to offer consumers greater choice, increase customer traffic through outlets, and reduce overheads.

• Internationalization - Higher growth rates being experienced in many international markets which lead major international brands to develop strategies to speed up penetration of these faster growing markets, and encourage minor brands to initiate


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export strategies. This will be supported by liberalization of economies for goods and services supporting the international brands.

• Franchising - This will continue to be a more important strategy to drive store growth in fast growing sub-segments, in smaller or higher risk international markets

• Technology - Online ordering is expected to increase significantly over the medium term and information technology will be increasingly important in driving sales, productivity and profitability in international QSR operators.

Agri-Food Market Structure and Trends It is difficult to arrive at a definitive account of the size of the food distribution services market in CARICOM due to the unavailability of accurate official statistics in some cases and the lack of a uniform reporting structure across the region. Some areas of the sector are included in the statistics on hotel and restaurant services in some countries, while in others, figures for the wholesale and retail trade include non-food items. Crude estimates using opinions of food distribution services leaders across the region place the value of food retail and QSR sales to consumers in the region of US$5.6 billion generated from over 17,000 stores employing over 112,000 people. Consumer purchases of fast food were about 20 percent of the total value of food retail. The value of the food wholesale goods purchased by the resellers to generate these sales is estimated to be approximately US$3.9 billion. Unquestionably, the sector is a very important contributor to economic activity, employment and enterprise development in the region. Agri-food trade and production data are also not sufficiently disaggregated to arrive at the value of all food purchased at the consumer level. Several challenges in assimilating the data were encountered. Trade data includes input and intermediate and consumer ready products. Import information is recorded at the freight on board (FOB) level. Secondary food manufacturing data tend to be aggregated in national statistics on light manufacturing. National agricultural data are recorded at the GDP level and often not at the sales level. Export data is recorded at the cost includes freight (CIF) level. Nonetheless, the Caribbean is a major net food-importing region with annual deficits in food trade in the region of approximately US$1 billion. Agriculture contributes US$1.3 billion to GDP in the region. Demand for food in the region is affected by structural adjustment programmes, ongoing market liberalization, and the following key consumer trends :

• Population growth – CARICOM’s population grew by 27.3 percent between 1985 and 2002 and is projected to grow by an average of 7 percent between 2005 and 2015.

• Per capita income – Per capita incomes in the region have increased steadily increasing purchasing power and making the region more attractive to food retailers.

• Working women – Statistics show that more women in the region are working away from home, increasing household incomes and driving the demand for convenience foods.


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• Urbanization – Almost all CARICOM countries are experiencing increased urbanization which favours the development of modern retailing practices.

• Household appliance ownership – Increasing ownership of refrigerators and microwaves have prompted an increasing demand for convenience foods and snacks that can be refrigerated or frozen.

• TV and cable ownership – Increasing awareness of international lifestyle and brands though penetration by international media and travel is changing lifestyles, tastes and purchasing patterns.

• Passenger car ownership - Increasing ownerships of passenger cars have allowed more consumers to make larger and fewer shopping trips and to select the best deals from different retailers.

An important trend emerging globally is the increased consumer spending on food to be consumed away from home, associated with increasing incomes and lifestyle changes. The CARICOM environment also shows signs of this phenomenon, at different levels based on the extent of development of the agri-food markets in each country. Food retail markets in the region can be roughly categorized as traditional, emerging, and modern based on per capita GDP and other geo-demographic trends. Traditional markets in the region are Guyana, Suriname, Belize, St Vincent and the Grenadines, and Haiti. Modern food markets exist in the Bahamas, Barbados, Trinidad and Tobago, Antigua and Barbuda, and St Kitts and Nevis. Other CARICOM countries have exhibited elements of traditional and modern retail markets and may be categorized as being transitional food retail markets. Supermarkets are becoming the dominant format in the region, and there has been evidence of consolidation in the retail sector and increasing merger and acquisition activity is expected as the CARICOM Single Market is solidified and capital markets are improved. The largest supermarket, Super Plus in Jamaica, operates 36 stores with sales, estimated in 2005, of over US$ 150 million. Many of the larger supermarkets are associated with regional conglomerates that have subsidiaries in a mix of food import distribution, maritime services, and food manufacturing. Over the last five years, coinciding with the entrance of foreign firms in the region mainly in the More Developed Countries of CARICOM (MDCs) and the development of the Caribbean Single Market and Economy (CSME), CARICOM firms have been actively investing to improve their competitiveness through the expansion of store numbers and sizes; introduction of new formats; expansion beyond the capital city into primary and secondary towns; development of higher margin food, non-food products, expansion of private label and international retail brand portfolios, and penetration/introduction of food and non food service ranges; investment in information technology; and investment in new logistic and procurement capability. These strategies have led to some consolidation of the industry and fall-out of smaller players is being reported in some countries. Backward, forward, and horizontal integration have also increased. Retailers and food service operators interviewed reported customer service, productivity, and profitability levels in keeping with leading international supermarkets.


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Food Retail Sub-Sector The CARICOM food retail sector is roughly estimated to have over 15,000 firms, employing over 85,000 people and generating US$ 4,555 million in sales. It has experienced strong growth in the more developed CARICOM food retail markets where larger numbers of international brands and a growing number of national brands can be found. Similar but more delayed patterns are being experienced in less developed markets. There are two international retailers in the region, PriceSmart and Winn Dixie. PriceSmart is trading in services in three CARICOM states, while Winn Dixie has sold its operations in the Bahamas. However, over the last five years, regional conglomerates, with food retail operations, such as Neal & Massy, BS&T, and Goddard’s Enterprises, have been actively making equity investments across the region either directly in supermarket firms or indirectly through their parent companies. Other distributors such as Grace from Jamaica, Laparkan from Guyana and Cirkel from Suriname have been exploring new markets across the region. Industry members report that CARICOM retailers are exploring opportunities for mergers and acquisitions but there appears to be little interest in the food retailers and foods service firms exporting retailing services outside the region at this time. However local retailers are concerned that future investment of foreign retailers in CARICOM will have a significant impact on their operations and profitability. Quick Service Restaurant Sub-Sector The CARICOM QSR sector is roughly estimated to have over 2,100 firms, employing over 27,000 people and generating over US$ 1,000 million in sales. It has experienced strong growth in the more developed CARICOM food retail markets, where larger numbers of international brands and a growing number of national brands can be found. Similar but more delayed patterns are being experienced in less developed markets. The top 35 firms, dominated by international brands, are estimated to have over 550 stores employing over 16,750 people, and account for over US$ 380 million or 35 percent of the total estimated sales in the sector. The leading firms include mainly international and a few leading national brands. The QSRs featuring chicken menus have by far the largest share (38 percent) reflecting the share (85%) of poultry meat in the diet of CARICOM people. Several other segments, with focus on Chinese, Caribbean, Burger and Pizza/Pasta menus, have between 11 percent and 16 percent of the market Restaurants with Chinese food have been growing rapidly as a result of the influx of Chinese immigrants across the region. Other segments are explored in the study such as sandwiches and seafood while lesser attention was paid to casual dining and snacks sub-sectors. Larger members of the industry, which tend to be international chains with strong marketing, operations, technology and supply chain support, report moderate international competitiveness while smaller and more indigenous brands report greater sensitivity to competition. Most industry members report that new competition in the sector has stimulated consumer demand. Several more established industry members report that the industry has played a key role in


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creating new businesses in the supply chain and raising the standards to meet those of the international brands. In addition several agri-food suppliers that have met these standards now qualify to export products to any other franchises in the international QSR chain. Over the last five years, regional operators have been expanding their efforts to export their brands within the greater Caribbean. However, foreign QSRs, owned by expatriate Caribbean nationals, have begun to develop formats based on Caribbean cuisine in the US and in the UK, and seem to be benefiting from first mover advantage in these markets. Several CARICOM QSRs have attempted to export services outside the region, with little success, and others are planning to do so in the short to medium term. The regulatory environment for this sub-sector in CARICOM has few restrictions, and these exist in only three countries, Barbados, Guyana and Suriname. Restrictions are also in place in the Bahamas, which is not part of the CSME. Food Import Distribution Sub-sector There are several types of wholesalers in the region, manufacturer distributors, importer distributors, importer retailers, and domestic wholesalers carry on wholesaling in the region. The more developed markets in the region tend to import higher proportions of internationally branded products. Belize and Guyana, which produce more of their own food, rely more on local manufacturers and wholesalers to distribute the greater part of food consumed in Belize. Importer distributors import on average more than 90 percent of their sales of which 10–40 percent emanate from the CARICOM region. Only a small number of distributors operate in more than one country in the region, but find it difficult to achieve economies of scale because of the manner in which the maritime freight system operates in the Caribbean. A growing problem in the region identified by distributors is the growth of “parallel trading”, where regional firms import from a wholesaler in an exporting country rather than from the manufacturers which have distribution agreements. Generally, larger distributors considered themselves able to cope with new competition due to their investments in distribution assets, strong trade relationships, local market knowledge, and ability to deal with local public-sector agencies. CARICOM distributors have been developing several strategies to address growing competition such as consolidating the distribution base (BS&T SBI Distribution), rationalizing portfolio of firms, brands and improving service levels (Geddes Grant Guyana and Jamaica), integrating backwards, developing retail brands (Grace-Kennedy’s’ Grace brand, Goddard’s Enterprises’ Eve brand), integrating forward (Goddard’s Enterprises acquisitions in food distribution in Grenada, St Vincent, Barbados, and new joint venture in restaurants with Island Grill). Distributors were well acquainted with trade in goods issues, but were largely unaware that their sector might be the subject of international services negotiations. Food Distribution Service Industry Supply Chains There is some evidence that the food distribution services industry has had a positive effect on the domestic supply chains. Larger QSRs, especially in states where agricultural tariffs make domestic product more price-competitive, report that they procure most (60 – 80 percent) of their major perishable and non-perishable food products locally with the major exceptions being cheese and French fries. In addition, there is evidence that non-food product and supply chains


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have been strengthened in the process of meeting the standards of the international brands. However in some states where tariffs are lower, and for smaller QSRs differentiating themselves by using “higher quality” imported products this is not so. Leading supermarkets reported that local content was generally lower (5 - 30 percent) than major QSRs (60 – 80 percent), with proportions varying significantly depending on the marketing strategy of the firm and the policy framework of the CARICOM state. As competition in food distribution services increases across the region, firms have sought to differentiate their offers. The leading food retailers in each country have improved the quality and choice of their offer to consumers by expanding their fresh, chilled, frozen portfolios and this has led to increased imports in these categories which tend not to be produced locally. The entrance of PriceSmart into the region has led to the development of several discount formats which have also sought to improve their price offer to consumers by parallel trading, purchasing from diverters, and increasing their complement of secondary and tertiary international brands. Often this is facilitated by tariff structures in CARICOM states that focus sensitive treatment on primary production rather than on value-added production. As a result, competition has led to increased imports in these product categories. There is evidence that trade in agri-food products can be facilitated by the development of trade in services as larger QSRs and supermarkets (PriceSmart) tend to source products from preferred certified suppliers within the region for distribution to their stores across the region. However, tariff structures within the CSME may also explain in part this preference for intra-regional sourcing. Improving Competitiveness in Food Distribution Services Competitiveness assessment is difficult at this point in time largely because data are unavailable in sufficient detail. Few companies are publicly listed. Only a few instances of information on Supermarket and QSR profitability have been identified. The study uncovered constraints to improved competitiveness and trade in services, which seem to have a disproportionate impact on SME retailers and indigenous QSR operations. There is a dearth of food distribution SERVICE market intelligence in domestic markets, but more so in export markets. Intra-regional air and sea freight, especially in the areas of refrigerated cargo and holding facilities on the ports limits the trade in service especially in the start-up phases. Port inefficiencies affect efficiency in food distribution. There is need to strengthen the backward linkages to agri-food and non-food supply chains to support export growth as suppliers in new markets tend to be underdeveloped and need to be supplied from domestic markets. Crime affects the profitability of distributors particularly in the retail sector by restricting options for service delivery and adding costs, e.g., for security and insurance. Insufficient use is being made of electronic commerce and information technology to improve marketing, productivity and general competitiveness. The industry lacks targeted public sector and private sector programs to improve competitiveness, especially in the areas of marketing, productivity, standardization of operations to support franchising, and human resource development. There seems to be no clear best practice franchising models that smaller firms can adopt. Industry organization as a basis for


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developing domestic and trade policy is minimal but there is interest from the industry to dialogue with the public sector, and this requires institutional support. There is evidence that firms recognize these constraints and the study proposes a series of programmes to address them by way of training, incentive programs, legislative development, improvements in national telecommunications infrastructures, and additional affordable e-commerce service offerings by financial institutions. Of particular importance, will be the development of backward linkages to the agriculture sector and light manufacturing through special programmes to help small farmers and processors meet volume, quality, safety, and dependability levels demanded by larger supermarkets and QSRs. Other areas of training suggested include contract negotiation and agricultural extension services. An industry policy for food distribution services is urgently required. This study has revealed significant economic activity and export potential. However, growth prospects will be affected by lack of a coordinated policy framework that is applicable throughout the CSME. The elements mentioned above are not intended to be comprehensive and other observers will no doubt identify gaps. These areas, though, did arise in the consultations conducted during the course of this study as of some immediate concern to stakeholders in the sector. In some cases, the action must emanate from the sector players themselves. In all cases, a collaborative approach involving dialogue between the private and public sectors is indispensable. Resolving these issues will equip the sector to better respond to the challenges of the negotiations on international trade in services in which the region is involved. Negotiating Options Services negotiations can play a role in improving the efficiency of food distribution sectors by facilitating new competition and investment in strategic areas in the sector, while at the same, time providing time for well-coordinated industry policy to strengthen the competitiveness of more sensitive sectors of the industry. Participation by the region in international services negotiations has been minimal, influenced by determination of officials that the sector is sensitive and would be negatively affected by new foreign entrants. Businesses in the food distribution sector do not have a uniform opinion on this matter, but there is interest in exporting services particularly in the franchising sector and also in the food retailing sector. The regulatory environment is underdeveloped in comparison with more developed economies and this is a factor restraining new services commitments. However, relatively few areas of discriminatory measures have been identified. CARICOM Member States have no existing commitments in distribution services in the WTO. Only Guyana made an offer in the sector in the now-stalled Doha Development Round (DDR) negotiations. A similar low level of commitment was envisioned in the Free Trade Area of the Americas (FTAA) negotiations. In contrast to the lack of international binding, the countries of CARICOM operate relatively open, non-discriminatory environments for trade in food distribution services. With respect to future trade negotiations, care should be taken in scheduling to avoid broad commitments that would include the food distribution sector and should consider using the


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approach of phasing. With respect to the various elements of the food distribution sector, raw product distribution might be less sensitive than processed products. CARICOM countries will find it difficult to make commitments in retailing. In franchising, there are some export interests and important penetration of the region by international franchises. Policy makers should recognize that the industries’ horizons and sensitivities are likely to change over time as they develop international experience and competitiveness. The ongoing exposure of CARICOM QSRs to international marketing, operations, and benchmarking systems may indeed be one reason why these firms view themselves as more competitive and less sensitive to competition. Programmes need to be established to establish similar benchmarking systems which might have similar impact on the food retailing sector. The QSR sector is the most poised to export from the region, and exports of services across the greater Caribbean region are growing. Although indigenous brands are less able to export services because of the absence of the support systems similar to that provided by the international fast food chains, several indigenous CARICOM QSRs have been and continue to experiment with exports in services to the US, EU, and as far afield as China. The region’s largest catering company is already operating in 21 countries in Latin America and the greater Caribbean. In addition, several Caribbean food QSR chains owned by Caribbean expatriates are developing in the US and may soon develop franchises in the region. Food retailers tend to be focusing on the CARICOM market for the time being, largely through equity transactions rather than trade in services. However, as they gain such experience in trade in service within the region they are likely to develop extra-regional trade interests. Importer/distributors are present in several CARICOM markets and a few have expressed interest in Latin American markets. Central America and the wider Caribbean tend to be of particular interest and should be the first focus of CARICOM export-seeking strategies in future negotiations. Multilaterally, Central America (with the exception of Panama) has not made commitments in the sector. Regionally, though, Central America and the Dominican Republic have made liberalizing commitments to the United States with respect to their laws governing distribution of goods. This changes significantly the competitive environment in Central America to the disadvantage of potential CARICOM exporters of goods and services, and might be addressed in a negotiation with Central America. Clearly, due to the sensitivity of the sector, defensive interests will be a priority and defensive impulses enhanced by the lack of extensive export interests. Requests made by the EU in the WTO negotiations are more likely to be addressed in the EPA framework and must be accompanied by specific CARIFORUM requests related to, inter alia, improving Mode 4 access, removal of sector exclusions, removal of economic needs tests, and improved cross border supply commitments. While engaging in the negotiation with Europe, CARICOM must take into consideration future negotiations with Canada and the United States in framing its commitments. In consideration of this, CARICOM should be prepared to consider some level of binding in the Distribution sector in exchange for removal of Europe’s more extensive restrictions in the sector, and additional concessions in sectors and modes of export interest to this region. Specific recommendations for consideration by Governments are made in this regard.


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Future Strategic Development and Industry Support Future work is required to inform strategies to develop the sector. The following project ideas are proposed for consideration:

1. Regional Food Distribution Service Industry Workshop – To bring regional public

and private sector stakeholders together, along with a selection of global industry specialists, together to explore opportunities, constraints and develop industry and policy strategies.

2. Development of National Food Distribution Services Sector Profiles and Sector

Policy Development Strategies – To detail the national sector, especially in areas not addressed by this study, and set out policy options particularly for sub-sectors not addressed by this study.

3. Logistics & Maritime Services – To examine the sub-sectors across the region and develop strategies to improve competitiveness and approaches to trade negotiation.

4. CARICOM Services Statistics Project – To integrate the findings and recommendations of this study into the existing CARICOM services statistics project and develop a common framework and reporting format for the sector.

5. Food Distribution Services Export Market Intelligence – To identify opportunities,

challenges and strategies to support the exporting interests of CARICOM firms, especially SMEs.

6. Franchise Best Practice Model – To investigate international best practices and inform adoption of these practices by local quick service formats.

7. Street Vendors & Speciality Fresh Food Vendors & Markets – To examine the impact of changes in the industry as a result of liberalisation on traditional perishable agri-food (F&V, chicken, meat, fish, dairy, and bakery) marketing channels (sellers not producers), which are predominantly SMEs.

8. Agri-Food Supply Chains Impact Assessment – To conduct a detailed review of impact that changes in the food distribution services industry will have on agri-food supply chains and the relationship between food distribution services industry policy, agricultural trade policy (tariffs), and the development of agri-food supply chains.


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1. AGRI-FOOD DISTRIBUTION SERVICES:

INDUSTRY DEFINITION AND ROLE IN THE ECONOMY

Introduction

This chapter defines the food distribution service industry and reviews the issues to be considered in the development of a policy framework for CARICOM governments. It should be noted while there are a range of service providers in the agri-food supply chain, this study focuses on the commercial food retail channels, i.e., supermarkets, quick service restaurants (QSRs), and import/distributors because they are most likely to export their service formats to other markets.

While several sources were used in preparing this review, the work of the Institute of Grocery Distribution, Food Marketing Institute, Rabobank, United States Department of Agriculture Economic Research Service (USDA–ERS), and the United Nations Conference on Trade and Development (UNCTAD) were especially relevant.

Agri-food Distribution Services Industry The agri-food industry comprises a number of interrelated actors, including the producers of agri-food products (farmers), primary agri-processors and food manufacturers, the distributors of agri-food product (food wholesalers, food retailers, and food service operators) and consumers (Figure 1.1). The agri-food distribution service sector is responsible for moving products along the agri-food supply chain and ultimately providing consumers with the food they eat.

While services such as financing, technical support, information systems, sorting, grading, packaging, storage, transporting, and marketing are provided along the agri-food commodity supply chain by various service providers, this study focuses on the services and service providers which are most likely to be involved in the cross border trade in services, i.e., food retailers, food service operators, and food wholesalers including commission agents.

The proportion of expenditure on food accounted for by the marketing bill, which includes processing, transport, wholesaling, and retailing, food service has risen significantly over time as can be seen in the case of the US (Figure 1.2). This is as a result of consumers seeking more convenience foods, which are highly processed, and a shift towards more meals being eaten away from home. This shift is associated with an increasing level of services in the composition of food expenditures by consumers.


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Consumers

Food Service Food Retail

Agricultural Input Suppliers

Agricultural Producers

Wholesale

Food Manufacturing Industry

Wholesale

Primary Processing Agro Industry

Wholesale


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0

100

200

300

400

500

600

700

800

1954 1964 1974 1984 1994 2004

U S C o ns u m e r E xp e n d itu r e o n F o o d , 1 9 5 4 – 2 0 0 4 , U S $ b

Fa rm V a lu e M a rk e tin g B ill

Figure 1.2: Distribution of Consumer Expenditure, USA, 1954 - 20043

Over time, consumers have access to a more diverse range of food consumption choices from an array of retail and food service establishments offering a full range of foods to be consumed at home or away from home. These are shown in Table 1.1.

Table 1.1: Consumer Spectrum of Food Consumption Choices

Prepared at Home Purchased from Food Retail

Prepared Away From Home Purchased from Food Service (Caterers/ Restaurants)

Meals From Raw

Components

Semi-prepared

Meals

Home Meal Replacement

Meals

Delivered Meals

Take Away Meals

Catered Meals

Restaurant Meals

Consumed At Home

Consumed On the Go

Consumed Away From Home

Source: Adapted from Rabobank, 19984 There are two major distribution channels providing customers with food – food retail channel and food service channels. Figure 1.2 shows the different channels and sub-channels in a traditional food retail market.

3 Source: http://www.ers.usda.gov/Briefing/FoodPriceSpreads/bill/table1.htm 4 Rabobank International, The Food Retail Market, Rabobank International, The Netherlands. 1994


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Figure 1.2 Food Markets Channels and Sub-Channels

The distribution of consumer expenditure between the different sectors in the food business differs greatly between food eaten at home and food eaten away from home. This can be seen in the case of the more developed food retail market in the US (1998) where services (transport, wholesaling, and food service) accounted for 69 percent of the consumer expenditure on food away from home compared to 39 percent in food consumed at home. (Figure 1.3)

Food at Home Food Away from Home

Figure1.3:Distribution of Consumer Expenditure, USA,19985

5 Source: The Retail Food Market, Rabobank 1994

Farm Value, 30%

Processing, 31% Transport,

6%

Wholesale, 10%

Food Retail, 23%

Farm Value, 16%

Processing, 15%

Transport, 3%

Wholesale, 6%

Food Service,

60%

ConsumersRood Retailers Food Service

OperatorsSupermarket Food Counter

Store

Mom & Pop Store Specialty Food Store

Department Store

Convenience Store

Independent Full Service

Quick Service

Hotels & Motels

Café, Bars & Vending Mach

Street Vendors

Airlines & Ships

Hospital & Schools

Industrial & Manufacturing

National Security

Leisure/ Events

Restaurants Catering


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Food Retail Sub-Sector The traditional food retail sector in CARICOM is made up of several main categories of food retailers – conventional supermarkets, self-service food stores or groceries which are really smaller supermarkets, counter shops, “mom & pop stores”, independent commercial traders, and specialty food retailers selling fruits and vegetables, meat, dairy, bakery, and beverage products. Products purchased from these outlets have traditionally been for meal components for the preparation of meals at home, but increasingly include semi-prepared meal solutions and fully prepared foods called home meal replacements. The following categories have been adapted for the CARICOM region from the Food Marketing Institute6.

• Conventional Supermarkets - The original self-service supermarket format, these are

normally between 10,000–15,000 SF in sales area but can range from 6,000–40,000 SF and carry anywhere from 8,000–18,000 stock keeping units (SKUs), with 5–20 cash registers. These stores offer a full line of groceries, meat, and produce and often offer services such as a deli, bakery, and food service. More recently online lottery, money transfer, and banking services can also be found. Conventional stores will average 60 percent of their sales from grocery items, 12.5 percent from the sale of meats, 10 percent from general merchandise/health beauty and care, 7.5 percent from frozen food, 5 percent from produce, and 5 percent from bakery products, deli services, and other services.

• Self-service Food Stores or Groceries - The self-service small corner grocery store is normally between 3,000–7,500 SF carries 3,000–8,000 SKUs with 2–5 cash registers. It sells a limited selection of staples, budget brands, convenience items, and a few lines of frozen meat and non-food groceries. These stores are strictly speaking supermarkets and are also called groceries in some countries.

• Counter Shops - These stores normally range between 750 and 2,000 SF with no cash register. They offer a limited assortment of basic staples, often repacked in the store from bulk packaging, very little refrigeration, and no fresh product. Goods are sold over-the-counter to the public and family members operate the store. They are also called neighbourhood shops, corner shops, and even sometimes groceries.

• “Mom & Pop Stores” - Normally from 250–750 SF, these shops are located in a room in a home or attached to a home and are operated by family members providing convenience foods and non-food items, snacks, beverages, and cigarettes to the immediate neighbourhood. They tend to operate extended hours.

6 www.fmi.org


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• Specialty Food Retailers - Traditionally food has been purchased from the following specialty food retailers, whose importance in the retail market depends on the stage of development.

Traditional Fresh/Wet Market – A collection of small retailers or a mix of

wholesalers and retailers selling perishables such as fruit, vegetables, roots/starches, condiments, meat, and fish.

Fresh Produce Shop – A shop which specializes in fruit and vegetables

Butcher/Meat Shop – A vendor or shop specializing in meat (also called pluck

shops or pluck & gut shops).

Fishmonger/Fish Shop – A vendor or shop that sells seafood.

Dairy Parlour – A shop that sells milk and/or dairy products including ice cream.

Bakery – A shop that sells bread and pastry products and ice cream. As the traditional food retail sector evolves, new formats are entering the market and now account for a larger share of consumer spending. These new formats include Superstore, Convenience Store, Wholesale Club, Super Centres, Super Warehouse, Super Warehouse/ Hypermarket, and Limited-Assortment Store, which are defined in the industry terms in the industry terms section.

Food Service Sub-Sector Food consumed away from home is traditionally purchased from food service providers which include full service restaurants (within or independent of a hotel), casual dining restaurants, QSRs, street vendors, and from caterers who normally prepare meals under contractual arrangements for organizations.

• Full-Service Restaurants – Feature waiting staff, more varied menus, and perhaps other amenities such as ceramic dishware, non–disposable utensils, and alcohol service. These may be associated with a hotel or be independent restaurants. These include casual dining restaurants.

• Quick Service Restaurants - Feature convenience as the main selling point. They have no wait staff, menus tend to be limited, and dining amenities are sparse. Important dimensions of convenience include speedy delivery of food for consumption in store at establishments


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located close to the consumer, or “on the go” via take away or drive through facilities, or delivery to the consumer’s home/office.

• Bars & Cafeterias – These are smaller food stores that prepare, serve, and sell food to the general public for a profit.

• Street Food Vendors – These include small itinerant operators, often individuals that prepare and serve food from temporary locations in the street.

Caterers – Prepare food in one location for serving in a separate location. These operations prepare and serve meals and snacks as an adjunct, supportive service in institutional and educational settings, such as schools, nursing homes, child day care centres, and hospitals. The distribution of food through these food service channels varies greatly depending on the country and stage of market development. Table 1.3 shows how the US food service industry has evolved. Notable in its absence is data related to street vendors which are more prevalent in developing countries. Increasingly, food service providers are offering take away service and delivering meals to consumers’ homes and thereby competing directly with food retailers.

Table 1.3: Share of meals and snacks away from home by type of outlet in the US 1929 - 2003

Year

Full Service eating places1

Limited Service eating places1

All eating places

Hotels and

motels

Schools and

colleges2

Stores, bars,

vending machines

Recrea -tional places

Others, including military outlets

(%) (%) (%) (%) (%) (%) (%) (%) 1929 51.1 9.0 60.1 10.4 5.0 18.8 1.0 4.7 1939 46.6 7.1 53.7 10.8 6.8 21.1 1.9 5.7 1954 54.9 4.3 59.2 6.0 10.4 16.1 2.2 6.1 1963 50.1 9.7 59.8 6.2 13.5 12.4 2.5 5.6 1972 41.3 21.2 62.5 5.8 13.0 11.4 2.0 5.3 1982 41.0 29.3 70.3 5.4 9.7 8.4 2.3 3.9 1985 39.4 31.3 70.7 5.9 9.3 7.9 2.4 3.8 1990 38.7 35.3 74.0 5.4 6.8 7.6 2.9 3.2 1995 37.5 38.1 75.6 5.0 7.2 5.7 3.8 2.7 2000 39.9 37.5 77.5 4.9 6.8 5.3 3.2 2.5 2003 40.4 38.3 78.7 4.5 6.7 5.0 3.1 2.0 Source: USDA Note: Percents may not add to 100 due to rounding. 1Excludes contract feeding and concessions. 2Includes child nutrition subsidies.

This study focuses on the quick service sub-sector because of its tendency to use franchising as a business format to grow chains domestically and to export their services.


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Food Wholesale Sub-Sector Wholesaling is carried out by four main types of operators: • Manufacturer/Distributors - These distributors tend to have a wholesaling operation to

service the domestic market, and often also have an exporting company to handle exports.

• Importer Distributors - Importer distributors wholesale goods from foreign manufacturers for whom they may or may not have a distribution agency agreement.

• Importer Retailers - Some retailers, especially those which are not associated with other types of food distribution companies, import a significant part of their offering themselves.

• Domestic Wholesalers - These wholesalers tend to be smaller wholesalers with no import or export operation and distribute products from local manufacturers, agri-processors, and agricultural producers in addition to those of importers. They tend to service smaller and more rural retailers and food service providers.

• Commission Agents’ - These handle products in bulk but do not own them, delivering them to wholesalers, retailers, or other individual users.

This study focuses on the Importer Distributors and Commission Agents because these businesses are more likely to trade in services.

Structure of Consumer Food Markets Several forces determine the structure of food retail markets. On the demand side, the level of development and income, cultural and historical factors, consumer tastes and geographic and demographic factors, as well as the overall regulatory environment, influence the structure and evolution of the distribution services market. Government regulations with respect to large-scale operations, zoning laws, hours of operation, etc., also influence the structure of these services. On the supply side, the growth of the distribution sector is driven by competition, market and trade liberalization, the introduction of new technologies, and access to inexpensive credit. The Institute of Grocery Distributors (IGD) of the UK has developed a methodology to classify food retail markets into three groups or stages of development: Traditional, Emerging, and Modern (Table 1.4). The IGD uses five sets of characteristics to classify these markets: two groups of


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demand characteristics, namely consumer profile and consumer shopping habits; and three groups of supply characteristics - retail environment, product categories, and service categories.

Using this analytic tool to classify countries/markets allows one to better understand the current status of the markets and to better predict the likely future course of development for these markets. Details on the demand dimensions of the three broad stages of development are presented below.

Traditional Retail Markets Traditional retail markets tend to be found where there are largely rural populations, with larger households and women who can prepare meals at home. Disposable income is low and the levels of household appliances such as fridges and microwaves are low, so there is limited capability to store chilled and frozen foods, making it necessary to shop frequently from neighbourhood shops, fresh markets, and specialty retailers. Levels of car ownership are low, limiting the opportunities for large and less frequent shopping at stores further away. Ownership of TV, cable, and access to the Internet and frequency of foreign travel are also low. Consumption focuses on traditional staples, basic fresh foods, often from local production, with food being seen as a source of sustenance. Consumption of food away from home is limited but is similar to those produced at home.

Traditional retail sectors have few modern supermarkets or international competition. Most food sales takes place through small self-service food stores with limited refrigeration capacity in urban areas, and through neighbourhood counter shops and van salesmen in rural areas, whose assortment largely comprises traditional staples. The lack of refrigeration in the retail shops and homes makes fresh markets and specialty food retailers of meat, fish, and bread very important sources of food in both urban and rural areas. Wholesalers offer products to both wholesale and retail customers at more attractive prices than can be found in the supermarkets. Fresh produce markets tend to be important channels for staples such as grains and packaged grocery and basic Health Beauty Care (HBC) items as well as fresh produce. Most stores are family owned, offer limited services if any at all, and open for restricted hours. Food retail accounts for the majority of consumer food purchases and food service is limited to street vendors.

Modern Food Retail Markets In comparison to traditional food retail markets, the population in modern food retail markets is more urban and household sizes are smaller. More women work and the population’s age increases as health services improve, disposable income increases, and there is a higher existence of appliances and cars. More international travel and access to cable TV increase the awareness of international lifestyles, products, and brands. The changes in the households’ model lead consumers to shop less frequently at different formats, making larger bi-weekly or monthly trips at a larger one-stop-shopping store further away from home, and purchasing fresh foods from local markets and topping up at neighbourhood stores and convenience stores. Purchasing of foods for consumption away from home increases and includes a wider range of cuisines.


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In modern food retail sectors, the traditional supermarket and counter shop lose market share to more modern retail formats such as superstores and hypermarkets, wholesale membership clubs, and discount supermarkets, which are predominantly found in the capital city, suburban areas, and in primary towns. These larger superstores and hypermarkets can accommodate a much larger offering of fresh produce, chilled meats, fish, dairy and prepared foods, and frozen foods; a wider selection of national and international brands including retail brands; a wider selection of higher margin General Merchandise (GM) and Home Beauty Care (HBC) lines and services. Membership clubs and discount supermarkets carry a limited line of products at more attractive prices. Service offerings are expanded as food retailers seek to gain share from other retail formats such as foodservice, financial services, gambling, pharmaceuticals, and photo development. The traditional supermarkets have migrated from the capital city to towns and self-service groceries. Counter shops have declined in number and have concentrated in smaller towns and villages, shifting their product offering away from staples to include more internationally branded products, convenience items, and services. Regional and international retailers have entered the market. Food service is provided by a few indigenous food service stores and an increasing amount of international fast food stores.

Emerging Food Retail Markets In between the traditional and the modern, there is a transitional stage and several countries share elements of both categories. Emerging food markets have less rural populations, with larger households, and women are still largely housewives. Disposable income is low, but appliances and cars begin to enter households.

Shopping intervals increase and consumers begin to shop at a wider range of formats including newly introduced supermarkets and convenience stores in the capital city, where they can find semi-processed staples, convenience products, and non-food categories. Brand awareness and loyalty develops for local brands. Consumers develop a greater understanding of nutritional and food safety issues. Consumption of food away from home increases and the cuisine widens to include foods not cooked at home, including international fast food. Emerging food retail sectors have begun to see the expansion in the numbers of modern supermarkets in the capital city. They begin to offer wider ranges of regional and international brands, and small amounts of refrigerated lines such as frozen meats and drinks and fresh produce. Greater attention is paid to providing services such as shuttle and delivery service and longer opening hours. Self-service food stores have entered primary and secondary towns and have increased market share. Fresh markets remain an important food retail channel. Food service is provided by street vendors, indigenous food service stores and a few international fast food stores.


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Table 1.4 Stages of Food Retail Development Characteristic Stage 1 Traditional Stage 2 Emerging Stage 3 Modern Consumer Profile

• More rural populations • Larger households/ Women at home • Low disposable income • Low households appliances • Little communication/ travel

• Less rural populations • Larger households/ Women at home • Low disposable income • Some households appliances • Little int. communication/ travel

• More urban populations • Smaller households/ Older ages • More women at work • Higher disposable income • Higher households appliances/Cars • More communication/ travel • Need for convenience shopping

Customer Shopping Habits

• Shops on a daily basis • Low spend on non food • Loyalty to local products • Low brand awareness

• Increasing spend on food & appliances • Loyalty to local products • Increasing local brand awareness • Enjoys promotions and entertainment

• High disposable income • Prefers to shop on a weekly basis • Prefers to do a one stop shop • Quality very important

Retail Environment - Store Formats & Competition

• Daily/weekly shopping - traditional outlets − Self-service Groceries − Neighbourhood Counter Shops − Fresh Food Markets

• Little sign of modern retail formats and international competition

• Bi-weekly/ daily shopping in developing modern & traditional formats

− Supermarkets − Convenience Stores

• Presence of domestic and foreign retailers increasing rapidly

• More monthly/weekly shopping in modern formats

− Superstores/ Hypermarkets − Wholesales/Discount SMkts − Convenience Stores

• More foreign formats Product Categories

• Traditional Staples • Basic Fresh Foods • Local Production • Food as a function rather than a taste

experience

• Semi processed staples • Convenience /novelty products • Increasingly open to foreign products but

loyalty to local brands • Focus on value for money • Increasing spend on non food • Nutritional value more important • Enjoys international fast food

• Happy to spend on luxury goods − Convenience products − Value added products − Health products − Customised products

• Brand promiscuity

Service Categories

• Counter service • Some self serve • Restricted opening hours

• Later opening hours • Shuttle & delivery services

• Foodservice • Financial – C/Card ATMs, Remit, Bill

Pay • Gambling • Pharmacy/ Photo/ Optician/ Car

Source: Adapted from IGD, 2005

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Figure 1.4: Comparison of Traditional and Modern Retail Markets Source: Wendy M. Becker, McKinsey & Company, UNCTAD Distribution Services Meeting, 2005

In Figure 1.4, Mc Kinsey and Company compare the distribution of retail formats in 2003 in the emerging Indian market where approximately 1 percent of consumer food expenditure takes place in supermarkets, with the US where modern food retail formats account for 85 percent of consumer expenditure. In India, counter stores, street vendors, and street markets are the main channels for retailing food. In other countries in transition from traditional to modern retail markets, a more even mix of formats can be found. Examples of emerging countries with growing levels of supermarkets would be Latin America where supermarkets account for 50 – 60 percent of food sales, Indonesia (33 percent) and South Africa (55 percent). Policy Definition for Food Distribution Services In international trade terms, the food distribution sector broadly comprises the following categories outlined in the document MTN.GNS w.120 (w.120), which itself is adapted from the much more detailed United Nations Central Product Classification (CPC). Under w.120, Distribution Services are defined as (Table 1.5):

US China India

$323B

Traditional

54%

5%

20%

20%

1%

PDS/ co-operative

Street markets

Street vendors

Counter stores

Supermarkets/ convenience/specialty

Percent of sales

100% = $180B

Modern

20 1-2

85

$2,325B

100% = 6.5 million food outlets, India

. . . traditional retail is fragmentedIn emerging markets, modern retail formats have minimal share . . .

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Table 1.5: W.120 Distribution Services Codes

Services Codes

Commission agents' services 621

Wholesale trade services 622

Retailing services 631+632, 6111+6113+6121

Franchising 8929

Other B622

Source: MTN.GNS. w.120

In the CPC, these services are much more specifically defined with 113 specific service activities found within five broad categories. Basically, the CPC includes categories of distribution of raw materials, processed foods and beverages, machinery, fuels, pharmaceuticals, toiletries, hardware, textiles and clothing, footwear, various office equipment, and household goods. The food sector is further disaggregated to include:

• Fruits and Vegetables;

• Dairy products and Edible Oils and Fats;

• Meat, Poultry, and Game;

• Fishery Products;

• Sugar, Confectionery, and Baking;

• Beverages;

• Coffee, Tea, Cocoa, and Spices;

• Tobacco; and

• Processed Foods. In addition, the service understood as franchising (in W.120 terminology) is not specifically defined in the CPC. The relevant heading in W.120 actually refers to trade in intangible assets (Box 1.1):

Box 1.1: CPC Franchising Definition 89290 89290 Other non-financial intangible assets

Royalties for the right to use similar exclusive rights as above, not elsewhere classified, owned by other economic agents.

In practice, this comprises activities found in CPC 64210 (Box 1.2):

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Box 1.2: CPC Franchising Definition 64210

64210 Meal serving services with full restaurant service

Food preparation and serving services and related beverage serving services furnished by restaurants, cafes, and similar eating facilities providing full service consisting of waiter service to individual customers seated at tables (including counters or booths), with or without entertainment. Included are such services provided by restaurants, bars, nightclubs, and similar facilities, operated in hotels or other lodging places or in transport facilities, e.g., in trains or aboard ships.

The UNCTAD Secretariat provides useful amplification of the specific business operations included under Distribution Services summarized as follows: -

• Commission Agents’ Services - These involve intermediaries, which also include

brokers, auction companies, and commission merchants. They handle products in bulk but do not own them, delivering them to wholesalers, retailers, or other individual users. Intermediaries trade on behalf of others, and while some intermediaries handle the goods themselves, as in the case of commission agents, others, brokers, for example, sell products without even seeing them (UNCTAD).

• Wholesalers - They collate, store, and disburse products. They cater to retailers and to other wholesalers, and for example, in the food business, to what are called "institutional customers", such as restaurants, hospitals, and catering services. They are either broad-line distributors, dealing with a wide range of products, or product-specialized wholesalers. Wholesalers perform both physical and trading functions. The physical functions include, inter alia: transport, which is often subcontracted; sorting, de-bulking, and handling; stocking; processing; and delivery. Trading functions include sourcing and assortment of supply, selling, marketing, and merchandizing, and managing financial and administrative flows, such as management of risk and stocks (UNCTAD).

• Retailers – They are distributors selling to end-consumers. In addition, retailers provide a set of different services such as product assembly and display, supply of product information, customer services such as delivery, credit, and implicit warranties, and production services such as packaging and processing goods in a suitable form for consumers. The retail sector includes two main types of retailers: store and non-store retailers. While the first operates fixed point-of-sale locations, non-store retailers or retailers "away from a fixed location" reach customers and market merchandise with methods such as broadcasting "infomercials", paper and electronic catalogues, door-to-door solicitation, and selling from portable stalls. Store retail

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services can be classified according to size, business format, and product mix or specialization7 (UNCTAD).

Table 1.6: CPC Classification of Food Distribution Services Sectors

Sector

CPC Code Description

Food Retailing

631

Food retailing services 6310 Retail sales of food, beverages and tobacco 63101 Retail sales of fruit and vegetables 5220 63102 Retail sales of dairy products and eggs 5220 63103 Retail sales of meat and meat products (incl. poultry) 5220 63104 Retail sales of fish and other sea foods 5220 63105 Retail sales of bread and flour confectionery 5220 63106 Retail sales of sugar confectionery 5220 63107 Retail sales of beverages not consumed on the spot 5220 63108 Retail sales of tobacco products 5220 63109 Specialized retail sales of food products 5220 n.e.c.

Food Franchising

89290 Other non-financial intangible assets Royalties for the right to use similar exclusive rights as above, not elsewhere

classified, owned by other economic agents

Food Wholesaling

6221 Wholesale trade services of agricultural raw materials and live animals 62211 Wholesale trade services of grain, oilseeds and oleaginous fruits, seeds and

animal feed 5121 62212 Wholesale trade services of flowers and plants 5121 62213 Wholesale trade services of unmanufactured tobacco 5121 62214 Wholesale trade services of live animals leather 5121 62215 Wholesale trade services of hides and skins and of5121 62219 Wholesale trade services of agricultural raw materials n.e.c 5121 6222 Wholesale trade services of food, beverages and tobacco 62221 Wholesale trade services of fruit and vs5122 62222 Wholesale trade services of dairy products and edible oils and fats 5122 62223 Wholesale trade services of meat, poultry and game 5122 62224 Wholesale trade services of fishery products5122 62225 Wholesale trade services of sugar, sugar and confectionery and bakery products 62226 Wholesale trade services of beverages 5122 62227 Wholesale trade services of coffee, tea, cocoa and spices 5122 62228 Wholesale trade services of tobacco products 5122 62229 Wholesale trade services of food products 5122

Commission Agents’ Services

621 Commission agents' services 6211 Commission agents' services 62111 Sales on a fee or contract basis of agri raw materials and live animals 5110

7 There are different retailing formats: corner store, cash and carries, convenience stores, specialized stores, department stores, discount stores, hypermarkets, superstores, supermarkets, warehouse clubs, super centres, mail-order catalogue sales, and virtual stores.

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Sector

CPC Code Description

62112 Sales on a fee or contract basis of foods, beverages and tobacco 5110

• Franchising – This is classified as a sub-sector of distribution services, but in practice

it is a business format. It is a certain system for reproducing business of a franchisor, which involves a standardized approach to delivering a product or service. The franchisee sells goods or services that meet the franchisor's quality standards and operates under the franchisor's trademarks. Despite uniformity in appearance, a franchisee is independent from its franchisor. The growing trend is towards increasing use of franchising, including in services such as medical and professional services (UNCTAD).

In addition, it is worthwhile pointing out that while logistical and maritime services play an important role in food distribution, they have not been examined in strict terms in this study, but are recommended for further study. In the context of this study, therefore, when we refer to agri-food distribution services, we are specifically referring to the definitions provided by UNCTAD and further specified by the Central Product Classification (CPC) sectors in Table 1.6.

Importance of the Food Distribution Services Industry It is well documented that since the 1990s, services have been the fastest growing element of the global economy in terms of value and in employment although it has slowed slightly in recent years. In 2005, according to the World Trade Organization (WTO), global services exports amounted to US$ 2.4 trillion, an increase of 11 percent over 2004. Services trade expanded most rapidly in Latin America and the Caribbean.8 Table 1.7 illustrates the contribution of the Distribution sector. Although widely varying, the contribution is still significant and plays an important role in all economies. Globally, in terms of economic contribution, the distribution services sector is second in importance only to tourism. UNCTAD reports that food is the most important element of the global distribution services industry, followed by personal care services and textiles and clothing, household appliances, and motor vehicles. The share of food distribution appears to be stable in developed countries.9 An efficient national food distribution service is vital to a market economy, since:

• It allows consumers to benefit from greater choice of a wider range of goods and services at higher levels of availability and more competitive prices.

8 World Trade Organization, World Trade Report 2006, pg. 6. 9 UNCTAD, Distribution Services (Note by the Secretariat) TD/B/COM.1/EM.29/2 dated 7 September 2005.

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• It increases the levels of food safety, fresh food grades, packaged food quality and new product introductions in the downstream agri-food and services industries that service the distributors.

• It provides one of the largest markets in most economies for products and services.

• It performs a particularly pronounced role in developing countries with regard to employment generation for people with lower skill levels, which in turn makes a direct contribution to poverty alleviation.

• It supports a large number of establishments and in particular because of low barriers to entry in the traditional sub-sectors it supports many small and micro enterprises.

• It can support other service industries, such as the tourism industry by leading the development and promotion of indigenous foods, food retail, and food service formats that enhance the tourism product offering.

• It links the consumer to the producer within and between countries and provides opportunities to develop export of products, as new products developed for local businesses become listed for sale across international distributor chains.

Table 1.7 Value added of distribution services* as percent of GDP10 Countries 1970 1980 1990 1995 2002

All economies 26.5 21.1 13.9 14.8 15.2

Developed economies 16.2 14.4 14.7 15.1 15.6

Developing economies 14.0 12.5 14.1 13.6 13.5

Latin America 18.3 15.5 14.9 13.3 14.3

Caribbean 25.1 23.0 21.5 18.9 18.7

Africa 16.1 13.1 15.7 15.6 14.4

North Africa 13.6 11.1 15.6 17.9 15.3

Sub-Saharan Africa 17.1 14.0 16.3 14.3 13.9

Developing Asia 10.3 10.2 13.3 13.4 13.0

West Asia 11.9 9.2 14.1 14.1 12.6

Developing Oceania 14.4 15.2 16.9 15.9 17.3

South-East Europe and CIS n/a n/a 5.7 16.2 16.8

Least developed countries (LDCs) 19.5 19.1 18.9 15.7 16.9

Heavily indebted poor countries 20.2 18.5 18.8 16.5 17.8

Landlocked countries 16.2 15.5 7.5 13.5 12.7

10 UNCTAD, Distribution Services (Note by the Secretariat) TD/B/COM.1/EM.29/2 dated 7 September 2005, pg. 6.

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Countries 1970 1980 1990 1995 2002

Developing economies excluding China 15.5 13.4 14.8 14.3 14.6

Major exporters of manufactures 12.9 12.5 13.4 12.7 13.3 *Measured as wholesale, retail trade, restaurants and hotels Source: UN National Accounts database.

At the same time, the drive for improving national competitiveness could have negative social implications, such as economic displacement, marginalisation, and change in family structures and relationships. Reconciling social and economic considerations was recognized as a key imperative for developing country governments. Developing countries have (most recently at an Expert Meeting on Distribution Services organized by UNCTAD in November 2005), expressed concerns about the potential impact on national development of liberalisation. Main concerns relate to the presence of large foreign firms using their power in an abusive manner and displacing small and medium-sized local establishments. Other concerns related to:

• Smaller farmers and attendant problems in selling to larger players possessing more leverage and their ability to meet quality, value, and other specifications.

• Large format retail shops displacing small shops.

• Negative effects on the informal sectors.

• Preference being given to own labels at the expense of products from developing countries, a problem seen to exacerbate when regional standards are adopted by a trading bloc.11

Apart from issues related to liberalization, significant challenges arise for developing countries through the evolution of the distribution services sector. In addition to the above, notable is the growing concentration in retailing and the domination of a few large firms. In Latin America, the top five supermarket chains account for 60 percent of the grocery market, for example. Product dumping in developing countries (taking advantage inadequate food safety standards and labeling requirements and lax border controls) affects local legitimate distributors apart from its possible deleterious effects on the consumer. Electronic commerce is changing the relationship between supplier and consumer and role of intermediaries. Local SME development is hindered by inadequate supports from developing country governments to encourage new financing mechanisms, address supply-capacity issues, use of modern techniques, develop human resources, and improve national communications and transportation infrastructures. Governments themselves suffer from the general dearth of data on the sector and its impact on economic development thereby inhibiting effective policy-making. In addition, where the need for competition policy frameworks is accepted, entrenched interests, human resource deficiencies, and inadequate commitment to enforcement can hamper implementation of laws. Exclusion from the more efficient global distribution channels raises transaction costs and impacts negatively on the ability of countries to diversify exports even where entrepreneurial activity leads to new product offerings. As such, access to global distribution channels, 11 UNCTAD, Report of the Expert Meeting on Distribution Services, TD/B/COM.1/EM.29/3 dated 15 December 2005, pg. 7.

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recognized during the negotiation of the General Agreement on Trade in Services (GATS) as a key constraint, still remains problematic and should be addressed directly in international trade negotiations. At the same time, it was accepted that improving intra-regional trade in distribution services and developing linkages across regions of the South could bring benefit to developing economies. Becoming more globally competitive in distribution services requires many improvements in developing countries. Two elements were cited as being particularly relevant – the importance of national regulations and ensuring a competitive internal market. An effective regulatory structure protects consumer welfare and provides order in the market. As has been noted with respect to other services sectors, a developed regulatory structure domestically in turn facilitates effective services exporting by economic operators. The CARICOM has taken a step in the latter regard through the creation of the Single Market for services, but national competition issues remain. In the absence of effective competition laws, large distribution firms effectively exclude new operators and can extract rents from the consumers. The situation in the CARICOM region mirrors the international trends identified briefly above. It is notable that in 2002, the Caribbean had the highest value-added of distribution services as a percentage of GDP among all regions of the world, and this is a continuing trend. The Second Report on the Performance of the Services Sector of the CSME for 2004 supports the global trends identified above.

• The CARICOM Services Sector continued to be the largest sector of the regional economy, having an average share of 67.2 percent of total GDP in 2004, and a share of employment in excess of 65.0 percent for the period 1998-2002.

• The Share of Services Output to Total GDP ranged from as low as 46.0 percent for Guyana to as high as 98.2 percent for Montserrat; and for all of the Less Developed Countries (LDCs) it was in excess of 75 percent of total GDP.

• With respect to sub-sector performance, Other Services, comprising Electricity and Gas, and Rental of Dwellings contributed the largest share of Services output at 33 percent in 2004, followed by Distribution Services comprising Wholesale and Retail Trade and Hotels and Restaurants.

At present, no CARICOM country has a national policy in place with regards to the Distribution Sector, much less for the agri-food distribution service sector. Similarly, the sector has received little prior attention at the regional level, a situation that is not unique internationally. In light of above and the importance of Distribution Services CARICOM decision-makers should seek to:

• Understand the sector in a global context, including market trends, regulatory frameworks, and trade barriers.

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• Assess how the developments in the sector regionally relate to the global sector including size, capacities, activities of firms, contributions to economies, the effect of the CSME, the operation of supply chains, linkages with other segments of the economy, and how consumers influence and are impacted by these developments.

• Determine how competitive regional economic operators are through consideration of the

activities of the market participants, establish which sectors are best able to withstand internal and external competition and export effectively, and gauge the operation of local supply chains.

• Explore the opportunities for trade in agri-food distribution services assessing the linkages with agri-food goods exports and the possible negative effects of increased access to the CARICOM market.

• Propose possible objectives, policies, and strategies for improving the competitiveness of the sector and trade negotiating strategies for ensuring that international negotiations respond to and support these policies.

Conclusion The agri-food industry comprises of a number of interconnected actors including farmers, processors, manufacturers, wholesalers, retailers, and food service operators. The agri-food distribution service sector is responsible for moving agri-food products along the supply chain through to the consumer. While services are provided along the agri-food commodity supply chain, this study focuses on the services and service providers which are most likely to be involved in the cross border trade in services, i.e., food retailers, food service operators, and food wholesalers including commission agents. Internationally, analysts have sought to classify markets as modern, emerging, and traditional. It is yet unclear whether CARICOM countries, which are clearly at different stages of retail market development can be so easily categorized. However, it is important to consider the stage of retail development of the individual markets in the region, and the differential impact of modernization on industry members. This will set the stage for a plan for development of the sector that includes well-articulated policy objectives, appropriate growth strategies and, where necessary, appropriate policy instruments. A proper functioning system of distribution would contribute to economic development. At the same time, developing countries, in international forums, are arguing for greater attention to the realities of underdevelopment and the challenges posed by the pressure to modernize and liberalize their distribution sectors. These discussions have relevance to Caribbean countries whose challenges are exacerbated by the small size of CARICOM countries and business operations. As a result, for CARICOM, a structured policy response, including regulatory development, and careful international negotiations becomes even more relevant and should improve competitive

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environments in domestic markets, promote export interests in agri-food services and goods where they exist, and provide a cushion for more sensitive operators in the sector such as many SME food distribution service providers. Such a policy response is currently lacking in CARICOM, and the sector’s needs, as distinct from key sectors like tourism and energy, is being addressed in a laissez-faire manner. The overall goal must be to increase the contribution made by agri-food distribution services to consumer welfare and national and regional competitiveness. This, in turn, should increase the product and service offering to the individual and corporate consumers, reduce transaction costs and impact favorably on many related sectors, including tourism, food manufacturing, agri-processing and related service industries.

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2. INTERNATIONAL FOOD DISTRIBUTION SERVICES INDUSTRY TRENDS

Introduction This chapter reviews developments in the food retail markets and identifies trends that are relevant to CARICOM food consumers and the food distribution industry. While several sources were used in preparing this review, the work of the Institute of Grocery Distribution (IGD)12, Rabobank13, Food Marketing Institute14, Thomas Reardon, Dave Weatherspoon, Franchise Times Magazine, and QSR Magazine were especially relevant.

Global Food Markets In 2003, as the world population reached 6.3 billion, the global food retail market was estimated to be US$3,496 billion (42 percent) of the global retail market. Three key regions accounted for 83 percent of the total retail expenditure and 75 percent of the food retail expenditure–North American Free Trade Area (NAFTA), Western Europe, and Asia Pacific. The level of retail market development varied substantially across the regions reflecting the global distribution of Gross Domestic Product (GDP).

Europe Europe comprises several zones with differing retail market characteristics. Western Europe, which accounts for 31 percent of the European population and 60 percent of the GDP, is a highly mature market characterized by stable prosperous conditions resulting from low GDP and population growth. Southern Europe accounts for 24 percent of the population and 23 percent of the GDP while Eastern Europe accounts for 33 percent of the population and 6 percent of the GDP. As a result, there is a great disparity in annual food spending with consumers in Western Europe spending over US$2,250 compared to approximately US$750 on food. Following on the expansion of membership in May 2004, the EU comprised 25 nations, accounting for 63 percent of the population of Europe and 42 percent of its GDP.

In Western Europe, price is a key consideration in many markets and consolidation is on the increase at the European and national level. Discount and convenience formats are seeing

12 www.igd.net/ Institute of Grocery Distribution. Report: Global Retailing 13 www.rabobank.com 14 www.fmi.org

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strong growth, especially in multi format retailers. Private label brands are growing in response to greater consumer acceptance and profitability pressure.

As Western and Central European markets become more consolidated and competitive, mainstream EU retailers have looked for markets in Eastern Europe and further aboard and in 2005 IGD (Table 2.3) reported that nine of the leading global retailers originated in Europe.

However, discounters have continued to increase share in the more consolidated Western European markets. The EU retailers have been very active in Latin America where 4 of the top 10 retailers originate from the EU.

NAFTA This market is characterized by a high level of competition dominated by Wal-Mart, which acts as a barrier to entry. In spite of this, all NAFTA countries are thought to have market potential and future growth prospects.

Central and South America Modern retailing is well developed in certain countries especially Brazil and Argentina, where consolidation and competition are increasing as retailers seek to optimize their operations. Discount stores are growing in popularity. The market continues to hold potential for future growth.

Africa and the Middle East These markets are very diverse with most development being seen in northern and southern Africa and the Middle East.

Asia Pacific The markets in this region are very heterogeneous, but are characterized by growing levels of urbanization and the rapid rise of modern formats.

The global food market growth is expected to average 5 percent per annum between 2003 and 2020, driven by an increased global population to 7.5 billion people (17.8 percent) in 2020, and average GDP growth of 3.7 percent per annum during the same period. In 2020, the food retail market is projected to be US$6,353 billion. The fastest growth on a regional basis will be the Middle East (33 percent), Africa (31 percent), Central Asia (23 percent), and to a lesser extent, Eastern Europe and Asia Pacific, compared to 4.1 percent for Western Europe. At the country level, China, Russia, India, and South Korea are projected by the IGD to show the strongest growth between 2003 and 2020 (Table 2.1).

The IGD has estimated the size of the total retail and food markets across the world, and the findings for a selection of countries across the Americas are presented below (Table 2.2). Globally, in 2003, food as a proportion of total retail spending averages 39.5 percent. In North America, the food retail market is estimated to be approximately 27 percent of total consumer expenditure.

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Table 2.1: Institute of Grocery Distribution (IGD) Top 10 Food Retail Markets 2003, 2010, and 2020 (US$ billion)

Rank

Country

2003

Country

2010

Country

2020

Growth 2003–2020

(%) 1 US 759 US 915 US 1,194 57 2 Japan 451 Japan 492 China 979 117 3 China 277 China 456 Japan 558 101 4 India 194 India 288 India 504 159 5 UK 156 Russia 203 Russia 388 148 6 France 152 UK 183 UK 230 51 7 Germany 136 France 187 France 216 25 8 Italy 133 Italy 147 Italy 170 10 9 Russia 129 Germany 147 Germany 165 28

10 Spain 64 Spain 79 S- Korea 144 125

Source: IGD Global Retailing 2005 Table 2.2: The Institute of Grocery Distribution (IGD) Retail and Market Sizes for Selected Countries in the Americas, 2003

Country GDP

(US$B)

Popu-lation (M)

Consumer Spending (US$B)

Consumer Spending

(US/Capita)

Total Retail

Market (US$B)

Food Retail

Market (US$B)

Food Retail Market

(US/Capita) US 10,881.6 291.0 7,608.7 26,142.7 2,857.9 759.2 2,608.6Canada 834.4 31.6 474.0 14,986.5 151.5 47.4 1,498.3Puerto Rico 65.2 3.9 8.5 2,178.0 6.8 4.4 1,129.0T & T 10.2 1.3 6.2 4,705.2 2.4 0.7 554.1Mexico 626.1 102.3 438.0 4,282.1 97.1 52.2 520.0Chile 72.4 15.8 45.8 2,902.8 15.5 7.5 476.9Jamaica 7.8 2.6 5.2 1,962.9 3.1 1.1 425.3Cuba 32.1 11.3 25.1 2,224.3 14.8 3.7 326.7Argentina 129.7 38.4 80.2 2089.2 22.7 12.3 321.2Honduras 7.0 7.0 4.4 627.0 3.1 2.0 282.3C/Rica 17.5 4.0 10.7 2,659.9 4.2 1.0 257.4Panama 12.9 3.0 7.0 2,361.0 3.6 0.8 255.4Nicaragua 4.1 5.5 2.3 425.2 1.6 1.1 196.2El Salvador 14.4 6.5 11.7 1,786.7 5.9 1.2 189.4Haiti 2.7 8.4 3.3 391.7 2.2 1.5 178.6Brazil 492.3 176.6 291.9 1,652.8 74.5 31.2 176.9Guatemala 24.7 12.3 20.0 1,628.7 10.1 2.2 175.3Colombia 77.6 44.4 51.2 1,152.6 20.5 7.3 165.3Dom Rep 15.9 8.7 10.5 1,198.9 6.2 1.2 141.7Venezuela 84.8 25.5 57.8 2,263.5 21.6 3.5 137.9

Source: IGD Global Retailing 2005GDP, Gross Domestic Product

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In Latin America, expenditure on food is estimated to be 35 percent of all consumer expenditure compared to 35 percent and 29 percent in Jamaica and Trinidad and Tobago, respectively. Several countries in Latin America have smaller food markets or smaller per capita spent on food than Jamaica. As incomes rise, it is also expected that consumers will continue to increase their consumption of food away from home as has been the case in the US. There the percentage of food consumed away from home has increased from approximately 25 percent of expenditure in 1960 to over 40 percent of expenditure in 2002 (Figure 2.1).

Source: ERS food expenditure series Source: ERS food expenditure series Figure 2.1: Expenditures for Food at Home and Away from Home15 Global Food Retail Sector Over the last 20 years, a small group of food retailers have been increasingly trading across the globe. In 2003, of the top 15 food retailers, 13 had their base in developed countries and 11 had a presence in 9 or more countries. Wal-Mart with US$325 billion (Euro285 billion) turnover significantly outstripped its nearest rival, Carrefour, which posted revenue of US$91 billion (Euro79.6 billion). Wal-Mart, however, trades in fewer countries than eight other global retailers. In addition, Wal-Mart’s major formats have a wider proportion of non-food items than other global food retailers.

The leading global retailers tend to be the market leaders in their respective home market and continue to invest heavily to maintain this position. Carrefour is considered to be the global leader since, in part, it operates in the largest number of countries around the world. In 2000, it had 19 percent share of the French market, which accounted for 51 percent of its turnover. Wal-Mart had the largest share of the US market and its US sales accounted for 80 percent of the firm’s turnover. Tesco had 27 percent share in the UK market which accounted for 80.4 percent of its turnover and Ahold had 12 percent of the Netherlands’s market, which accounted

15 http://www.ers.usda.gov/Briefing/FoodMarketStructures/foodservice.asp

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for 63.6 percent of its turnover. This investment in domestic markets is important for global market development strategies since it provides a source of cash to fund overseas operations, a platform for fine-tuning new initiatives before global launching, a market to recruit the best domestic talent, and opportunities to build strong relationships with domestic and regional suppliers.

Table 2.3: Profile of the 10 Global Retailers as Ranked by Institute of Grocery Distribution (IGD) Retail Index, 2003

Retailer Home

Country Turnover (B Euro)

Domestic Sales (%)

Countries (No)

Sales Area (mm)

Stores (No)

EBIT (%)

Carrefour France 79.6 51 32 13.7 10,386 4.4 Wal-Mart US 285.2 80 11 60.8 5,305 6.1 Tesco UK 50.3 80.4 13 4.2 2,318 5.8 Ahold Netherlands 63.6 16.5 21 7.4 5,066 4.0 Metro Germany 60.5 52.8 28 11.4 2,370 2.8 Auchan France 32.4 62.0 12 6.2 2,459 4.1 Casino France 25.9 79.6 20 6.6 8,639 5.0 Ito-Yokado Japan 30.5 63.7 19 4.9 27,384 6.2 Aldi Germany 39.7 62.2 12 ― 7,110 5.3 Delhaize Belgium 21.2 19.5 9 5.1 2,559 4.3 Aeon Japan 30.1 95.0 9 ― 6,678 4.0 Cencosud Chile 1.5 65.0 2 0.5 132 3.0 Colruyt Belgium 4.3 91.9 2 ― 578 8.3 Dairy Farm China 4.5 ― 8 ― 2,570 4.1 $ General US 6.8 100 1 4.2 6,700 8.0

Source: IGD Global Retailing 2005 In their home markets, global retailers tend to compete in different parts of the food retail markets with different formats. Tesco provides a good example of this. Outside of their home markets, global retailers need to use a mix of strategies to penetrate new markets. They try to promote the developed country formats that made them successful in their home markets. These are normally large hypermarkets, which include strong non-food departments, super centres focused on a wide offering of food products, or discount supermarkets that target the price sensitive segment of the population, and traditional supermarkets. In addition, they tailor these formats to local markets and purchase local chains to build critical mass in new markets. Their experience at managing different brands and formats allows for flexibility in the mode of entry into new markets.A profile of a selected group of global retailers of interest to the Caribbean food distribution industry is presented below.

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Carrefour The IGD ranks Carrefour16 as the most globalized retailer based on a mix of factors including sales, international presence, retailing vision, global strategy, and culture. In 2005, with US$106 billion (Euro93 billion) in sales and US$32 billion (Euro28 billion) of market capitalization, it was the largest retailer in sales in Europe and the second largest in turnover in the world, operating 7,000 stores in 32 countries with 436,000 employees.

Carrefour’s store portfolio is dominated by three leading formats by sales, viz; hypermarkets (58.8 percent), supermarkets (17.8 percent), and hard discounters (8.6 percent), but also includes convenience and cash and carry stores. Their main format, the hypermarket, typically averages 80,000 SF in size and offers a wide range of up to 80,000 stock keeping units (SKUs) of food and non-food products at attractive prices. In the Americas, Carrefour’s operations accounted for 6.8 percent of sales in 2005. Table 2.4 details the Carrefour presence in Latin America.

Table 2.4: Profile of Carrefour Operations in Latin America, 2005

Country First store Number of stores Hypermarkets Supermarkets Hard Discounters Argentina 1982 461 28 114 319 Brazil 1975 336 100 35 201 Colombia 1998 21 21 ― ― Dominican Republic 1999 1 1 ― ―

Source: Carrefour In the 1990s, Carrefour also entered Mexico and Chile, but in 2004, it sold its eight hypermarkets in Chile to Dand. In March 2005, Carrefour sold its 29 hypermarkets in Mexico to Chedraui, This can be viewed as part of this firm’s ongoing exploration of markets and restructuring of its portfolio.

Wal-Mart Wal-Mart17 continues to be the largest company by turnover in the world accounting for 20 percent of all food sales, down from 20.5 percent in 2003. It has narrowed its position on Carrefour as it transfers its knowledge and private label brands worldwide. In 2005, its sales were US$312 billion. Wal-Mart has established a cost and price leadership in its domestic market, where it succeeded in driving the price agenda for both food and non-food products with prices that are up to 15 percent lower than competitors. Wal-Mart’s Every Day Low Pricing (EDLP) is based on Every Day Low Costing (EDLC) driven by an industry leading supply chain, joint planning with global suppliers, limited promotional programmes, a simple

16 www.carrefour.com 17 www.walmart.com

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centralized management structure to contain overheads, and a company culture focused on cost control. The Wal-Mart store portfolio in the US is dominated by three leading formats by store numbers, Wal-Mart Stores (30 percent), Super Centres (53 percent), and SAMS Clubs (14 percent), but also includes Neighbourhood Markets. In 2005, it operated 40 percent of its 6,577 retail units in 14 countries outside of the US. In 2006, Wal-Mart plans to open 220–230 units in existing markets with relocations or expansions of existing stores accounting for 30 percent of these units, while the remainder represents new operating units for the company. Wal-Mart attributes its success in international markets to its ability to transport the company’s culture and effective retailing concepts to each new country. It seeks to adapt to local cultures and become involved in the local community. Table 2.5 shows the Wal-Mart penetration into global regional and countries which appears to bear some relationship to bilateral trade agreements between the US and other countries or regions. In 2003, the Latin American operations of Wal-Mart accounted for less than one percent of sales and the retailer had 212 stores in South and Central America of which 152 were local formats. Table 2.5: International Trading Activates of Wal-Mart, 2005

Region Country Retail Units Date of Entry North America Mexico, Canada, Puerto Rico 797, 54, 278 1991, 1992, 1994 Europe Germany, UK 87, 321 1995, 1996 Asia China, Japan 57, 395 1996, 2002 Latin America Brazil, Argentina 293,12 1995 Central America Costa Rica, El Salvador, Guatemala, Honduras, 128, 58, 120, 37, 33 2005

Source: Wal-Mart The pattern of market entry across the Americas is interesting to note. In 1991, Wal-Mart entered Mexico with a joint venture with Citra to open Sam’s Club in Mexico City, the first country in its international division. In 1997, it acquired a majority position in Cifra and changed the name to Wal-Mart de Mexico. Wal-Mart planned to open 70 units in Mexico in 2005. In 1991, Wal-Mart entered Puerto Rico and opened a Sam’s Club in the same year, followed by two more Sam’s Club’s in 1992 and a Wal-Mart Super Centre in 2001. In 2003, the company acquired the largest supermarket chain adding 32 stores to its portfolio, bringing the total number of stores in Puerto Rico to 42. In 2006, it expected to open two Super Centres. In 2005, Wal-Mart entered the Central American region by acquiring 33.3 percent interest in a regional retailer CARHO from the Dutch retailer Royal Ahold NV. In March 2006, Wal-Mart increased its interest to 51 percent and the name CARHCO was changed to Wal-Mart Central America. Wal-Mart Central America is reported by Wal-Mart to be the region’s largest retailer with 363 supermarkets and 23,000 employees in Guatemala, El Salvador, Honduras, Nicaragua, and Costa Rica. It has three operating companies―La Fragua, originally founded in Guatemala in 1928, CSU founded in Costa Rica in 1960, and an agro-food supplier Corporation de Coaneas Agrocola Industrias. In each country, it has a portfolio of different

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types of supermarkets trading under local names. In 2006, Wal-Mart planned to open new stores in Costa Rica (6), El Salvador (8), Guatemala (17), Honduras (13), and Nicaragua (8). Tesco Since the mid-1990s, Tesco18 has been investing in new markets overseas. In the UK, Tesco has four different store formats: • Tesco Express stores have sales areas below 3,000 SF with 7,000 lines including fresh

produce, wines, spirits and in-store bakeries.

• Tesco Metro stores range in size from 7,000–15,000 SF. They are convenience stores located in town and city centres offering a tailored range of food lines, including ready-to-eat meals and sandwiches.

• Tesco Superstores range in size from 20,000–50,000 SF and sell mainly grocery items and a number of non-food ranges such as DVDs and books.

• Tesco Extra stores are one-stop destination stores with sales area of 60,000 SF and above. They have the widest range of food and non-food lines, ranging from electrical equipment to home wares, clothing, health and beauty, and seasonal items such as garden furniture.

In 2003, the Tesco global store portfolio stood at 2,318 stores, dominated by two leading formats by store numbers, Tesco Superstores (25 percent) and Tesco Extra stores (12 percent), but also includes convenience formats such as Tesco Express stores and Tesco Metro stores (58 percent), most of which were located in the UK and Ireland. By 2005, this number had grown to 2,500 stores worldwide in 13 markets outside the UK focused on Europe (6) and Asia (7). It is the market leader in five countries but has no operations in the Americas. Royal Ahold Royal Ahold19 is the third largest retail-based company in the world after Wal-Mart and Carrefour. However, a large part of its turnover is from foodservice, and on the basis of retail sales alone, it would rank a few places lower. In the latter half of the 1990s, it expanded into markets in Eastern Asia and Latin America. In 2003, it operated 690 stores in Mexico, Brazil Guatemala, El Salvador, Honduras, and Costa Rica. But this ambitious global expansion was halted by fraud at the chain's American subsidiary, U.S. Foodservice, and by a Board-level accounting scandal. This led to the sale of some of its grocery chains in Latin America and elsewhere, and by 2003, Ahold had totally halted operations in Brazil, once a sizable market for Ahold.

18 www.tesco.com 19 www.ahold.com

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PriceSmart PriceSmart20 owns and operates membership shopping warehouse clubs in Central America and the Caribbean. The company’s goal is to be the "low-price leader" for the markets served. It seeks to do so by offering a limited range of products in a low-cost, US-style no-frills warehouse type environment. It seeks to achieve economies of scale in buying as stores are added and buying power and negotiating leverage improves, to operate a low-cost distribution, to build a strong network of suppliers, and to leverage its experience in running similar operations. Stores have a standard format, averaging 50,000 SF in size with 2,500–3,000 SKUs that sell brand name and private label items at low prices. The product assortment is approximately 45 percent food and 55 percent non-food items. In 2005, sales were US$604 million but the company suffered a net loss of US$63 million. In the early 2000s, PriceSmart expanded its operations into the Philippines and Mexico, but has since exited these markets to focus on Central America and the Caribbean. The Caribbean locations include wholly-owned subsidiaries as shown in Table 2.6.

Table 2.6: International Trading Activates of PriceSmart, 2005

Region Country Retail Units Central America Guatemala El Salvador Honduras Costa Rica, Panama 2, 2, 2, 3, 4 Greater Caribbean DR, USVI, 2, 1 CARICOM T&T, Jamaica, Barbados 2, 1, 1

Source: PriceSmart

This short review of the leading global retailers demonstrates their capacity to open a large number of stores in different countries and different formats each year. They are continually entering and exiting markets as they probe new investment opportunities and realign their portfolio of stores. Entrance into new markets is undertaken both by organic growth (through the construction of new stores) and the acquisition of local chains. These companies also swap interests in markets. It is notable that they also invest in countries with small populations like the US Virgin Islands and Aruba, and small retail markets like those in Central America and the Caribbean.

20 www.pricesmart.com

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Global Food Retail Trends

Developed Country Retailer Trends

Discount or Price-Oriented Retailing Strategies

In both the US and EU, hard discounters are experiencing strong growth driven by range adaptations and wider customer appeal. They have been experiencing increases in both “Like-for-Like” sales and in number of stores, which has led to increased market share. Cost leadership increased in 2004 in response to slow economic conditions, weakening demand, and reduced consumer confidence due to higher unemployment and low wage increases. Other factors included increases in the proportion of low-middle income consumers and aging population, and increased consumer acceptance of the hard discount sector and price inflation. Pressure to operate at a low-cost base, has led some retailers to divest non-core subsidiaries to focus on their key markets. The success of the hard discounters has made it more difficult for the mainstream retailers to achieve price leadership with fewer customers willing to pay for an extended premium range of products. Traditional retailers are responding to the growth of discount retailers by improving their low-cost offers, introducing new entry-level own-label ranges priced to match discounters, and rationalizing ranges to increase volumes and hence improve buying terms from leading brands. There is also increased interest in purchasing alliances to improve purchasing power. Differentiation Strategies Smaller retailers in markets dominated by large-cost leaders have been adopting successful differentiation strategies clearly focused on strategies that are not scale-dependant. Alternatively, mainstream retailers are employing other strategies to differentiate their offer on terms differing from price. Strategies include providing a premium quality food assortment throughout the entire range or focusing on specific category particularly fresh products; ranging a limited assortment of specialist goods, excellence in customer service, innovation in food or food service provision, especially where consumption of food away from home is growing, or by building excitement to create a unique bond with the local catchments. Non-food Items In mature markets, supermarkets are expanding into non-food items to compensate for lower growth in food. Grocers have allocated more space to the non-food ranges. Multiples have large non-food portfolios of between 21 and 50 percent of floor space in newer categories, mainly low priced clothing/footwear and electrical goods, higher priced health and beauty, furniture, sporting goods, and lighting.

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Box 2.1 Key Drivers Underlying Non-Food Category Growth

PUSH PULL • Slowing population growth reducing food

expenditure growth • Food share of retail declining • Limited ability to differentiate on food alone • Increasing popularity on eating out • Harsher price competition on core grocery • Further operational efficiency in food retailing hard

to find • Continuing need to provide returns to shareholders • Keeping with the competition • Growing acceptance of one-stop shopping

• Improved margin opportunities • Developed greater draw to the store • Stronger growth prospects in categories outside of

grocery • Perceived weakness competition set in non-food

sectors • Leveraging of business scale • Capitalizing on brand trust • Opportunity to grow store traffic and increase

transaction size • Mass market grocery credentials translate into

favourable non-food price perceptions • Price competitiveness offer derived from scale • Consumer desire for one-stop shopping

Planning restrictions have been the biggest barrier to increasing non-food sales and retailers are becoming more innovative in creating space to expand this category. Grocers can leverage the non-food sales to improve their offer to the food customers or lower their food positions to encourage increased traffic and sales of more profitable non-food items. The key drivers of this are outlined in Box 2.1.

Service Offerings In markets which are more mature and there is considerable consumer trust in the major retail brands, the major multiples are witnessing significant uptake by consumers for services sold in store or through on-line services. Services begin with on-line sales and home delivery of their supermarket products and include petrol forecourts, health and optical services, financial services, pharmaceuticals, entertainment and vacation, and communication. Moreover, analysts are predicting a dramatic reduction in the cost of various financial services from insurance to loans. These offers of non-food services are continuing to revitalize consumer interest in the supermarket brand and contribute to consumer loyalty.

Consolidation Consolidation of the global industry, which is most present in developed countries, will expand to less developed regions driven by retailers from developed markets where growth is stagnant. Mergers and acquisitions will continue to be a major part of the food retail landscape. In mature developed country markets, large-scale acquisitions will give way to small-scale fill-in acquisitions. In developing markets, consolidation will continue. Competition authorities will likely force retailers to look at unorthodox mergers across formats and sectors to consolidate size. Mega mergers are still likely as Wal-Mart’s sheer size allows it to negotiate the acquisition of any of its competitors, who may themselves consider pre-emptive mergers in anticipation of Wal-Mart’s plans.

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Supply Chain Relationships Relationships between retailers and suppliers will become more centralized and there will be greater pressure for regional/global purchasing decisions by retailers. Retailers and suppliers will also enter into more collaborative projects which will bring benefits such as better relationships, increased profitability and joint business planning, efficient negotiations, and conflict resolution. Supply chain management will become more important driven by the momentum of Every Day Low Prices (EDLP) strategies. Market maturity will lead retailers to improve productivity by tailoring each site to the catchment area.

Product Introductions Product introductions are the lifeblood of the food industry and are increasing at great pace. This is of major concern to many retailers. The growth in product introduction exceeds growth in store capacity, and retailers increasingly have to refuse new products. As a result, food producers must alter the push strategies they have followed over the last few years. In the US, this has lead to producers paying fees to get their products onto shelves and to share in the commercial risk of product failures. Developing Country Retailer Trends: Latin America Recent work by Reardon et al21 (2002) on the impact of supermarkets on the Latin American agro-food economies, has shown the rapid and profound impact that supermarkets can have on consumers and the agro-food industry in developing countries. In the 10 years leading up to 2000, supermarkets in Latin America have increased their share of the food retail market from 10–20 percent before 1990, to 50–60 percent in 2000. During this period, many small shops went out of business at the expense of supermarkets, hard discounters, and convenience stores. Fresh fruit and vegetable stores, however, have held ground. In the 1980s, supermarkets spread quickly from their niche in capital cities to intermediate cities, and then to medium-sized and small towns in the 1990s. In addition, they moved from upper-income neighbourhoods where a few of them were before 1990, to spill into middle-class neighbourhoods and then into working class neighbourhoods in the late 1990s. The latter development is especially occurring by way of large supermarkets and hypermarkets with low prices and austere presentations. This means that they directly affect the rural zones on both the demand and supply side. During the 1990s, supermarkets have moved across Latin America from richer or larger countries to smaller ones seeking competitive territory. Moreover, multinationals such as Wal-Mart, Carrefour, and Ahold were the dominant force in foreign direct investment across the continent with the exception of Chile where local capital has remained the major shareholder. There is also a clear pattern of acquisition of smaller independents and chains by larger retailers as part of the inter country dynamic growth pattern.

21 Reardon, Thomas, The Rapid Rise of Supermarkets in Latin America: Challenges and Opportunities for Development

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The growth in supermarkets was accompanied by rapid consolidation to where the market share of the top five retailers was, on average, 65 percent. The consolidation began with large domestic chains buying independents and smaller provincial chains. This was followed by multinationals buying the larger national chains and joining with domestic firms to purchase independents and local chains. Moreover, there was a rapid increase of multi-nationalization to where the share of multinationals in the sector exceeded 55 percent. In particular, the multinationals (mainly by the top three retailers in the world―Wal-Mart, Royal Ahold, and Carrefour) owned 60–80 percent of the top five retailers in most countries. The multinational entry and growth was initially driven by mergers and acquisitions followed by slower new store development. Reardon et al. (2002) have proposed that the main drivers of supermarket growth in Latin America come from both the demand and supply side. From the demand side: • Urbanization which provided greater catchment areas for supermarkets. • Entry of women into the workforce with increasing opportunity cost of their time

encouraging them to purchase more convenience and processed foods. • Rapid growth of mean per capita income which has led to:

Greater demand for non-staples, especially perishables and processed foods; Greater availability of kitchen appliances, especially refrigerators, which allowed

storage of perishables and less frequent shopping trips and for speedy cooking of convenience foods; and

Growing access to cars by middle income and middle-low income consumers. From the supply side: • Trade liberalization made it easier and cheaper to import food and non-food products. It

stimulated the importation of cars and refrigerators. • Structural adjustment programmes and regional free trade agreements facilitated greater

levels of foreign direct investment in food retailing. Reardon et al (2002) stated that the transformation of the food distribution sector has had significant impact on the agro-food supply chain.

• Market Share - Supermarkets are fast becoming the main retail buyers in supply chains of processed foods.

• Food Retail Market Development - Supermarkets play an important role in developing and expanding urban and rural food markets and agro food supply chains to stimulate growth of the sector.

• Regional Development - Supermarkets, as they spread across regions, have expanded their supply chains across countries thereby contributing to regional market and industry development.

• Agro Food Procurement Practices - Supermarkets and large processors procurement practices-quality and safety standards, packing and packaging, cost, volumes, consistency, and payment practices-have a big impact on, and are an important challenge for, farmers and supply chains in the region. They are quickly changing the rules of the game through

59


their coordination and organization of the supply chain through their contracts, private standards, sourcing networks, and distribution centres.

• Market for Agriculture and Food Industry Products - Supermarkets provide a far more important market for small producers and firms than do export markets. Reardon et al. (2002) estimated that in Latin America, supermarket purchases of fresh fruit and vegetables was US$24 billion compared to the total exports of similar products of US$10 billion.

Developing Country Retailer Trends : Africa Weatherspoon et al22 (2003) have shown similar transformation in southern Africa where supermarkets have quickly spread in southern and then eastern Africa, but are still only starting in poorer regions of West and Central Africa. The rapid growth pattern displayed by supermarkets follows the development of the food retail markets as they move from niche markets to intermediate and then advanced stages of development. Growth in Africa is characterized by three waves, from richer or larger countries to the poorer or smaller countries, from capital city to smaller towns, and from the rich to the middle income and even poor neighbourhoods. Within a region, they found that supermarkets would first saturate their home countries, then they would expand to other countries (usually higher margin) countries through organic growth or acquisition. For example, in 2003, in the southern African region, where South Africa is at a more advanced stage of food retail market development, the largest chain Shop Rite Supermarkets operated a portfolio of over 360 stores. Although the company had only been established in 1979, it had still managed to establish 70 stores (19 percent) in 11 other African countries, mainly in the southern African region, but also as far away as Egypt and Kenya. Since then, Shop Rite has been exploring the possibility of entering markets on other continents. Another chain, Pick N Pay was established in 1968 and had 342 stores in South Africa and 79 stores in five countries, viz., Botswana, Mozambique, Namibia, Swaziland, and Zimbabwe, with 53 in Zimbabwe alone. Weatherspoon et al. (2003) proposed that this pattern of rapid growth of supermarkets in Africa is driven on the demand side by urbanization, population growth, increased incomes, inexpensive high quality products, and relative political stability. It is driven on the supply side by competition, market and trade liberalization, the introduction of new technologies, and access to inexpensive credit. Supermarket growth will continue to develop quickly and as supermarkets spill out into the more rural and lower income areas, they will have a profound impact on both the lives of consumer and on suppliers.

22 Weatherspoon, Dave D. et al. “Battle of the Supermarket Supply Chains in Sub-Saharan Africa: Challenges and Opportunities for Agrifood Suppliers.”

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Global Quick Service Restaurant Industry In 2004, the Franchise Times Magazine23 reported that there were 72 restaurants on its ranking of the top 200 global franchises. These 72 restaurants, led by predominantly US quick service restaurant (QSR) chains, operated 156,424 units across the world and generated US$163 billion in sales. Leading Global QSR Chains The global fast food industry is dominated by six companies, which in 2004 achieved sales of US$110.9 billion and accounted for 68 percent of the sales of the leading 78 global franchise restaurants in the Franchise Times list. These are McDonald’s Corporation (US$50.2 billion), Yum! Brands (US$27.8 billion), Burger King Corporation (US$11.8 billion), Wendy’s International (US$8.6 billion), Doctor’s Associates which operates Subway (US$7.8 billion), and Domino’s Pizza (US$ 4.6 billion). Yum! Brands had the largest number of stores in total and McDonald’s had the largest number of stores outside of its domestic markets. (Figure 2.2) The six leading restaurant concepts (as opposed to companies above) all experienced sales growth in 2004. Subway’s (Doctor’s Associates) opening of an additional 799 international units helped it grow sales by a robust 14 percent. Although McDonald’s unit expansion was subdued with its additional 261 units, representing less than 1 percent growth in units for the year, its increases in same store sales growth helped by the introduction of healthier offerings, led to an increase in sales of nearly 10 percent for the chain. The two top QSR concepts of Yum! Brands (KFC and Pizza Hut) both registered sales growth greater than 7 percent. Burger King managed to increase sales to an impressive 6.5 percent despite a slight decrease in total units. Global QSR business strategies revolve around a mix of elements including choice of (i) fast food segments, (ii) QSR concepts, (iii) store design, location, and ownership, (iv) menu and services, and (v) international markets. These strategies are borne out by a brief examination of the market leaders. Three of the global leaders, McDonald’s, Yum! Brands, and Wendy’s, pursue a multi-brand strategy and operate QSR concepts in several of the fast food segments while the remaining three, Burger King, Subway, and Domino’s operate only one concept and focus on one segment only. Table 2.6 shows the portfolios of the leading six brands. As QSRs re-evaluate their strategies, they enter and exit markets and segments by acquiring or disposing of concepts. For example, in 2004, the global consumer goods group Diagio sold Burger King to Burger King Holdings, and in 2003, McDonald’s disposed of its subsidiary Donato’s Pizza.

23 www.franchisetimes.com

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5,008

5,933

7,624

17,910

13,673

20,610

2,992

3,367

3,376

7,990

18,127

13,690

0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000

Dominos

Wendy’s

Burger King

Subway

McDonalds

Yum! Brands

Domestic StoresInternational Stores

Figure 2.2 Leading International QSR Companies Ranked by Number of Outlets, 2004 The pizza/pasta and sandwich segments serve as examples of how QSRs tend to differentiate themselves on location, menu, and service. The Pizza Hut franchise is the largest restaurant chain in the world specializing in the sale of ready-to-eat pizza products and leads the field in dine-in Pizza sub segment. As a result, it has larger stores with table service and play facilities for families. Domino’s Pizza is the second largest pizza company in the world and leads the market in the pizza delivery segment. In contrast, its stores are principally delivery locations and generally do not have any dine-in seating. Papa John’s Pizza differentiates itself by offering fresh “high quality ingredients” in its pizza from small stores with little dine-in facilities and delivery service. In the sandwich segment, Subway claims to have achieved continued growth in part to developing stores generally without any dine-in seating, designed principally as delivery locations, and located in non-traditional locations closer to the customers. Companies adopt varying approaches to store development ranging from full company ownership of store to franchising of stores, but also including joint ventures and others forms association. Companies experiencing fast growth such as Subway, and Quizno’s tend to use franchising to fund rapid expansion and have over 95–100 percent of their units franchised. The store development programme is related to the mode of international market entry. Generally, levels of company-owned stores are higher in the lower risk markets such as the QSRs domestic market, in developed country markets across the globe or in larger markets where there is enough critical mass for the parent company to establish a subsidiary. Yum! Brands tends to own stores in North America, the UK and other “Established Markets” while it uses other forms of ownership such as joint ventures in “Emerging Markets” and operates some markets as “Franchise Only” markets. The McDonald's business model is slightly different from that of most other fast-food chains. Globally it owns and operates 27–29 percent of its stores and operates the rest through franchises and affiliated companies. However it requires that, as a condition of the franchise agreement, the Corporation owns the

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properties from which many McDonald's franchisers operate. This explains in part why most units are free-standing stores and the large difference in the fee structure of McDonalds franchises (Table 2.7).

Table 2.7: Fast Food Segments Serviced by Leading Global QSRs

QSR Company Burger Sandwich Chicken Pizza Mexican Snack Seafood Asian McDonalds Corporation

McDonalds Restaurants

Pret-a -Manger

Boston Market

- - Chipotle Mex Grill

Aroma Café

― ―

Yum! Brands Inc

A &W ― KFC Pizza Hut

Taco Bell

― LongJohn Silver

―

Burger King Holdings

Burger King

― ― ― ― ― ― ―

Wendy’s International

Wendy’s Burgers

― ― Pasta Promodo

Baja Fresh

Tim Hortons

― ―

Doctor’s Associates

― Subway Restaurants

― ― ― ― ― ―

Domino’s Pizza

― ― ― Dominos Pizza

― ― ― ―

Source: Company Websites Firms are continuously reviewing their strategies to remain competitive. This process is demonstrated in the review of global leaders and their international development programs provided below (Table 2.8).

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Table 2.8: Top 25 Global Franchise QSR Profiles, 2004

Parent Company

QSR Brand

First Store

Opened

Global Markets

(No) Ownershi

p

Total Stores 2004 (No)

Domestic Stores 2004 (No)

Domestic Stores 2004 (%)

Stores Franchise

d 2004 (%)

Staff (No)

Global Sales 2004

(US$ B)

System Wide Sales Growth last

year (%) McDonald’s Corporation 5 QSR Brands 1954 100 Public 30,481 13,656 45 73 447,000 50.2 6.20 Yum! Brands Inc. 5 QSR Brands 1952 100 ― 33,607 20,610 61 77 272,000 27.9 3.33 Burger King Holdings Inc. Burger King 1954 65 ― 11,188 7,545 67 91 30,300 11.8 5.80 Wendy’s Int. Inc 5 QSR Brands 1969 20 ― 9,687 5,935 67 82 57,000 8.6 4.20 Doctors Associates Inc. Subway Sandwiches 1965 80 ― 22,468 17,909 80 100 150,000 7.8 ― Dominos Pizza Inc. Dominos Pizza 1960 55 ― 7,757 5,008 65 92 145,000 4.6 -6.00

Dunkin Brands Inc Dunkin’ Donuts ― ― ― 6,193 4,418 71 100 ― 3.6 ― Triarc Restaurant Group Arby’s ― ― ― 3,461 3,327 96 93 ― 3.2 * ― Brinker International Inc. Chili’s Gril & Bar ― ― ― 1,028 930 90 24 ― 2.9 * ― IDQ Companies Dari Queen ― ― ― 5,672 4,765 84 99 ― 2.9* ― Quiznos Master LLC Quizno’s Classic Subs 1981 20 ― 3,728 3,339 90 100 450 1.4* ― Sonic Corp. Sonic, America’s Drive-in ― ― ― 2,885 2,879 99 81 ― 2.8* ― Papa John Int. Inc Papa John’s Pizza 1985 20 ― 2,829 2,565 91 80 13,200 1.8 2.80 CKE Restaurants, Inc Hardee’s ― ― ― 2,175 2,034 93 69 ― 1.8 ― Chick-Fil-A, Inc. Chick-fil-A ― ― ― 1,191 1,191 100 100 ― 1.75 ― AFC Enterprises Popeye’s Chicken & 1972 28 ― 1,825 1,472 81 97 1,500 1.5 ― Panera Bread Co. Panera Bread ― ― ― 741 741 100 70 ― 1.2 ― Dunkin Brands, Inc. Baskin Robbins ― ― ― 5,410 2,765 51 100 ― 1.0 ― Hooters of America Hooters ― ― ― 388 356 92 070 ― 0.8 ― Chester’s International LLC Chester’s ― ― ― 1,751 1,501 86 100 ― 0.8 ― Magic Restaurants, LLC Fuddruckers ― ― ― 211 210 99 046 ― 0.3 ― Taco John’s International Inc Taco John’s ― ― ― 411 411 100 098 ― 0.2 ― Selected Minor QSRs Operating in CARICOM

Carlson Rest.WorldwideT.G.I. Friday’s ― ― ― 760 531 70 65 ― 2.4 ― Ruby Tuesday, Inc. Ruby Tuesday ― ― ― 736 700 95 34 ― 1.5 ― Arcapita Bank Church’s Chicken 1952 16 ― 1,568 1,234 79 82 1,700 0.9 ― TCBY Systems TCBY ― ― ― 1,233 1,046 85 100 ― 0.2 * ― Blimpie’s Int Inc Blimpie’s Subs & Salads 1964 12 ― 1,345 1,335 99 99 70 0.2 ―

Source: QSR Websites, Top Franchise Systems - Franchise Times Magazine NB: * - Franchise Times Estimate

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McDonald’s Corporation McDonald’s24 was founded in 1954 and is the world’s largest fast food company by sales. In addition to McDonald’s Restaurants, the Corporation operates other restaurant brands such as the chicken brand Boston Market, Chipotle Mexican Grill, and Aroma Café. It also has a minority stake in Pret-a-Manger, which is a sandwich company. Until December 2003, it also owned Donato’s Pizza. The 2005 McDonald’s Annual Report shows that it operated in over 100 countries with 31,800 stores employing 447,000 people and generating system-wide sales of over US$50 billion and company revenues of US$20.4 billion. See Table 2.9. Sales growth for the financial year ending in 2005 was 7.30 percent. McDonald’s is a public company traded on the New York Stock Exchange (NYSE). In 2005, compared to its competitors, McDonald’s operated a higher proportion (29 percent) of its stores itself. Thirteen percent were run together with affiliates and 58 percent through franchises. In addition to ordinary franchise fees, supplies, and percentage of sales, McDonald's also collects rent, partially linked to sales.

Table 2.9: McDonald’s Corporation Brand Portfolio, 2004

Parent Company

QSR Brand

First Store Opened

Global Markets

(No)

Total Stores2004 (No)

Domestic Stores2004 (No)


Stores Franchised

2004 (%)

GlobalSales 2004

(US$ B)McDonalds Corp McDonald 1954 100 30,481 13,656 45 73 50.2

Boston Market–1 ― 1 656 656 100 4 0.07 Chipotle Mex Gril–1 ― 1 305 305 100 2 0.335 Aroma Café ― 1 ― ― 100 ― ― Pret-a-Manger ― ― ― ― ― ― ― 5 QSR Brands 1954 100 31,442 14,617 ― ―

Source: 2005 Franchise Times. NB: 1 - US 2003

Compared to its competitors, McDonald’s has the lowest proportion of stores in its home market. In 2004, McDonald’s operated a total of 30,481 stores of which 46 percent were in US and over 16,000 outlets in over 100 international markets. These are grouped by the company into four zones: - APMEA (Asia, Pacific, Middle East Africa, but mainly Japan) with 24 percent of stores, and Europe, Latin America, Canada, and Other with 20, 5, 5, and 4 percent, respectively. In 2006, McDonald’s planned to open 800 new restaurants and remodel 2,500 existing ones.

Yum! Brands International Yum Brands25 is the largest fast food operator in the world in terms of locations. It operates five QSR brands, viz., KFC Corporation, Pizza Hut Inc, Taco Bell, Long John Silver’s Inc., and A&W All American Food Restaurants which sell root beer and burger stands. The 2005

24 www.mcdonalds.com 25 www.yum.com

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Annual Report places the number of units at more than 34,300 with franchise, license, and joint venture outlets in more than 100 countries employing 272,000 people and generating sales of US$27.9 billion (Table 2.10). Sales growth for the financial year ending in 2005 was 3.30 percent.

Table 2.10: Yum! Brands QSR Portfolio, 2004

Parent Company

QSR Brand

First Store

Opened

Global Markets

(No)




Stores Franchised

2004 (%)

Global Sales 2004

(US$ B) Yum! Brands Inc KFC Corporation 1952 > 100 13,266 5,525 42 77 12.2 Pizza Hut 1958 > 90 12,274 7,500 61 78 8.7 Taco Bell ― ― 6,138 5,900 96 79 5.9 Long John 1969 ― 1,234 1,200 97 43 0.8 A & W ― ― 695 485 70 100 0.3 5 QSR Brands 1952 > 100 33,607 20,610 61 77 27.9

Source:2005 Franchise Times

In 1997, the company, then known as Tricon, became independent of Pepsico and became publicly owned via a tax-free distribution of Yum! Brands’ common stock to the shareholders of Pepsico. Long John Silver’s and A&W brands were added when the company acquired Yorkshire Global Restaurants Inc. in 2002 and the company changed its name to Yum! Brands. The major brands of the company are KFC, Pizza Hut, and Taco Bell, the first two accounting for over 75 percent stores outside of the US.

• KFC Corporation26: This is the leading fast food chicken chain offering the trademark Colonel’s fried chicken, chicken and fish sandwiches, chicken pot pies, crispy chicken strips, mashed potatoes, gravy, and potato wedges. The company was formed in 1952, and in 2004, it operated in over 100 countries with 13,226 stores employing 88,000 people and generating US$12.2 billion in sales. Sales growth for the financial year ending in 2005 was 1.50 percent. In 2004, 41.7 percent of stores are in the home country US and 77 percent stores were franchised. Increasing the KFC franchise is a part of the global Yum! Brands plans for future growth of the brand.

• Pizza Hut Inc27: This is the largest restaurant chain in the world specializing in the sale of ready-to-eat pizza products. Pizza Hut was founded in 1958, and in 2004, it operated in over 90 countries with 12,274 stores employing 83,900 people and generating US$8.7 billion in sales per annum. Twenty-two percent of the stores are company-owned and the remaining units are franchised or licensed. In 2004, 61 percent of the stores were in the US.

26 www.kfc.com 27 www.pizzahut.com

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• Long Johns Silver’s28: This is the largest quick service seafood chain offering batter-dipped fish, chicken, shrimp, and hush puppies as well as sandwiches, salads, and other chicken items. The company was established in 1969 and by 2004, it operated 1,234 stores employing 21,000 people and generating US$0.8 billion in sales. In 2004, it operated in only a few countries apart from the US as is reflected in the high percentage (97 percent) of stores in the domestic market. Forty-three percent of its stores are franchised.

In 2005 Yum! operated 22 percent of its units itself with the remainder being either franchised (66 percent), licensed (7 percent) or operated by affiliates (5 percent). The US accounted for 61 percent of locations and with 13,610 international traditional restaurants, the company is the second largest restaurant company outside the US. Yum! divides its non-US business into four business units - the UK; “Established Markets”; “Emerging Markets”; and “Franchise Only Markets” which includes Asia, Continental Europe, Middle East/ North Africa, Caribbean/ Latin America, and southern Africa. “Established Markets” includes China which has the largest share (7 percent) of international stores followed by Japan, UK, Canada, Australia, South Africa, and Malaysia each with over 1 percent of total stores. In 2005, Yum Brands! opened about three new restaurants per day in over 50 countries outside of the US. The main planks of the Yum! International growth strategy for 2006 are to build dominant China restaurant brands by opening 400 restaurants, drive growth in other markets by adding 750 restaurants, improve same store sales growth through product and customer service, and to expand multi-branding in the US by adding 550 units.

Burger King Corporation Burger King29 is the second largest burger chain in the world. Burger King Corporation was founded in 1954 and only operates one QSR brand. In 2004, it operated in over 65 countries and territories with 11,188 stores employing 30,300 people and generating system-wide sales of US$11.8 billion. Sales growth for the financial year ending in 2005 was 10.6 percent. Ninety-one percent of its stores are franchised many of which are family-owned. Burger King, is owned by four large US investment firms led by Texas Pacific Group, which bought the company in 2002 from Diageo for US$1.5 billion and privatized it.

The chain offers a variety of fire-grilled beef burgers, chicken and fish sandwiches, salads, and breakfast items. Burger King restaurants in Latin America offer regional menu items featuring local traditional dishes like the Broiled Salmon Fish Sandwich in Chile, Full-muscle chicken/sandwich throughout Central America, Customary breakfast platters such as the Breakfast Burrito in Mexico and Gallo Pinto from Costa Rica, and other seasonal dessert items throughout Central and South America. In 2004, it operated 67.4 percent stores in the home country (US) and the remaining 3,647 stores in over 65 countries and territories. Burger King Corporation franchised its first international restaurant in Puerto Rico in 1963, and now it operates over 650 restaurants in 24 countries within Latin America and the Caribbean. Sixty Burger King restaurants were

28 www.ljsilvers.com 29 www.bk.com

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opened in the Latin America/Caribbean region during 2004. System-wide sales in Latin America and the Caribbean were approximately US$595 million in 2004, representing more than 12 percent growth in system sales over the prior fiscal year. Wendy’s International Inc. Wendy’s30 was founded in 1969 and is now one of the world’s largest restaurant companies operating three major brands ― Wendy’s Old Fashioned Hamburgers, Tim Horton’s, and Baja Fresh Mexican Grill, in addition to the smaller restaurant chains ― Café Express and Pasta Pomodoro stores. In 2005, it operated 9,697 stores employing 57,000 people and generating US$11.5 billion (Table 2.11). Wendy’s International is a public company traded on the NYSE.

Table 2.11: Wendy’s International Brand Portfolio, 2004

Parent Company

QSR Brand

First Store

Opened

Global Markets

(No)




Stores Franchised

2004 (%)

Global Sales 2004

(US$ B) Wendy’s Int. Wendy’s Old 1969 20 6,671 5,935 89 78 8.6 Tim Horton’s ― 2 2,721 251 9 96 2.6 Baja Fresh ― 1 295 295 100 51 0.3 Café Express ― 1 19 19 100 ― ― Pasta Pomodoro ― 1 46 46 100 ― ― 5 QSR Brands 1969 >20 9,687 6481 67 82 11.5

Source: 2005 Franchise Times

In 1964, Tim Horton, which operates over 2,271 stores, and is the largest coffee and fresh baked restaurant in Canada, merged with Wendy’s. It also has a small presence in the US with 251 stores. In 1990, Wendy’s acquired Baja Fresh, which is the leader in quality Mexican food and operates 295 restaurants in the US. Café Express operates 19 stores and Pasta Pomodoro 46 stores also in the US of which 82 percent are franchised. In 2004, 33 percent of the group’s stores were located outside of the US, most of which were 2,500 Tim Horton stores in Canada. Wendy’s Old Fashioned Restaurants operations outside the US comprise five company and 342 franchise stores in 20 countries, predominantly in Latin Horton’s stores can be found in Canada and The US. The smaller chains are also located in the US. Doctors Associates Subway31 was founded in 1965 and is the world’s largest sandwich chain offering hot and cold sub sandwiches, wraps, salads, and soups. It offers customers two million different sandwich combinations. In 2005, the company reported that it operated in 83 countries with 25,900 stores employing 150,000 people and generating US$9.5 billion in system wide sales.

30 www.wendys.com 31 www.subway.com

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Sales growth for the financial year ending in 2005 was (1.90 percent). It is a privately held company owned by Doctor’s Associates in the US. The main planks of the Subway strategy are to offer healthy food while providing customers flexibility to design their own meals, use international store development as a way to broaden the brand's scope, and to reach new customers through the development of non-traditional outlets. In 2005, the Subway chain had over 20 percent of its stores in non-traditional locations such as airports, hospitals, or grocery stores, including more than 3,200 branches at convenience stores and filling stations, college and university campuses, and within Wal-Mart stores. All of its stores are franchised and only one company-owned unit is operated as a testing facility. In 2005, the chain experienced strong growth in store numbers adding 2,407 new locations, including 1,564 in the US and 843 throughout the rest of the world. The chain's international locations now account for 22 percent of the total subway chain, up by 1.3 per cent from 2004. The chain's target for 2006 is to open another 2,800 Subway restaurants throughout the world with 44 percent of new locations opened being in international markets. With US$7.17 billion in sales, the United States market accounts for the majority (75 percent) of system-wide sales with Canada and other international markets accounting for US$0.816 billion (9 percent) and US$1.54 billion (16 percent) respectively. Domino’s Pizza, Inc. Domino’s Pizza32 was founded in 1960 and is the second largest pizza company in the world, leading the market in the pizza delivery segment. Its stores are principally delivery locations and generally do not have any dine in seating. Domino’s operates in more than 55 countries with 7,757 stores employing 145,000 people and generating US$4.6 billion in system wide sales. Sales growth in 2004 was (6.0 percent). Domino's is listed on the NYSE. Sixty-four percent of its stores are in US and the remaining 2,749 are in international markets. In 1995 the company reported global system-wide sales of nearly US$5.0 billion in 2005, comprising approximately US$3.3 billion (66 percent) domestically and US$1.7 billion (34 percent) internationally. Fast Food Industry Sub-Sectors In 2005, QSR Magazine33 published its annual report on the 50 leading fast food chains in the US. The report gives further insight into the performance of the firms in the fast food segments in the US in 2003. QSR Magazine identifies eight market segments―Burger, Sandwiches, Chicken, Pizza/Pasta, Mexican, Snack/Beverage, Seafood, and Asian. We have added a ninth, the Caribbean segment. Table 2.12 looks at the firms by segment in the US and Table 2.13 takes a more in-depth look at the firms with a special focus on firms currently operating in CARICOM. Where available, the website addresses for these QSRs are listed in the appendix.

32 www.dominos.com 33 www.qsrmagazine.com

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Mainstream Sub-sectors

Burger Sub-Sector The burger sub-sector is dominated by three bands, McDonalds Corporation, Burger King Holdings, and Wendy’s International which in the US are ranked one, two, and three by sales but includes a number of smaller brands such as, Sonic Drive-In, Jack in the Box, Hardees, Carl Js, What a Burger, Checkers Drive Up, Steak & Shake, White Castle Culvers Burger, Krystal Fuddruckers Burger, and In-N-Out Burger. The segment has the largest companies in the fast food industry with McDonalds being three times larger than its closet rivals. The sub-sector continued to experience significant sales growth ranging from 3.1–13.9 percent with the exception of Burger King, which was being restructured subsequent to its divestment by Diageo. Sandwich Sub-Sector The sandwich sub-sector is dominated by four brands, Subway, Arby’s, Quiznos Subs, and Panera Bread Company, but includes a number of smaller brands such as Einstein’s/Noah’s Bagles, and Blimpie. The leading companies in the sub-sector experienced strong growth ranging from 4.1–42.7 percent with Quizno’s and Panera Bread Company registering increases of 42 and 27 percent, respectively. Chicken Sub-Sector The chicken sub-sector is dominated by KFC, Chick-fil-A, Popeye’s Chicken & Biscuit, Church’s Chicken, and Boston Market Chicken which is owned by McDonalds. There are also a number of smaller brands such as Buffalo Wild Wings, El Pollo Loco, Bo Jangles, and Chester Fried Chicken. The major players in the market experienced more modest growth of 2.0–4.6 percent. Pizza/Pasta Sub-Sector The pizza/pasta sub-sector is dominated by four brands, Pizza Hut, Domino’s Pizza, Papa John’s International, and Little Caesar’s Pizza, but includes a number of smaller brands such as Sbarro’s, Cici Pizza, Papa Murphy’s, Fazoli’s, and Hot Stuff Pizza. The leading companies experienced slow growth is sales ranging from 0.0 percent to 3.9 percent with the exception of Domino’s, which grew by 5.7 percent. Mexican Sub-Sector The Mexican sub-sector is dominated by one major brand, Taco Bell, whose sales are over 10 time larger than its competitor Chipote, Del Taco, Baja Fresh Mexican Grill, and Taco John’s. Growth in sales of the leading companies was strong ranging from 5.6 percent to 43.3 percent with the exception of Baja Fresh which experienced a decline of 10.3 percent in sales.

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Table 2.12: Profile of Selected US QRS by Segment, 2003

QSR 50

Rank QSR Chain Systemwide

Sales 2004

Sales Growth

2004

QSR 50 Rank

QSR Chain SystemwideSales 2004

Sales Growth

2004 (US$ M) (%) (US$ M) (%) Burgers Sandwich

1 McDonald's $24,391.00 10.3 4 Subway $6,270.00 10.0 2 Wendy's $7,712.00* 3.1 11 Arby's $2,836.00* 4.7 3 Burger King $7,700.00 –10.5 19 Quiznos $1,275.00 42.5

12 Sonic Drive-In $2,770.00 13.9 21 Panera Bread Company $1,241.20 27.1 13 Jack in the Box $2,541.60* 7.7 44 Einstein/Noah's Bagels $345.00 –3.1

Chicken Mexican 7 KFC $5,000.00 2.0 5 Taco Bell $5,700.00 5.6

16 Chick-fil-A $1,746.40 13.8 34 Chipotle $480.00* 43.3 18 Popeyes Chicken & Biscuits $1,538.00 4.6 35 Del Taco $472.00 9.5 25 Church's Chicken $756.80 4.7 47 Baja Fresh Mexican Grill $305.00* –10.3 26 Boston Market $700.00* 2.9 55 Taco John's $234.10 14.9

Pizza/Pasta Snack/Beverage 6 Pizza Hut $5,200.00 2.0 9 Starbucks $4,804.10 38.3

10 Domino's Pizza $3,173.20 5.7 10 Dunkin' Donuts $3,380.00 15.0 17 Papa John's Pizza $1,712.70 0.3 30 Baskin-Robbins $535.00 4.9 22 Little Caesars Pizza $1,210.00 0.0 49 Jamba Juice $285.00 22.5 36 Sbarro $456.00 3.9 50 Cold Stone Creamery $283.00 86.2

Seafood Asian 23 Long John Silver's $800.00 0.0 27 Panda Express $610.80 23.1 31 Captain D's Seafood $524.70 3.8 Noodles & Co. $90.10

Table 2.13: US QSR performance parameters, 2003

QSR Segment QSR Brand

Systemwide Sales (US$ b)

Sytem wide Sales

Growth

Total Stores (No)

Stores Franchise

d (%)

Store Number Growth

(No)

Sales/ Store (US$ 000)

Sales Per Store

Growth (%)

Gross Margin

(%)

Operating Margin

(%) Burger McDonalds 24.39 10.30 13,673 80 ― 1,900 11.8 50.45 20.37 Burger King 7.70 –10.50 7,624 92 ― 995 ― 33.90 10.50 Wendy’s 7.71 3.10 5,933 78 3.0 1,300 ― 23.60 9.60 Chicken KFC 5.00 2.00 5,515 78 0.0 896 ― ― ― Popeye’s 1.54 4.60 1,472 96 ― 949 ― 87.33 23.84 Church’s 0.76 4.70 1,220 77 ― 620 5.8 ― ― Pizza Pizza Hut 5.20 2.00 7,519 77 0.3 794 6.1 ― ― Dominos Pizza 3.17 5.70 5,008 88 ― 634 4.7 ― 13.79 Papa John 1.71 0.30 2,565 78 ― 674 ― – 7.20 Sandwich Subway 6.27 10.00 17,910 100 8.6 366 ― ― ― Quiznos 1.28 42.50 3,339 100 ― 422 ― ― ― Blimpie 0.23 10.00 1,407 0 ― ― ― ― ― Mexican Taco Bell 5.70 5.60 5,871 78 –1.5 1,069 6.4 ― ― Seafood L/John Silver 0.80 0.00 1,195 42 0.3 652 ― ― ― Captain Ds 0.52 3.8 577 45 ― 902 ― ― ―

Source For both tables: * Includes figures estimated by GE Franchise Finance, Technomic Information Services, QSR Magazine

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Seafood Sub-Sector The seafood sub-sector is a small sub-sector with only two brands of any significance―Long John Silver’s and Captain D’s both of which experienced low growth in sales. Snack/ Beverage Sub-Sector There are two major players in the snack/beverage sub-sector, Starbucks and Dunkin Donuts. This sub-sector also includes smaller brands such as Baskin Robbins, Jamba Juice, Cold Stone Creamery, and TCBY. Sales growth of the leading companies was between 15.0 and 86.2 percent with the exception being Baskin Robbins, which only grew by 4.9 percent. Asian Sub-Sector The Asian sub-sector is small with only one company, Panda Express, of any significant size, but also includes smaller companies like Noodles & Co. Panda Express experienced a growth in sales of 23 percent. Caribbean Sub-Sector The Caribbean QSR segment is small and emerging and spread unevenly across the West Indian Diaspora. Several types of concepts are taking shape such as Jamaican patties, Caribbean chicken concepts, and on the higher end of the market, Caribbean casual dining restaurants. (Table 2.14). The most notable QSR operators outside of the Caribbean region are Golden Krust Bakery and Grill34, JerQ’izine Caribbean Grille35, Sally’s West Indian Restaurants in North America; Cummin ‘Up36, Hot & Spicy, Mr Jerk in the UK; and Roopram’s Roti in the Netherlands. Jamaican patty shops are reported to be the largest segment of the Caribbean restaurant sector in the North Atlantic metropoles. In North America there are an estimated 750–1,000 stores featuring patties and other Jamaican foods with two chains, Golden Krust with over 100 stores and JerkQuizine with just over 10 stores developing franchising formats. There are several smaller chains such as Sally’s West Indian Restaurant with a hand full of stores which tend to be company owned. In the UK there are an estimated 500–750 stores which also sell patties but tend to offer a wider and more balanced range of Caribbean cuisine items. Jamaican Patty Restaurants While some patty shops prepare their own patties in house many purchase their supplies from several bakeries the largest being Golden Krust Bakery, Caribbean Food Delights and Tower Island Foods in New York and Juici Beef in Canada. These bakeries also supply retailed packed product to major supermarkets and warehouse chains, such as Costco, Wal-Mart and Pathmark. The main leading Caribbean QSRs involved in franchising are

Golden Krust Caribbean Bakery & Grill – Golden Krust Caribbean Bakery & Grill is a manufacturer, distributor of Caribbean food products, and franchisor of

34 www.goldenkrustbakery.com/ 35 www.jerkqzine.com/ 36 www.blacknet.co.uk/cummin-up/

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Caribbean dining establishments. Since Ephraim Hawthorne, originally from St Andrews, Jamaica, opened its first restaurant in 1989, in New York, Golden Krust has expanded to over 100 stores. The company operates a bakery producing 125–150,000 patties daily at Bronx headquarters for distribution to its franchisees is now the largest producer of Caribbean baked products in the United States. The QSR’s menu is very similar to Tastee, or Juici Beef and Mothers in Jamaica and is focused on eight varieties of patties sold individually or with side orders of peas, rice, and plantains. While the store began by focusing on a West Indian clientele it is beginning to develop cross-over appeal. The restaurant brand is reported to be experiencing double digit growth and revenues in 2004–05 are estimated to be US$40 million. Golden Krust is a privately-owned corporation.

Table 2.14: Emerging International and Indigenous Caribbean Restaurant Concepts, 2006

Caribbean Restaurant Concepts

Parent Company

Concept Name

Markets

QSRUnits(No)

Jamaican Patty Golden Krust Bakery Golden Krust Bakery & Grill US >100 Royal Caribbean Bakery JerkQ’zine Caribbean Grille US >10 Tower Isle Frozen Foods [Frozen Patty Plant in US] US 0 Juici Patties Ltd Juici Patties, [Froz Patty Plant in Cda] Jamaica/Canada 50 Tastee Ltd Tastee Patties Jamaica/ Antigua 25 Mothers Enterprises Ltd. Mother’s Jamaica 22 West Indian Food Take Two Take Two UK 6 Cummin ‘Up Cummin ‘Up UK 4 Hot & Spicy Restaurant Hot & Spicy UK 4 Sallys West Indian Restaurant US 5 Mr Jerk Mr Jerk UK 2 Island Grill Bamboula UK 1 Chicken Island Grill Ltd. Island Grill Ltd. Jamaica/Barbados 15 International Castle Ltd Royal Castle CARICOM 29 Chefettes Restaurants Ltd Chefettes Restaurants Barbados 13 Demico/ DIL Banks Qik Serv Guyana Pizza Mario’s Pizzeria Ltd Mario’s Pizza T&T/ Grenada 16 Casual Dining Darden Restaurants Bahamas Breeze US 43

Source: Company Websites and Interviews

Since its start, the Company is undergoing strong and steady growth, and plans to open more outlets. During the 1980s, Lowell Hawthorne, President & CEO of Golden Krust, and eight of his siblings and their spouses migrated to the US and in 1989, opened the first Golden Krust bakery retail outlet in Bronx, New York, with an investment from Hawthorne family members. In 1996, Golden Krust which was then operating 13 retail locations, opened a state-of-the-art manufacturing plant in the Bronx. In the same year, Golden Krust began offering franchises. Over 95 percent are franchised largely to franchisees with Jamaican roots. Golden Krust franchisees pay a franchise fee of US$25,000 and royalty of three percent and achieve sales of between US$750,000 and US$1,000,000 per annum. Golden Krust has become the first Caribbean company to

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design a major ad campaign, a billboard, and bus and train poster promotion throughout the NY Metro area. A Spanish Marketing Campaign and community outreach efforts have been launched to attract the Hispanic market. In 2003, the company opened the 50th store, and by 2005, Golden Krust had over 100 stores in operation across eight states. It is now extending stores to elsewhere along the eastern seaboard of the US. It is positioned to become a leading food franchise with plans to have more than 200 stores by 2010. It is the goal of Golden Krust’s founder, Lowell Hawthorne, to spread authentic Caribbean cuisine to every neighbourhood. Being the premier patty producer in the US, Golden Krust has carved out a niche for itself, not only in the ethnic market, but also in the fiercely competitive mainstream fast-food market.

• JerkQ'zine Caribbean Grille – In 2005, Vincent Ho Sang, the principal owner of Caribbean Food Delights and Royal Caribbean Bakery launched JerkQ’zine in New York. Since its establishment, the company had opened 10 stores by mid-2006 most of which were franchised. The average size of a JerkQ'zine Grille is 1200-2500 SF and will require first-time franchise fee agreements of US$25,000, an initial investment of between US$325,000 and US$475,000 not including real estate costs, JerkQ'zine royalties of 5 percent, and a regional advertising fee and a national advertising rate totalling 3 percent of sales. JerkQ'zine helps with site selection and lease negotiation, pre-opening and ongoing training and support in training, operations, and marketing through store visits, newsletters, regional, and national meetings. In addition, a help line is available to assist franchise owners with questions.

• Royal Caribbean Bakery – Royal Caribbean Bakery manufactures bakery products such as hard dough bread, coco bread, spice fruit buns, bulla, muffins, and black fruit cakes. Caribbean Food Delights manufactures frozen foods such as frozen (unbaked), microwave-able (pre-baked), individually wrapped (for vending machines), and deli-style Jamaican patties, whole jerk chicken, jerk chicken wings, plantain tarts, curry goat, oxtail, and other items. The 73,000 SF facility in Rockland County, New York, has the capacity to manufacture in excess of 30,000 patties per hour and employs a workforce in excess of 125 employees. Products are distributed to 17 US states and are sold through local Sam's Wholesale Club, Costco Wholesale, Wal-Mart, Shop Rite, Pathmark, Stop & Shop, Market Basket, Winn Dixie, Key Food, or Antilles.

Other Caribbean Quick Service Restaurants Apart from patties in the US there are other Caribbean restaurants formats found in the UK and the Netherlands such as:

• United Kingdom – Richard Simpson, owner of the Cummin Up QSR chain and Chairman, Caribbean Cuisine Consortium, which has a membership of 70 restaurants in the UK, reports that there are an estimated 500–750 restaurants offering Caribbean dishes in the UK. Most of them offer a menu with a wide variety of Caribbean dishes based on the cuisine of several Caribbean islands including items such as patties, ackee, curry, and Creole dishes. At least half of them offer quick service meals. While most are independent stores there are several small chains such as Take Two ( 6 stores), Cummin

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‘Up ( 4 stores), Hot & Spicy ( 4 stores), and Mr Jerk ( 2 stores). Jamaica’s Island Grill also operates a store in London, Bamboula Restaurant, in conjunction with Walker Wood which uses it for market research, product testing, and development. Mr Simpson, who established the Cummin Up chain in the 1990s, estimates that the average store has annual sales of 375,000 pounds. He points out that while 25–30 percent of the costs of a West Indian Restaurant are likely to be of Caribbean origin, far less are actually sourced form the region because of a lack of reliable cost effective supply.

• Netherlands - Rooprams Roti shop which originates out of Suriname operates two restaurants in the Netherlands and also sells ready to eat product through food retailers.

Caribbean Casual Dining Restaurants Other upscale restaurants are developing formats to service the demand for Caribbean restaurants Bahama Breeze37 which opened in 1996 and Cheeseburger in Paradise which was opened in 2002. Bahama Breeze which was established in 1995, operates 32 restaurants in 19 US states and had sales of US$164 million in fiscal 2005. Average annual sales per restaurant were US$5.1 million. Bahama Breeze claims to have a unique combination of Caribbean-inspired cuisine, hand-crafted tropical drinks, vibrant atmosphere, and people who are happy to be of service. Bahama Breeze gives guests the feeling of a Caribbean escape. Bahama Breeze belongs to Darden Restaurants, Inc. which is the largest publicly traded casual dining restaurant company in the world, based on market share and revenues from company-owned restaurants serving more than 300 million meals annually at 1,381 restaurants in 49 US states and Canada. It operates four distinct restaurant concepts that together generate annual sales of more than US$5.2 billion. Red Lobster® and Olive Garden®, their flagship brands, are the market share leaders in their casual dining segments. Each generates sales of US$2.4 billion annually, making Darden the only casual dining restaurant company with two restaurant concepts of this scale. Their emerging brands are Bahama Breeze and Smokey Bones Barbeque & Grill, and another concept, Seasons 52, is in the test phase. Based in Orlando, Florida, Darden employs more than 150,000 people, and trades on the NYSE under the symbol DRI. Cheeseburger in Paradise38 is owned by Margaritaville Holdings in a joint venture with Outback Steakhouse. There are seven so far, most clustered in the Midwest, offering a mix of Caribbean, New Orleans, and other American food in tropical settings. Global Quick Service Industry Trends The major trends driving change in the global QSR industry are indicated below. Menus Consumers are becoming increasingly health conscious, sophisticated, aware of international cuisine, and the flavorful ingredients that go into their preparation. This has led QSRs to include more fresh, healthy items with international flavours to their menus. The bird flu

37 www.bahamabreeze.com 38 www.cheeseburgerinparadise.com

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virus is causing QSRs to review their multi brand concepts and menus to include stronger alternatives to chicken such as fish. Service The modern consumer is demanding more convenience. The QSRs are also facing increased competition from quick-casual chains, many of which offer easy dine-in or take-out options. These trends will lead to continued growth in takeout, drive through, and delivery services. Multi-branding Strategies The leading industry firms will develop and expand their multi-brand portfolios of QSRs and invest more in multi brand locations that will provide opportunities to offer consumers greater choice, increase customer traffic through outlets, and reduce overheads.

Internationalization Higher growth rates being experienced in many international markets will lead major international brands to develop strategies to speed up penetration of these faster growing markets, and encourage minor brands to initiate export strategies. This will be supported by liberalization of economies for goods and services supporting the international brands. Franchising This will continue to be the more important strategy to drive store growth in fast growing sub-segments, in smaller or higher risk international markets Technology Online ordering is expected to increase significantly over the medium term. The Global Food Distribution Service Regulatory Environment Developed Countries Planning restrictions in several countries are intended to protect small retailers and to structure the food retailing industry. In the United States, however, there is an absence of strict planning regulations, and large food stores consequently hold the largest market share of food sales. In the European Union (EU), excluding the United Kingdom, strict controls on store size and location have existed, especially in Mediterranean Countries. As a result, the large number of small grocery stores still account for a major share of grocery sales. Gradually, national laws are being harmonized within the EU. In Japan, planning restrictions are very strict. The Large-Scale Store Law has made growth in large-scale food stores almost impossible. The Japanese government has been revising this law resulting in an increase in the number of large supermarkets chains and a fall in the number of small family-run stores. In general, protection of small retailers delays modernization of food retailing and permits a continuation of inefficient distribution. Liberalization seems to be unavoidable in the long-term, and will take place at the expense of the less-efficient small-scale retailer. Other ways of protecting the small retailer include price controls, such as the Robinson-Patman Act in the US, and controls on mergers and acquisitions. In the EU regulations, the takeover of firms with a turnover of more than US$5.8 billion is forbidden, but regulations have been drafted to lower this threshold to US$2.3 billion. This could severely damage the

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process of internationalization which is becoming more important in the sector. Low gross and net margins, pressure on prices, and continuing concentration within food manufacturing all point to further concentration within food retailing. While national or regional market shares may be high, these shares, however, are relatively low in the internal EU market. Competition is high and does not necessarily lead to monopoly in most markets. Environmental concerns in the EU increasingly affect food retailers. Measures to recover packaging waste and replace ozone depleting substances used in refrigeration and cooling equipment result in high costs. This could force small independent retailers to close their businesses.

Developing Countries The policy environment of many developing countries has been to support the agri-food industry as a source of export revenue and or as a source of food and rural employment. Given the impact the expansion of supermarkets will have on the agro-food supply chain, Reardon et al. (2002) have recommended speedy realignment of public policy and development strategy to address the challenges and opportunities facing the small farm and small agri-food industry firm in the supply chain. These include: • Competition Policy – It is important to promote competition between supermarkets and

in the retail sector as a whole through the adoption and enforcement of competition law.

• Speciality Shops – It is useful to have programmes to develop, modernize, and promote speciality shops and fresh markets for their cultural and employment value to local communities and for alternatives for small suppliers.

• Retailer-Supplier Relations – It is important to promote Retailer-Supplier Relations that

protect both sides by establishing or regulating contract and business rules.

• Technology Improvement – Small holders need to be supported by programmes that allow them to make investments in equipment, management, technology, commercial practices, and the development of strong and efficient organizations to meet the needs of supermarkets.

Weatherspoon et al. (2003) proposed policy measures for Africa, which are similar to those of Reardon et al. (2002) for Latin America.

Conclusion

At the global level, the food market represents a significant proportion (42 percent) of consumer’s expenditure on retail goods and services and this is predicted to grow by 5 percent up till 2002 driven by global population growth and growth in GDP per capita. An important trend emerging is the increasing expenditure on food consumed away from home, associated with increasing incomes and lifestyle changes.

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There is increasing globalization of the food retail industry, dominated by supermarkets and fast food operators, driven by urbanization, entry of women into the workplace, rapid growth of income, trade liberalization, and structural adjustment programmes. Growth of supermarkets tends to take place in several waves, first by retailers saturating their own markets, then by expansion into regional markets by acquisition of local chains and establishment of new formats, followed closely by the entrance of international food retailers. International QSRs which are also penetrating global markets, tend to enter the regional markets before local operators begin cross border trade in services. The global food retail marketplace is dominated by a small group (9) of multinational companies with a commercial presence in over 10 and up to 32 countries. Three of the top four companies have a presence in countries in the Americas including North America, Central America, South America, and the Dominican Republic. A number of global retailing trends have been identified. These include increases in price-oriented retail strategies, differentiation, non-food items services sales, consolidation, supply-chain improvements, and the penetration of supermarkets in developing countries. The global quick service industry is dominated by a handful of chains originating in the US and a few chains operate in over 100 countries around the world. The market can be segmented based on the main menu of the operators with Caribbean menus being a very small but growing segment, largely in international markets where the Caribbean Diaspora reside. There are only a few CARICOM QSRs supplying services outside of the region, while several export associated food products to the North Atlantic markets. The mode of entry into global markets depends inter alia on the growth strategy of the company, its ability to maintain standards, levels of market risk, and the regulatory framework. Entry is predominantly achieved through franchising, followed by joint ventures and lastly by international equity investment. The growth of supermarkets and to lesser extent fast food operators has been shown, over relatively short periods of time, to have a significant impact on the choice and prices of food available to consumers, the structure of the food retail industry, and the related agri-food supply chains in developing countries. The regulatory framework for the industry across the world varies significantly with developed countries tending to apply more restrictions with the intention of protecting small retailers and organising the food retailing industry. Developing countries are more concerned with the impact of liberalisation of the sector on food prices, food distribution service SME, development, employment, and the agri-food supply chain. Given the impact that the expansion of supermarkets will have on developing economies several international experts have recommended realignment of public policy and development strategy in the areas of competition policy; strategies to modernize and promote speciality shops and fresh markets for their cultural and employment value to local communities and for alternative for small suppliers; promotion of Retailer-Supplier relations that protect both sides by establishing or regulating contract and business rules; and programmes to improve technology adoption by the industry.

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3. CARICOM FOOD DISTRIBUTION SERVICES INDUSTRY: CONTRIBUTION AND SIZE

Introduction

This chapter attempts to define the size of the Food Distribution Services Industry and its contribution to the regional economy. It then goes on to examine some consumer trends driving change in the industry.

Contribution to the Economy

The contribution of the food distribution service industry to the economies of CARICOM States is difficult to establish, as the statistics for the sector are; a) aggregated with related sectors, b) treated differently in the accounts of the various member states, and c) not available for some member states. The categories used for the distributive trade across CARICOM can be seen in Table 3.1.

Table 3.1: Categories Used by CARICOM States for Food Distributive Trade

CARICOM Member state Food Retail - Food Consumed at Home

Food Service –Food Consumed Away From Home

Barbados Wholesale & Retail Tourism Belize, Suriname Trade Hotels & RestaurantsGuyana DistributionJamaica Distributive TradeMontserrat —Antigua/Barbuda, Grenada, St Kitts/Nevis, Dominica, St Lucia, St Vincent/ Grenadines

Wholesale & Retail Hotels & Restaurants

Trinidad and Tobago Distribution Services Guesthouses & Restaurants

Source: CARICOM Secretariat

These differences in treatment of the distributive trade reflect in part the differing importance of the components of the food distributive trade across CARICOM. States, which have more significant tourism sectors, are more likely to have a category to capture “Tourism” or “Hotels and Restaurant” information. However, in both the food retail and food service sectors there is not sufficient desegregation of the food component to allow the required analysis of the sectors. Apart from food and beverages, Wholesale and Retail Services includes pharmacies and toiletries; hardware and household goods stores; industrial and office equipment suppliers; textiles, clothing, and footwear stores; and petroleum and car retailers. While restaurants are an important part of the tourism product, it is not possible to separate sales of rooms and other tourist services from restaurant sales.

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Table 3.2: Hotel and Restaurant Services GDP at Factor Cost at Constant 1990 Prices (EC$ million) 39

Countries Note 2001 2002 2003 2004 Bahamas 1,114.5 956.1 954.4 —Barbados B 536.3 523.9 577.0 168.2Antigua & Barbuda A 146.8 149.9 165.3 176.4St Lucia A 139.2 138.4 161.4 170.9Grenada A 51.2 54.1 61.6 53.5St Kitts & Nevis A 24.7 23.8 31.2 41.4Trinidad & Tobago E 38.9 35.7 27.5 —St Vincent & the Grenadines A 14.8 13.7 12.9 13.6Dominica A 10.8 10.5 11.3 11.3Montserrat 0.9 1.0 0.7 0.9TOTAL 2,078.1 1,907.1 2,003.3 636.2

Source: CARICOM Secretariat NB: A. Wholesale & Retail Trade and Hotels & Restaurants; B. Wholesale & Retail Trade and Tourism; C. Trade, Hotels and Restaurants; D. Distribution/Distributive Trade; and E. Data exclude restaurants Table 3.3: Wholesale and Retail Trade Services GDP at Factor Cost in Constant 1990 Prices (EC$ million)

Countries Note 2001 2002 2003 2004 Trinidad & Tobago E 3,872.8 3,933.7 3,994.6 4,517.5Jamaica D & F 2,872.1 2,878.9 — — Bahamas 1,665.0 1,651.0 1,703.9 — Barbados B 891.1 892.0 884.6 202.8 Suriname C 655.7 710.8 939.3 995.3 Belize C 392.7 407.2 422.8 533.3 St Lucia A 124.8 126.4 136.2 146.9 St Vincent & Grenadines A 112.0 115.4 122.0 132.0 Antigua & Barbuda A 117.6 114.3 117.1 121.9Grenada A 75.6 76.0 81.8 77.3 Guyana D 76.2 75.4 73.5 75.0 St Kitts & Nevis A 66.9 67.1 70.3 66.8 Dominica A 58.0 55.0 57.0 58.7 Montserrat A 2.7 2.9 2.8 2.8 TOTAL 10,983.2 11,106.1 8,605.9 6,930.3

Source: CARICOM Secretariat. NB: A. Wholesale & Retail Trade and hotels & Restaurants; B. Wholesale & Retail Trade and Tourism; C. Trade, Hotels and Restaurants; D. Distribution/Distributive Trade; E. Distribution, Services, Hotels, Guest Houses & Restaurants; and F. GDP at constant 1990 Producers' prices. na, Not available

Table 3.2 shows Hotel and Restaurant Services Gross Domestic Product (GDP) at Factor Cost at Constant 1990 Prices for the four-year period 2001–2004 as ranging from US$ 230

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(EC$636) million to US$ 752 (EC$2,078) million. However, depending on the reporting country, this includes elements of tourism, hotels, and the distributive trade. As previously indicated, restaurants include full service and quick service restaurants. Table 3.3 shows Wholesale and Retail Trade Services GDP at Factor Cost at Constant 1990 Prices EC$ million for the four-year period 2001–2004 as ranging from US$2,510 (EC$ 6,930.3) million to US$4,024 (EC$ 11,106.1) million for the most complete year. However, this includes other sectors of the distributive trade such as pharmaceuticals, clothing, hardware, etc., and is not of much value in estimating the contribution to the industry. In this table, the information for Belize, Suriname, Guyana, and Jamaica includes tourism and restaurant data. Industry Size Three approaches are available to arriving at the size of the food distribution service markets using the national accounts. These are • Trade and Production. • Household Budget Surveys. • Interviews with Industry Leaders & Specialists. Trade and Production The first approach would be to estimate the supply of food available for consumption using trade and production data where Supply = Production + Imports – Exports + (Opening inventory – closing inventory). The data on trade in agriculture, food, and beverages are obtained from the FTAA hemispheric database (Chapters 1–24). They are shown in Table 3.4 for imports and Table 3.5 for exports. Although the data sets are incomplete, 1999 provides the most comprehensive information. Imports in 1999 were US$2.371 billion and exports in 1999 were US$1.342 billion, revealing a net deficit in trade in food of US$1.03 billion. The major food importers by value are the larger member states of CARICOM, viz., the Bahamas, Jamaica, Trinidad, Barbados, St Lucia, and Guyana, which account for 78 percent of imports. Bahamas, with a higher per capita GDP, a small agri-food production base, and a large tourist sector, has higher levels of imports than its population size might suggest. Belize and Guyana, which have lower per capita GDP and also produce a large proportion of their food, have lower imports than their population sizes alone may suggest. While the data set is incomplete, the trends show that exports are decreasing and imports seem to be increasing and the region remains a significant net food importer. Table 3.4: Imports of Agriculture, Manufactured Food and Beverages by CARICOM Countries 1997–2003 (US$‘000)

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Countries 1997 1998 1999 2000 2001 2002 2003 Bahamas — — 838,576 — — — —Jamaica 525,780 548,354 516,517 499,270 531,010 — —Trinidad & Tobago 323,910 345,084 308,721 288,372 361,315 281,815 —Barbados 178,945 171,853 175,987 179,768 186,855 190,943 205,550St Lucia 85,147 86,485 83,971 83,708 81,539 75,489 91,285Guyana 86,768 92,972 81,895 81,683 93,329 — —Suriname 87,984 88,340 79,016 92,121 78,405 — —Antigua & Barbuda — — 77,540 73,439 — — —Belize 56,351 56,228 61,632 63,435 66,926 65,730 66,198St Vincent & the Grenadines 46,287 48,874 46,457 43,168 43,142 44,334 44,067Grenada 38,998 40,639 40,689 43,820 42,838 42,904 45,691Dominica 35,944 13,062 31,723 31,646 30,140 28,445 30,645St Kitts & Nevis 28,688 29,122 28,764 37,628 33,168 32,647 34,215Haiti — — — — — — —Montserrat — — — — — — —TOTAL 1,494,802 1,521,013 2,371,488 1,518,058 1,548,667 762,307 517,651

Source: FTAA Hemispheric Data Base NB: Table ranked by size for most complete year – 1999 Table 3.5: Exports of Agriculture, Manufactured Food, and Beverages by CARICOM Countries 1997–2003 (US$‘000)

Countries 1997 1998 1999 2000 2001 2002 2003 Jamaica 331,619 318,262 314,789 325,032 314,901 — —Guyana 240,583 228,018 234,559 225,728 232,459 — —Trinidad & Tobago 244,387 253,958 231,031 244,558 265,175 211,158 —Bahamas — — 150,507 — — — —Belize 141,815 125,319 139,971 162,668 143,927 139,162 171,951Barbados 98,059 79,666 76,451 75,638 78,899 74,383 67,932Suriname 78,171 54,767 53,722 56,215 54,184 — —St Lucia 40,172 38,580 42,037 32,980 46,067 32,559 28,787St Vincent & the Grenadines 37,455 42,020 40,196 38,161 34,688 32,799 20,545Grenada 18,632 20,991 27,730 24,920 26,399 24,808 22,228Dominica 25,941 21,828 23,054 20,631 15,994 16,294 13,972St Kitts & Nevis 23,608 10,414 7,568 7,953 7,684 1,056 8,520Antigua & Barbuda — — 1,055 1,180 — — —Haiti — — — — — — —Montserrat — — — — — — —TOTAL 1,280,442 1,193,823 1,342,670 1,215,664 1,220,377 532,219 333,935

Source: FTAA Hemispheric Data Base NB: Table ranked by size for most complete year – 1999 na, Not available

Table 3.6: Contribution of Agriculture to GDP at Factor Cost Constant 1990 Prices (EC$ million)

Countries 2001 2002 2003 2004

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Jamaica 1,064.2 947.8 996.7 914.2Trinidad & Tobago 491.3 527.0 530.1 —Suriname 514.3 494.3 515.4 523.4Guyana 456.1 483.6 475.4 490.4Belize 254.7 262.2 309.7 345.7Bahamas 220.9 266.6 257.1 266.8Barbados 185.5 177.8 167.8 —Dominica 76.6 76.1 73.3 76.1St Vincent & Grenadines 68.4 73.7 72.1 68.3Grenada 55.2 65.7 64.1 59.4St Lucia 64.5 62.2 53.9 56.7Antigua & Barbuda 43.3 43.7 44.8 46.0St Kitts & Nevis 27.7 31.4 27.5 30.8Montserrat 0.9 1.2 1.2 1.0Haiti — — — —TOTAL 3,523.6 3,513.3 3,589.1 2,878.8

Source: CARICOM Statistics Database NB: Ranked by size for most complete year; na, Not available Table 3.7: Contribution of Manufacturing to GDP at Factor Cost Constant 1990 Prices (EC$ million)

Countries 2001 2002 2003 2004 Trinidad & Tobago 2,414.1 2,601.0 2,696.2 —Jamaica 1,874.5 1,891.8 1,902.4 1,900.3 Suriname 695.3 670.1 707.9 774.9 Bahamas 512.3 521.7 523.0 541.8 Barbados 296.0 296.7 294.5 — Belize 189.5 192.4 191.5 214.7 Guyana 96.8 98.8 96.8 96.8 St Kitts & Nevis 76.5 73.4 73.2 78.8 St Lucia 66.5 69.8 70.2 68.4 Grenada 56.5 54.3 52.8 45.2 St Vincent & the Grenadines 40.1 38.9 39.2 39.0 Antigua & Barbuda 31.7 32.7 34.5 33.9 Dominica 27.1 26.5 26.6 28.1 Montserrat 0.5 0.5 0.5 0.5 Haiti — — — — TOTAL 6,377.4 6,568.6 6,709.3 3,822.4

Source: CARICOM Statistics Database NB: Ranked by size for most complete year; na, Not available

Food production comes from two sources, (i) agricultural production and primary agro processing, (ii) secondary food manufacturing. As shown in Table 3.6, total contribution of agriculture to GDP has remained stable at US$1.3 billion (EC$3.5 billion) with Jamaica accounting for the largest share. Table 3.7 does however illustrate a flat performance for regional manufacturing in contribution to GDP in the region. Using data from the years with complete entries, the contribution to GDP increased from US$2.3 billion (EC$6.4 billion) in 2001 to US$ 2.4 billion (EC$6.7 billion) in 2003. While statistics are available on the value

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of agricultural output, they are unavailable for secondary food manufacturing such as beverages, canned foods, and bread because they are often subsumed in the national accounts as light manufacturing. In addition, trade data reflect sales of product while GDP reflects value added. Household Budgetary Data Another approach would be to take the household budgetary survey data collected by national statistical agencies and estimate the consumption of food at home and food consumed away from home. However, the methodology for data collection, reporting, and timing of these surveys would make reporting on a regional level challenging. It would be useful to do this in the future, for a few countries, to test the estimates of food consumption derived by other methods. Field Interviews with Industry Leaders and Specialists A third approach, which is the one being taken in this project, would be to assume that the private sector would have a reasonable estimate of the size of their industries and markets. Such estimates could help, with some reference to the available national statistics where available, to estimate the sector size. The results of this are presented later in the report. CARICOM Food Distribution Service Industry Size Based on the methodology outlined in the foreword, the value of food retail and QSR sales to consumers in CARICOM is estimated to be over US$5,600 million and is generated from over 17,000 stores employing over 112,000 people. The value of the food wholesale goods purchased by the resellers to generate these sales these sales is estimated to be over US$3,900 million. (Table 3.8) This estimate focuses on sectors that are normally traded and does not include (i) Dominica, St Kitts Nevis, Montserrat, and Haiti, and (ii) the retail sector for Suriname. It also does not include the full service restaurants and street food vendor sales.

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Table 3.8: CARICOM Food Distribution Service Industry Profile, 2005

Sub Sector Stores (No)

Employment (No)

Consumer Sales

(US$ million) Food Retail 15,025 85,125 4,555

Quick Service Restaurants 2,100 27,600 1,045

Full Service Restaurants, Caterers, Street Vendors – – – Subtotal Food Retail & QSR 17,125 112,725 5,600

Wholesale Equivalent of Retail Sales 3,940

Source: Industry Interviews NB: Figures rounded Table 3.9: CARICOM Consumer Food Sales in Food Retail and QSR Sub Sectors by Country

CARICOM State

Retail Food Sales

(US$ million)

Full Service Restaurants &

Catering, Street Vendor Sales (US$ million)

Quick Service Restaurant

Sales (US$ million)

Retail & QSR Consumer Food

Expenditure (US$ million)

Regional Market Share (%)

Jamaica 1,250 – 325 1,575 28 T & T 1,090 – 155 1,245 22 Bahamas 530 – 200 730 13 Barbados 520 – 110 630 11 A & B 225 – 55 280 5 Guyana 200 – 40 240 4 Suriname 190 – 45 235 4 STL 155 – 30 185 3 Belize 150 – 35 185 3 SVG 140 – 20 160 3 Grenada 105 – 30 135 2 Dominica – – – – – Haiti – – – – – MNT – – – – – SKN – – – – – CARICOM 4,555 – 1,045 5,600 100

Source: Industry Interviews NB: Figures rounded

Table 3.9 shows the distribution of consumer expenditure of food in food retail and QSRs across CARICOM. Consumers’ expenditure of food from QSRs is approximately one quarter of their expenditure on food from retail outlets. As can be expected, Jamaica and Trinidad and Tobago account for the largest shares of expenditure. Some countries such as Bahamas, Barbados, and Antigua have larger shares of the regional market, in part because of the higher levels of disposable income.

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Key Consumer Trends Driving Food Retail Market Changes

A review of the key trends driving change in the demand side of the CARICOM retail food markets can help to crudely assign countries into different stages, although several states have characteristics of various stages. Per Capita Income In 2005, the forecasted per capita income in the region ranged from as high as US$18,256 in the Bahamas to as low as US$1,035 Guyana,. In 2000, Haiti’s per capita GDP was lower than Guyana. The countries that might be grouped in the highest per capita incomes (over US$10,000) were in decreasing order: Bahamas, Barbados, Antigua and Barbuda, St Kitts and Nevis and Trinidad and Tobago. The countries with the lowest per capita income were Haiti, Guyana, and Suriname. The GDP Per Capita by Country at Market Prices (1980-2005) is shown in the Table 3.10. Table 3.10: Per Capita GDP at Current Market Prices 1980-2000, Projections 2005 (US$)a

Countries 1980 1990 2000 2005c Bahamas – – 16,206.0 18,256

Barbadosb 3,455.0 6,688.6 9,687.2 10,747

Antigua & Barbuda -- -- 9,453.0 11,592

Saint Kitts & Nevis 1,087.0 3,802.2 8,536.7 10,244

Trinidad & Tobagob 5,764.5 4,170.6 6,238.7 10,533

Saint Lucia 1,183.4 3,166.4 4,734.9 4,140

Grenada 940.3 2,436.2 4,391.3 4,394

Dominicab 803.1 2,395.6 3,802.8 3,814

Belize 1,354.4 2,183.1 3,415.4 4,120

Jamaica 1,256.3 1,938.5 2,992.4 3,388

Saint Vincent & Grenadines 605.7 1,874.1 2,959.8 3,719

Surinameb 2,514.0 4,432.6 2,020.6 2,452

Guyana 762.4 633.1 1,086.2 1,035

Haiti 253.8 446.1 438.5 -

Source: Statistical Yearbook for Latin America and The Caribbean - 2002, p. 198, Table136. aThe rate of exchange used for the entire series is the IMF “rf” rate; hence the values are not necessarily consistent with those elaborated for the same year in the series in dollars at constant 1995 prices. bFrom 1997 to 2001 the source is the United Nations Publication. cIMF. NB: Table ranked by size for most complete year – 2000

There is a definite trend of annual increases of per capita income for the region. Only Suriname experienced lower per capita income in 2005 ($2,452) when compared with 1980 ($2,514). Comparing data for 2000 to 2005, two countries experienced lower per capita incomes: St. Lucia (from $4,734 to $4,140, a 12 percent decrease), and 13th place Guyana

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(from $1,086 to $1,035, a 4 percent decrease). All the other countries experienced increases in per capita income in 2005. The countries with higher per capita incomes suggest that they may have more developed retail markets, e.g., Bahamas, Barbados, Antigua and Barbuda, St. Kitts and Nevis, Trinidad and Tobago. In contrast, the countries with the lowest per capita income are expected to have more traditional retail formats, e.g., Suriname, Guyana, and Haiti. Finally, there are clearly some in a middle grouping, and these include St. Lucia, Grenada, St Vincent and the Grenadines, Dominica, Belize, and Jamaica. Population Population size is a basic driver of food intake and in the Caribbean this takes two forms – the resident population and the tourist population. The population of the CARICOM states was 15.1 million people in 2002, with the countries with the largest populations, Haiti, Jamaica, Trinidad, and Guyana, accounting for over 88.3 percent of the population. The United Nations (UN) has reported that CARICOM's population increased by 27.3 percent for the period 1985–2002 with growth rates highest in Belize (44.8 percent), Haiti (41.3 percent), the Bahamas (33.3 percent), and St Lucia (34.8 percent). In contrast, Guyana, Dominica, and St Kitts and Nevis experienced no growth or negative growth. The UN has projected that CARICOM’s population will increase between 2005 and 2015 by an average of seven percent with the highest rate of growth being found in countries at all stages of market development - Belize and Bahamas (10 percent), Jamaica (9 percent), St Lucia (7 percent), and Trinidad and Tobago (5 percent). These markets that experience significant growth in population size, without any decline in income, will experience growth in the size of the retail market. However, this may not in itself change the stage of development. (See Appendix 2). Tourist Visitors and Tourists’ Expenditure In 2002, there were 5.0 million tourist visitors and 6.1 .million cruise ship passenger visitors to CARICOM states and these accounted for a total expenditure of US$ 4,898 million in 2001. It is estimated that between 10 – 20 percent of tourist expenditure is on food, and therefore countries with higher tourist arrivals and strong growth rates in tourist arrivals are likely to have more modern food markets because of the increased demand for value-added and convenience products. In absolute terms, the highest arrivals are in the Bahamas (1.5 million), Jamaica (1.3 million), Barbados (498,000), and Trinidad and Tobago (384,000), but on a per capita basis, arrivals would also be relatively high in several of the OECS states. Demographics • Urbanization – Greater urbanisation is associated with modern retailing, because these

populations tend to have higher incomes, smaller households with less family members to cook at home, and more concentrated populations to justify the development of larger store formats. In the case of smaller islands, urbanisation seems to be less important than population density.

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In 2005, the UN40 reported within the more developed regions of the world, 74.9 percent of their populations resided in urban areas, compared to 43.2 in the less developed regions. The CARICOM countries with more than 75 percent of their populations living in urban areas are Bahamas, Suriname, and Trinidad & Tobago. The countries with less than 43 percent were Grenada, St Lucia, Haiti, Antigua and Barbuda, and St Kitts and Nevis.

In 2005, more developed parts of the world had population densities of 23.0/km2 and less developed parts of the world 27.7/km2. In contrast, population densities in CARICOM islands ranged from a high in Barbados of 627 people per sq km, to a low in Montserrat (44/km2) with other countries ranging somewhere in between such as Haiti (307/km2), St Vincent and the Grenadines (307/km2), Grenada (299/km2), St Lucia (298/km2), Jamaica (241/km2), Antigua and Barbuda (184/km2), St Kitts and Nevis (164/km2), and Dominica (127/km2). At such higher population densities, in small countries where access to the capital city does not involve long travel times, urbanisation may be a less important driving force for the development of modern retail formats. It is likely that income and the population size would be more important drivers. See Appendix 2.

• Working Women - More traditional retail markets are associated with lower

participation of women in the labour force because there are likely to be larger families where women cook at home and participate in the production of food for the household. In contrast, higher levels of working women help to increase household income allowing for the purchase of more household appliances and drives the need for food service and convenience foods.

The countries with the highest participation rates (over 60 percent) are Bahamas, St Lucia, Barbados, Dominica, and Antigua and Barbuda. In contrast, the countries with the lowest participation rate of less than 40 percent were Guyana, Belize, and Suriname. The other countries have women’s participation rates of between 40 percent and 59 percent. Over the ten years ending in 1991, although there were increases in most countries, the strongest gains were observed in Bahamas (27 percent), Suriname (23 percent), St Kitts and Nevis (11 percent), and St Lucia (6 percent). Such changes increased household incomes allowing the purchase of new appliances and driving the demand for convenience foods and food service. See Appendix 2.

• Household Appliance & Vehicle Ownership- In the absence of a data set for the whole

region, the case of Trinidad and Tobago shown in Table 3.11 serves to demonstrate the rate at which household appliances, communication facilities and vehicles are penetrating homes in a higher income and more developed retail market in the region.

Over the 25-year period to 2000, kitchen appliances ownership has increased significantly - stoves (96 percent), microwaves (28 percent), refrigerators (83 percent), and freezers (18 percent). This allowed a far greater percentage of consumers to move away from purchasing basic food commodities which need extensive preparation at home, to semi-prepared foods, home meal replacements, and convenience foods which require minimal preparation.

40 http://esa.un.org/unpp

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Over the period 1976 to 1998, communication facilities in the household have increased significantly as ownership of radios has increased from 77.8 percent to 84 percent, televisions from 42.8 percent to 87 percent, and fixed telephone lines from 11.5 percent to 54.7 percent. Cable TV, computers, and the Internet are also increasingly penetrating the average household. These technologies will impact on food consumption significantly in several ways. First, access to international media will change consumers’ consumption patterns, especially for foods that bring functional and aspirational values to their lives. Second, modern communications technologies allow retailers to communicate more directly with consumers and will support the penetration of international and regional products and brands that are able to use the electronic press to communicate their promotional programmes. Finally, the Internet will allow younger consumers to research food purchases from stores that they had not yet visited, just as recent research in the US indicates, where 40 percent of young Internet users do similarly.

Table 3.11: Penetration of Modern Kitchen Appliances, Communication & Transport Facilities into Trinidad and Tobago Households 1976–2000

Household Facilities Percentage of Households with Facilities

1975/76

(%) 1981/82

(%) 1988 (%)

1997/98 (%)

2000 (%)

Kitchen Appliances

Stove 65.6 89.4 96.1 97.4 96.5

Microwave -- -- -- 19.7 28.3

Refrigerators 59.2 77.3 84.6 83.6 83.17

Freezer -- -- 11.0 16.9 18.6

Communication

TV 42.8 71.8 84.7 87.0 86.5

Radio 77.8 42.5 48.1 84.0 --

Phone Land Lines 11.5 10.6 45.6 54.7 61.5

Cell Phones -- -- -- -- --

Cable -- -- -- 16.5 28.46

Computer -- -- -- 5.3 9.5

Internet -- -- -- -- 7.19

Transport

Car -- -- -- -- 40.25

Vehicles/ 1,000 People -- -- 171 176 250 Source: Trinidad and Tobago CSO - Household Budget Survey NB: -- No Data Available

In 2000, in Trinidad and Tobago, 40 percent of households owned cars. Overall motor vehicle ownership has grown by half from 171 for each 1000 persons in 1998 to 250 per thousand persons in 2000, allowing more consumers to access food retailers and restaurants more easily, and make larger purchases of food less frequently. This will have a significant impact on the need to purchase bulk quantities, and the ability to purchase fresh and semi-prepared foods,

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which were previously purchased at the weekend fresh market, and to shop further away from home. Similar trends are expected to be seen across the Caribbean, but at different rates as can be seen for communication facilities and Passenger Cars and Commercial Vehicles in Use (Appendix 2).

Improved transportation is an important driver in the development of food retail market as it allows consumers to make larger and fewer shopping trips for their main shopping, to top up their main shopping further way from home, and in a wider range of shops. It also favours larger stores, the location of stores away from urban centres and greater choice in dining away from home.

Conclusion It is challenging to arrive at a definitive account of the size of the food distribution services market in CARICOM, due to the unavailability of accurate statistics in some cases and the lack of a uniform reporting structure across the region. Some segments of the sector are included in national statistics on hotel and restaurant services which is dominated by hotel services sales, while data for the wholesale and retail trades includes non-food retail sales. In the case of both food retail and food service there is insufficient disaggregation of the food component thus hindering proper analysis. In addition, agri-food trade and production data are also insufficiently disaggregated to arrive at the value of all food purchased at the consumer level. Trade data, for example, includes raw material inputs, and intermediate and consumer-ready agri-food products. Secondary food manufacturing data tends be included within national statistics on light manufacturing. Nonetheless, it is possible to note that while agriculture contributes US$1.3 billion to GDP in the region, the Caribbean remains a major net food-importing regional with annual deficits on food trade of approximately US$1 billion. In light of the above, this study arrives at estimates of the size of the food distribution sector using information from food distribution sector leaders across the region. It is estimated that food retail and QSR sales of food and beverages to consumers in the region stands at approximately US$5.6 billion. This sum is generated from sales of almost 18,000 stores employing more than 112,000 people. Consumer purchases of fast food were about 19% of the value of food retail. The value of food wholesale good purchased by resellers to generate these sales is estimated to be approximately US$3.9 billion. This suggests that the sector contributes importantly to economic activity, employment, and enterprise in the regional. It is important to note that these estimates do not include food purchased from bars and cafeteria, full service restaurants, caterers or street food vendors or country data from St Kitts and Nevis, Dominica, Montserrat, or Haiti. The key trends driving changes in the market are increasing per capita income, increasing national populations, increasing tourist arrivals, greater urbanization, a higher percentage of working women, more modern appliances in households, and increasing vehicle ownership. These trends are not evenly manifested throughout the CARICOM, because of the differing stages of development across the region, but will continue to affect the market for food in the region. Business operators and Governments will have to understand and be sensitive to these changes in implementing their growth, development and trade negotiations strategies for the sector.

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4. CARICOM FOOD RETAIL SECTOR:

PROFILE, TRENDS AND TRADE RESTRICTIONS

Introduction This chapter describes the CARICOM food retail sector and segments, identifies industry and competitiveness trends in the context of global industry trends, and reviews the policy and regulatory framework for the sector.

CARICOM Food Retail Sector The food retail sector in CARICOM, as defined in the Foreword, has a turnover estimated to be in excess of US$4.5 billion from over 15,000 retail establishments employing over 85,000 people. Modern supermarkets stores dominate the retail food markets with over 40 percent share of the market followed by smaller self-service food stores or groceries (17 percent), counter shops (7 percent), and mom and pop shops (7 percent). Wholesalers who sell directly to consumers still retain a significant market share in Jamaica, Guyana and Suriname and regionally account for 4 percent of retail sales. Convenience stores (2 percent) and discount retailers (7 percent) account for smaller but growing market shares.

CARICOM countries are in differing stages of food retail market development, but it is possible to group them, with some difficulty, into three types of retail sectors – more modern (Bahamas, Barbados, Trinidad and Tobago, St Kitts Nevis, and Antigua and Barbuda), more traditional (Guyana, Belize, Suriname and Haiti) and others with transitional or emerging food retail sectors. The rate of development of the markets is influenced by a mix of income growth, urbanization, demographic changes, market liberalization, and structural reform programmes which drive the development of the markets. The attractiveness of the markets to external retailers also increases as the markets modernize.

As seen in Table 4.1, modern supermarket stores dominate the retail food markets with sales of over US$1,900 million representing 42 percent of the market. There are 275 major supermarkets operated by 75 companies employing over 17,000 people across the region. These are found largely in the capital cities, and in primary towns, and sometimes secondary towns. There are over 1,250 smaller self-service food stores found in urban neighbourhoods and in towns in most CARICOM countries employing over 22,000 people and accounting for over 17 percent of food sales. When food stores are combined with supermarkets, almost 70 percent of food is now purchased in self-service stores. There are over 3,000 counter shops, an important distribution channel for staples in rural towns and villages, accounting for 7 percent of all sales. Convenience stores, either in the form of the traditional “mom and pop shops” or the modern service station format represent 9 percent of food sales.

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Table 4.1: CARICOM Food Retail Service Profile Category Firms

(No) Stores (No)

Total Staff (No)

Total Sales (M USD)

Channel Share (%)

Modern Formats Supermarkets 75 275 17,290 1,900 42 Discount Formats 15 20 1,860 310 7 Convenience Stores 205 435 2,200 100 2 0 0 0 0 51 Tradtitional Formats Self Service Food Stores/ Groceries 1260 1,260 22,845 785 17 Counter Shops 3300 3,300 7,300 335 7 Mom & Pop Shops 8850 8,850 9,750 310 7 Wholesaler/Retail Sales 885 885 4,920 195 4 Fresh Markets/ Specialty Retailers 0 -- 18,960 620 14 49 Total 0 15,025 85,125 4,555 100

Source: Industry Interviews NB: Figures rounded The number of fresh markets and specialty food shops was difficult to arrive at, but their sales were estimated by the industry members to be in the order of US$620 million representing 14 percent of the market. However, this value may not include consumption which takes place by rural consumers in their homes and communities and therefore understates the value of total food consumption. Crude estimates of the proportion of perishable foods being purchased through these channels in selected CARICOM states is presented in Table 4.2. Table 4.2: Proportion of Perishables Consumed Sold in Specialty Retailers/Fresh Markets in Selected CARICOM States

CARICOM State F & V

(%) Chicken

(%) Pork (%)

Beef (%)

Fish (%)

Dairy (%)

Bakery Products

(%) Belize 90 15 80 80 70 -- 15 St Vincent & Grenadines 90 10 10 10 90 -- -- Guyana 85 60 60 60 70 -- 15 Suriname 70 20 90 90 85 -- 30 Jamaica 50 20 40 40 50 5 20 Trinidad & Tobago 50 50 30 10 70 10 25 St Lucia 50 15 20 20 70 -- 60 Barbados 50 30 20 10 40 10 30 Bahamas 15 5 5 0 85 0 5 Antigua & Barbuda 10 5 15 10 75 5 60 Source: Industry Interviews NB: -- No information available

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As can be seen in Table 4.3, Jamaica and Trinidad and Tobago are the largest markets in the region. However, Bahamas, Barbados, and Antigua and Barbuda have larger market sizes than their population sizes, which in part reflect their higher per capita income and larger tourism sector. Table 4.3: Profile of CARICOM Food Retail Sub Sector by Country CARICOM State Food Retail Stores

(No) Food Retail Employment

(No) Food Retail Sales

(US$ million)

Jamaica 2,945 26,350 1,250 T & T 3,115 22,200 1,090 Bahamas 310 2,915 530 Barbados 365 4,320 520 A & B 340 1,340 225 Guyana 2,745 6,190 200 Suriname 2,030 9,460 190 STL 430 2,955 155 Belize 1,340 4,920 150 SVG 665 2,205 140 Grenada 805 2,270 105 Dominica – – – Haiti – – – SKN – – – CARICOM 15,025 85,125 4,555


More Traditional Food Retail Sectors Belize While there are two small traditional supermarket chains, which dominate the urban upper end of the food market, the larger part of food sales in Belize takes place in smaller stores in towns and neighbourhoods and from specialty food retailers. Smaller neighbourhood stores and specialty agri-food retailers, still account for a significant proportion of locally-produced food. Brodie’s SuperFoods of the James Brodie & Co Group has four modern food retail stores of 5,000–7,500 SF located in Belize City and Belmopan. Sav-U Supermarkets of the Santiago Castillo group operates two supermarkets ranging in sizes from 8,000 to 10,000 SF. Both chains stock between 7,500 and 10,000 SKUs and carry strong assortments of international and regional brands which they source mainly from their associated food importer-distributor companies. The top five operations are estimated to have a 28 percent share of the US$150 million food retail market. It is estimated that there are 50 self service food stores with 1,000–7,500 SF in sales area and 2–4 check-out counters and selling mainly basic staples, budget brands, convenience food, and non-food grocery items accounting for another 25 percent of food sales. Another 500 counter shops

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and 1,000 “mom and pop” stores across the country account for a further 15 percent and 10 percent, respectively. Specialty vendors, most of which operate out of the 10 municipal markets, account for 90 percent of fruit and vegetables, 80 percent of beef and pork, 15 percent of chicken, 70 percent of fish, and 15 percent of bread and pastries. Belize is self-sufficient in most of these products, as well as in rice and corn. The major supermarkets are implementing strategies to expand existing store sizes, to improve the product and service offers to consumers, and to extend operations beyond the capital city. Smaller importers and QSR operators are entering the food retail market, often buying directly from Miami and bypassing the local distributors. Since the late 1990s, the service station chains have expanded their numbers to 70 gas station chains, and have established modern purpose-built food marts stores in 32 outlets, which have become a major source of convenience and ready-to-eat foods. Guyana In Guyana the informal retailers and specialty food retailers still play a significant role in the food distribution system. Most supermarkets are still independent stores and there is only one food retail chain of small meat centers. The four largest supermarkets in Guyana are relatively small compared to most other CARICOM states and are all located in Georgetown. Three of them are small, traditional single-store supermarkets servicing the middle to upper segments of the market. Wm Fogarty’s Supermarket with a 10,000 SF store with eight checkouts, Nigel’s Supermarket with a 8,000 SF store with four check-outs, and Bonny’s Supermarket with 6,000 SF and four check out counters, all stock between 6,000–10,000 SKUs of local, regional, and international brands and have small fresh and chilled foods departments. One operation, Bounty’s Farms has four 2,500 SF meat marts with large frozen meat and branded grocery departments targeted to middle and upper income consumers in Georgetown. See Box 4.1. Two are associated with importer distributors - Wm Fogarty’s with Laparkan Ltd. and Bounty Meat Centres with Bryden and Fernandes. These four operations are estimated to account for only about 15 percent of the US$200 million food retail market. There are over 30 smaller independent self-service food stores in Georgetown and the major towns across Guyana with sales areas of 2,000–7,000 SF and 2–4 check-out counters, carrying 3,000–6,000 SKUs of largely staple foods, budget brands, and smaller amounts of frozen foods, but almost no chilled or fresh foods. This distribution channel is estimated to account for 22 percent of food sales. The smaller communities across the country are serviced by an estimated 750 counter shops and 1,500 mom and pop shops. The product mix in these stores is predominantly basic staples, non-food grocery items, and some convenience items. While the formal retail distribution channels account for most of the food imported into Guyana, a significant amount also passes through wholesalers, operating from fresh markets, especially the Georgetown markets. These wholesalers sell imported and locally produced staples which they retail in the markets, and wholesale to smaller van salesmen who then resell to counter shops and households in the villages. This channel is estimated to account for approximately 20

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percent of all food sales. Moreover, specialty food retailers and fresh markets still account for a significant proportion of locally-produced food such as 85 percent of fruit and vegetables, 60 percent of beef and pork, 50 percent of chicken, and 15 percent of bread and pastries. Fishmongers sell about 70 percent of fish directly to consumers. Guyana is self-sufficient in most of these products as well as in rice.

Box 4.1: Bounty Farms Meat Centers Develops Multiple Format with Franchise Strategy

The Meat Center is a division of Bounty Farms, a fully-integrated poultry processor originally established to improve the poultry and meat sales of the chicken operation, Bounty Farms is itself a subsidiary of one of Guyana leading food distribution groups - John Fernandes Ltd, which is involved in port services, poultry processing, rice production (Fairfield Investments), and grocery retailing and wholesaling (Bryden & Fernandes Ltd). In 2005, Bounty Farms Meat Centers operated 4 small food retail outlets employing 80 people and generating sales of US$4.5 million.

The Meat Centers are small mini-marts of 2,000 to 3,000 SF of sales area with up to 4,000 SKUs and 3 – 4 checkouts. The product mix varies depending on the location but is predominantly frozen product (50 percent), with small amounts of chilled (5 percent), fresh (5 percent) and branded grocery. One store targeted to higher-income consumers has a higher percentage of imported packaged goods and the other stores targeted to lower or middle income groups sell a larger proportion of essential staples. No services (e.g., bill payment, remittances, lotto) are being offered by the Centers.

The first store was opened in Georgetown in 1990 and three more stores were added in 2002, 2003 and 2005. The last store was opened under an agreement to franchise its Bounty Meat Centre retail brand, fascia, and staff uniforms format to an independent supermarket in return for an agreement to be the only Bounty chicken outlet in the catchment area. Bounty plans to continue to expand its chain to penetrate the market with a fifth in the town of Grove, in 2006.

Source: Bounty Farms Ltd.

Over the last five years, there have been some changes in the food retail landscape in Guyana. Several wholesalers, corner shops, and fresh market wholesalers have developed into food stores, as has been the case for Nigel’s Supermarket. There have been several new entrants to the market such as Survival, Jays, R&R, and R&S who have built new stores, and New Thriving Restaurants, which has acquired Bonny’s Supermarket. Several wholesalers such as Mattai’s General Merchants have expanded beyond wholesaling into retailing. More development is taking place in secondary towns as counter shops trade up to smaller self-service food stores and have increased in numbers in secondary towns. Formats and fascias are being modernized. Service stations have introduced modern forecourts. Several small malls with small supermarkets and food courts are being constructed. One retailer, Bounty Farms is exploring supermarket franchising in its bid to extend its presence outside of Georgetown.

Suriname

There are no supermarket chains in Suriname and the five largest supermarkets are all single store operations, located predominately in greater Paramaribo. The smaller, traditional formats and specialty food retailers continue to play a significant role in the food distribution system.

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The largest supermarket, Combe Markt, which occupies over 31,000 SF of sales area, is organized like a “bazaar” and operates 50 check out counters with a staff of 500 people. It operates on a high volume, low overhead, and low margin basis offering low-income consumers value through budget pricing. The remaining four larger supermarkets – Chois Supermarket, Best Supermarket, Summit Supermarket in Paramaribo and Bisessar’s Supermarket in Nikerie have smaller sales areas of 8,000 – 15,000 SF with 4 – 6 check outs employing 30 – 60 people and offer more of a quality proposition with somewhat larger and more modern frozen and chilled facilities and small fresh departments. There is generally a high level (over 80 percent) of imported product in the assortment of these stores, with a noticeably high percentage originating in Asia (particularly China and India). The levels of services offered by the leading supermarkets, and indeed all supermarkets are limited. These five operations are estimated to have a 25 percent share of the US$ 155 million food retail market. Apart from these larger stores, there is a growing number of minor self-service supermarkets, which are estimated to account for a further 25 percent of sales. These stores range in size between 3,000 and 9,000 SF, stocking 3,000 – 6,000 SKUs and operating 2 – 4 check out counters. This channel is growing in store numbers as newly-arrived immigrant Chinese entrepreneurs make investments in counter stores and transform them into small self-service supermarkets. The modern convenience store sector is still small and limited to only (30) gas station food courts which are small, open for longer hours, and is estimated to account for a small amount (2 percent) of total sales. The more traditional food retail channels – neighborhood counter shops and “mom and pop” shops – still play an important role in the food distribution system, accounting for 30 percent of sales. Counter shops are small (750 – 3,000 SF), sell a limited range in SKUs, mainly ambient temperature staples and budget-branded packed groceries, tend to have no cash registers and are managed largely with 1 – 3 family members. “Mom and Pop“ shops are even smaller (500 – 750 SF), family-run shops, carrying mainly convenience and top-up items tailored to the local community. Some wholesalers offer consumers the option of purchasing in retail quantities the products and brands they carry at their outlets. This segment is estimated to represent 4–5 percent of total food purchases by consumers. There are 12 fresh food markets across the country and a number of specialty fresh food shops in the towns which are estimated to account for 20 percent of consumer food purchases. Six of the markets are state-run municipal markets together with six cooperative farmers markets which tend to open on fewer days of the week. These markets house 1,200 – 2,000 vendors and are supervised by the state authorities. These markets remain an important distribution channels for fresh foods to local communities especially for foods produced in Suriname. It is estimated that the majority of beef and chevron (90 percent), pork (90 percent), fish (85 percent), fruit and vegetables (70 percent), and chicken (20 percent) consumed in Suriname is sold through these channels. In addition independent specialty bakeries sell an estimated 30 percent of fresh bread and pastries consumed. Haiti Most of the population in Haiti purchases food daily from wet markets and street vendors that supply the fresh produce, meats, fish, beverages, and staples which account for approximately

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80–90 percent of food sales41. Neighbourhood corner shops in villages also provide staples and a limited amount of packaged groceries. The rest of food is purchased from a relatively few small, independent supermarkets, perhaps 60–80 in all, located in the major cities where 30–35 percent of middle to upper income Haitians shop to buy branded and refrigerated items which cannot be found in the fresh markets and neighbourhood stores. In the late 1990s, the leading supermarkets were Caribbean Supermarket, Deli Mart, Royal Market, and Eagle Supermarket, of which the largest, Caribbean Supermarket only has six check-out counters. The IGD42 estimated the value of retail food sales to be US$1.2 billion in 2003. More Modern Food Retail Sector In CARICOM, the Bahamas, Barbados, Trinidad and Tobago, and Antigua and Barbuda appear to fit more easily into this category. Presumably, based on GDP per capita income, St Kitts and Nevis would fit in this category, but the consultants did not visit that country. Jamaica has many elements of a modern food retail sector, but also has a very large rural population, which is still emerging. It is important to note that many OECS states have much smaller land masses and higher population densities which facilitate the access of consumers to more modern food retail facilities, and suggests that they may be better placed in the modern rather than the transitional food retailing category. The Bahamas The food retail market in the Bahamas is well developed, and is concentrated on the three islands where the bulk of the population resides New Providence, and to a lesser extent, Grand Bahama, and Abaco. Three modern supermarket chains dominate the market. The largest chain, Bahamas Supermarkets43 operates 12 traditional supermarkets ranging in size from 15,000–35,000 SF in New Providence (9 City Markets) and Grand Bahama (3 Winn-Dixies). See Box 6.4 for a more detailed description of Bahamas Supermarkets. Another, Super Value Food Stores, operates 10 similar formats each ranging in size from 25,000–30,000 SF, all located in New Providence. A third chain, Abaco Markets Ltd. (Box 4.3), operates two “big box” formats - four Solomon Super Centres which range in size from 10,000 to 50,000 SF and three Cost Right Discount Warehouses with sizes of up to 120,000 SF in New Providence, Grand Bahama, Abaco and the Turks & Caicos. Together, the leading five chains account for 63 percent of all food sales estimated to be US$530 million per annum. While the middle to upper income consumers shop mainly in supermarkets, smaller self-service food stores, 2,000–7,500 SF in size with two to three check-outs, operating with family labour and low overheads, provide basic staples and a limited line of frozen meats and convenience foods to lower to middle-income neighbourhoods. In addition, there are an estimated 50 neighbourhood counter shops, 200 “mom and pop” shops, and several service station food markets offer consumers convenience foods and groceries. Specialty fresh food retailers and fresh produce markets are not very significant in the Bahamas with the exception of fish, with the majority of fish (80 percent) consumed being purchased by

41 http://www.fas.usda.gov/gainfiles/200403/146105803.pdf 42 Institute of Grocery Distribution, Global Retailing 2005. 43 See Box 6.4 for a more detailed description of the Bahamas Supermarket operations

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consumers at the fish landings. That apart, the specialty retailers account for 5–15 percent of all fruit and vegetable, chicken, pork and bakery products consumed in the Bahamas. The Bahamas food retail sector has been saturated for some time now and no new supermarkets have been built. Rather, the two traditional supermarket chains have been increasing sales by restructuring their store portfolios through refurbishing, rebuilding, and relocating of stores. Abaco Markets Group is reported to be having difficulty making the big box formats profitable and is currently implementing a strategy to structure and refocus their core operations including divesting under performing stores and taking equity stake holding in the Bahamas Supermarkets as a strategic partner. (Box 4.2) Box 4.2: Abaco Markets Seeks Strategic Partners in the Region Since 2005, Abaco Markets has been focusing on long-term growth and profitability and has adopted a strategy which includes: - • Concentrating on the key markets of Nassau, New Providence and Freeport, Grand Bahama with the

greatest potential for the group • Improving its customers’ in store experience to increase same store sales • Reducing excessive shrink, loss and damage in stores • Seeking strategic partners in the region to achieve purchasing synergies to deliver better products and

better prices to our customers, and operational support. • Redeploying capital and resources for a better return on investment by divesting assets provide for a

substantial reduction in the group’s bank debt and allow Abaco Markets to move forward as a smaller, more profitable company. Planned divestments include:

- Solomon’s, Abaco to Price Right Limited (Super Value Food Stores Ltd.); - Solomon’s, Treasure Cay; - Solomon’s, Cedar Street, Freeport which includes an option to lease back a portion of the building; - Cost Right Abaco and Cost Right Turks. While the search for a strategic partner in the region had been ongoing, when the opportunity to invest in BSL Holdings arose, Abaco Markets determined that the prospect could provide similar benefits that Company had been seeking. Abaco Markets investment in BSL Holdings was for a minority stake. Source: Adapted from http://www.abacomarkets.com/financialdata.htm

Table 4.4: Bahamas Food Retail Store Growth, 1990–2006

Company Fascia 2000 2005 2006 Supermarkets Bahamas S/Markets City Markets 9 9 12 Bahamas S/Markets Winn-Dixie 3 3 0 Super Value Food Stores Supermarket 12 11 10 John Chea & Sons J Chea Food Stores 4 8 8 Lucky Food Stores Lucky Food Stores 1 4 4 Budget Food Stores Budget Food Stores 0 5 5 Discount Formats

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Abaco Markets Solomon S/Centre n/a n/a 4 Abaco Markets Cost Right Discount W/House n/a n/a 3 Super Value Food Stores Discount Store 0 0 1 Source: Industry Interviews

Several small chains such as John Chea & Sons (8 stores), Lucky Food Stores (4 stores), and Budget Food Stores (5 stores) have been expanding their stores in response to demand of price sensitive customers in suburban neighbourhoods, often at the expense of mom and pop stores that have been in decline (Table 4.4). Gas station C-stores have been growing and offering consumers greater access to convenience products and services. Trinidad and Tobago In Trinidad and Tobago, supermarkets account for a significant share of consumer food expenditures and are gaining share from smaller food retailers and specialty food retailers. The four largest supermarket chains in Trinidad and Tobago – Hi Lo Food Stores, JTS Supermarkets, Tru Valu, PriceSmart, and the Naipaul Group are estimated to have 28 percent share of the US$1.09 billion food retail markets with Hi Lo accounting for 18–20 percent of retail food sales. The supermarket distribution channel, found predominantly in the capital city, primary towns, and secondary towns, is estimated to account for 43 percent of food sales. There are approximately 80 operators of traditional supermarkets of which 14 are chains of 2–20 stores. The largest by number of stores are Hi Lo Food Stores with 20 stores, CL Financial with 2 chains of 4 stores each, Persad’s Superstore with 5 stores, and JTA Supermarkets and Fong’s Supermarkets with four stores each. There are approximately 10 retailers with 2 stores each and 65 independent supermarkets. Supermarket sizes range from 6,000 – 35,000 SF in sales area, carry 8,000–20,000 SKUs, and have 6–15 cash registers. In addition, there are over 250 smaller self-service food stores, often called groceries, which account for 23 percent market share and are found mainly in smaller towns, villages, and neighbourhoods, where they offer consumers mostly groceries and a few frozen lines. 750 counter shops and 2,000 “mom and pop” shops offer convenience food and top-up groceries to consumers, mainly in rural neighbourhoods across the country. The specialty food retailers are found largely in 14 official municipal fresh food markets and another 14–16 itinerant street markets where consumers purchase 50 percent of fruit and vegetable, 50 percent of chicken, 10 percent of beef, 30 percent of pork, 70 percent of fish, 10 percent of dairy, and 25 percent of bread consumed in the country. Specialty shops are estimated to account for US$158 million (TT$1000 million) or 15 percent of all retail food sales. Over the last five years, there have been many changes in the food retail landscape. In the early 2000s, two international retailers planned to enter the market. KMart established a joint venture with local shareholders and began construction of a 50,000 SF hypermarket, but this fell through during construction when the parent company went into receivership. PriceSmart Wholesale Membership Club entered in 2001 with one 50,000 SF and followed soon after with a second one in 2003.

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In anticipation of the entry of foreign retailers, local retailers took steps to improve their competitiveness in several ways. Store sizes were expanded through rebuilding and refurbishing programmes to increase the size of their stores. Hi Lo’s activities were detailed in Box 4.3. Tru Valu Supermarket opened a 35,000 SF store in Trincity Mall in the “KMart” store location by the end of 2006. Several independents such as Naipaul’s and Food Basket have added new stores with very modern formats. See Table 4.5. These stores include expanded fresh, chilled, frozen, and GM and HBC lines. They have also expanded the range of services offered in areas such as food service, financial series, online gaming, and pharmaceuticals.

Box 4.3: Hi Lo Food Stores Moves to Differentiate Its Offer From New Competition

Hi Lo which was established in 1950, is the largest food retailer in Trinidad and Tobago and leads the quality supermarkets segment. Hi Lo is a subsidiary of Neal and Massy Ltd., which owns several complementary companies involved in food distribution, logistics, and maritime services across CARICOM. It trades under the Hi Lo Food Stores (18 stores), LB’s Supermarket (1 store) and Food Master Supermarket (1 store) brands with most of the stores concentrated in the urban and sub-urban East-West corridor in the north of Trinidad. In 2005, Neal & Massy operated 20 supermarkets in Trinidad and Tobago altogether employing 1,500 people and generating sales of approximately US$150 million

Hi Lo embarked on a multi-branding strategy in 1998 in response to the growth of independent supermarkets. It purchased the three-store Budget Food Store chain in 1998, and subsequently purchased independents LB’s and Foodmaster Supermarkets in the east-west corridor in 2004. It has since disposed of two Budget Foods Stores and kept the remaining stores under their original fascias. These “Alternative” formats retain the ambiance of the original independent store, so that the loyal customer base will not be alienated but benefit from the Hi Lo chain supply chain and operational systems.

Traditionally, Hi Lo has operated supermarkets with sales areas of 6,000–25,000 SF, stocking 6,000–17,000 SKUs of which 85 percent is food and 15 percent non-food. Since 2004 the company embarked on a programme to upgrade its real estate stock though the rebuilding of stores, and in the process, expanded the stores sizes to 25,000–40,000 SF with 15,000–25,000 SKUs allowing for a greater emphasis on wider ranges of chilled, frozen, and non-food lines and expanded service offerings. The first stores to be rebuilt were Westmoorings (2004) and Diego Martin (2004), followed by refurbishing of Glenco (2004) and Marabella (2005) and the latest, St Augustine (2006), St Ann’s (2006), and Maraval (2006) stores.

Apart from carrying an assortment of international and regional brands, the chain also carries international distributors’ brands – IGA, and President’s Choice as well as its own labels, Hi Dee and Cuisine. Most of the Hi Lo locations offer additional services like Deli, Rotisserie (40 percent), Bakery (40 percent), Pharmacy, Sure Pay (72 percent), money transfer (70 percent), and on-line gaming (17 percent). Some newer Hi Lo’s offer a mini-restaurant where coffee and light snacks are served. Automatic banking machines are strategically-located adjacent to the supermarkets.

Hi Lo has been investing in new information technology systems to strengthen its marketing, store productivity, and purchasing programmes. The “Smart Shopper” card loyalty programme has enabled Hi Lo to understand the buying pattern of all its customers to improve shelf fill, stock management, new product introduction, and category management with larger international distributors. Most of the products sold in the store (65 percent) are imported from extra-regional (55 percent) sources and from CSME (10 percent) sources. Main categories purchased locally are chicken, pork, beverages, packaged foods such as canned vegetables and cereals, snacks, fruit and vegetables, and bakery products.

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Neal & Massy has been interested in investments in food retailing and food distribution in the larger CARICOM market ever since it established the Jamaican Hi Lo chain in the 1950s, which it later sold to Grace Kennedy. It has continued to invest in food distribution operations directly in Jamaica (HD Hopwood), Guyana (Geddes Grant), and Miami (Neal & Massy International) where it established a logistical hub) and indirectly through the purchase of BS&T shares (20 percent) in Barbados. It actively continues to explore opportunities for investment in food retailing and distribution operations across the region, and in particular in the More Developed Countries (MDCs) such as Jamaica (convenience stores), Guyana (supermarkets), Suriname, and the Bahamas (supermarkets).

Source: Hi Lo Food Stores Ltd. The service station companies, National Petroleum and UNIPET, have also diversified into gas station convenience stores to build sales and margin, but also presumably in preparation of the eventual arrival of international gas station retailers. The Super Pharm chain opened its first store in 2005 and features a 24-hour pharmacy with a convenience food store stocking mostly imported products.

Table 4.5: Trinidad and Tobago Food Retail Store Number Growth, 1990 – 2006

Retailer Stores 1990

Stores 1995

Stores 2000

Stores 2001

Stores 2002

Stores 2003

Stores 2004

Stores 2005

Stores 2006

Supermarket Chains Hi Lo Food Stores 18 18 17 17 16 16 17 18 18 Hi Lo Alternative Stores 0 0 3 2 1 1 2 2 2 TruValu Supermarkets 1 4 8 8 8 4 4 4 3 TruValu Superstore 0 0 0 0 0 0 0 0 1 Fong’s Supermarkets 2 2 5 4 4 4 4 4 4 Naipaul’s Supermarket 0 0 0 1 1 2 2 3 3 Persad’s Superstore 0 0 0 0 2 3 4 5 5 Convenience Formats NP Quick Shoppes -- -- -- -- -- -- -- -- 12 UNIPET Forecourts -- -- -- -- -- -- -- -- 4 Super Pharm 0 0 0 0 0 0 0 0 3 Discount Formats Price Smart W/sale Club 0 0 0 1 1 2 2 2 2 Kmart Department Store 0 0 0 0 Exit 0 0 0 0 Source: Industry Interviews Barbados In Barbados, the supermarket channel is also well developed and accounts for the largest share of retail food sales. The five major supermarkets chains – Super Centre, Trimart Inc., Jordan’s Supermarkets, Carlton Supermarkets, and Less Frills Supermarkets each have from 2 and 6 modern supermarkets with sales areas ranging from 8,000–40,000 SF. The largest five supermarkets are estimated to account for 51 percent of the retail food sales estimated to be US$520 million.

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Another 15 self-service food stores, ranging in size from 3,000–8,000 SF, offer similar products as the larger supermarkets, but with less SKUs. These account for 10 percent of sales. One hundred and fifty mini-marts and 500 “mom and pop” shops account for a further 10 percent of sales. The specialty food retailers are found largely in seven official municipal fresh food markets in itinerant street markets where consumers purchase 50 percent of fruit and vegetable, 30 percent of chicken, 10 percent of beef, 20 percent of pork, 70 percent of fish, 10 percent of dairy, and 30 percent of bread consumed. The last five years have seen a significant change in the Barbados food retail market, coinciding with the entrance of PriceSmart Wholesale Club in the early 2000’s. Barbados Shipping and Trading consolidated its position by becoming a joint venture partner of PriceSmart, merging with several larger independents supermarkets and several convenience stores, and constructing a large superstore. Julie’N supermarket chain of three stores folded and was acquired by its suppliers. Several independents such as Emerald City Supermarket opened a new store. There has been an increase in convenience stores, especially gas station food marts. In addition, there has also been some consolidation in the food wholesaling sector, led by an initiative by BS&T. This restructuring has led to increasing consolidation of the industry with the top five chains stores accounting for over 50 percent percent of food sales. In addition, retailers are moving into the suburbs with increased emphasis on fresh and prepared foods, thematic shelves, private labels, expanded services to deliver faster check-out times, extended hours, and new services such as pharmaceuticals, photo development, banking and gambling services, shuttle and delivery services, and food service. More stores are upgrading their information systems to improve marketing, operations management, procurement, and store productivity. Several discount formats have entered the market, adopting strategies introduced by PriceSmart. This increased consolidation and the associated competition has had its impact on smaller retailers, several of which are reported to be exiting the market. St Lucia The St Lucia food retail landscape is populated by several modern supermarkets and mini-marts dominated by the Consolidated Foods group (See Box: 4.4). The other leading retailers are Glace Supermarkets (2) belonging to Glace Motors, Uptown Supermarket, Wintrades Supermarket which are all traditional supermarkets ranging in size from 4,000 to 8,000 SF, and Dilly’s Mart which is a small chain of small up market mini-marts. The leading five food retailers are estimated to account for 69 percent of the US$ 155 million in food sales in St Lucia. There are another thirty food stores and mini-marts spread across the island providing consumers with staples and non-food grocery items and are estimated to account for 10 percent of food sales. One hundred corner shops and 200 “mom and pop” shops supply staples and packaged groceries in rural and urban St Lucia. Shell and Texaco operate 20 gas station food marts. There are 10 municipal markets, each with 20–50 permanent vendors together with several itinerant vendors who sell only on weekends. The specialty agri-food retailers in these markets and specialty shops still account for a significant proportion of perishable foods sales. It is

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reported that they account for 50 percent of fruit and vegetable sales, 20 percent of beef and pork sales, 15 percent of chicken sales, 70 percent of fish sales and 60 percent of bakery product sales. The sector has undergone a significant amount of change over recent years. Supermarkets have expanded their product and service offers to meet the growing demand of consumers for variety and international brands. The leading chain has also developed several formats to service the need of consumers for quality, discount and convenience shopping. Convenience shopping has increased with the growth in mini-marts and gas station forecourts. The more traditional counter shops and “mom and pop” stores have been in decline. A greater percentage of perishable foods are being purchased through supermarkets rather than in the specialty food retailers. The industry has been consolidating (See Box 4.7) and the sales of the largest chain, Consolidated Foods, is estimated to represent over 50 percent of all food sales in St Lucia. The five largest supermarkets in St Lucia are estimated to have approximately 70 percent share of the US$150 million food retail market. Box 4.4: St Lucian Food Retailers Merge to Form Consolidated Foods

Consolidated Foods Ltd., the largest food retailer and distributor in St Lucia, dominates the food retail landscape with three food retail formats – eight Super J Supermarkets, one BJ’s Wholesale Club, and four Utra Mart retail franchises. It also runs the Big Banana QSR. In 2005, Consolidated Foods operated nine stores directly (Super J’s and BJ’s) employing 850 people.

Super J supermarkets range in size from 8,000 to 12,000 SF in sales area with 12,000 to 15,000 SKUs and eight to twelve checkouts per store. The product assortment includes a full range of grocery and fresh, chilled, and frozen foods. In addition to a complement of local brands, it offers a strong selection of international, regional, and local brands, many of which are sourced through distribution agencies belonging to Consolidated Foods. The four Ultra Mart mini-marts range in size from 3,000 to 6,000 SF in sales area. Most (90 percent) of the product sold in the chain is imported from extra-regional sources (65 percent) and CSME (25 percent) sources. The main categories purchased locally are beverages, bakery products, packaged grocery, fruit and vegetables, chicken, snacks, and paper products. Services offered include deli, rotisserie, pharmacy, lottery, telephone cards, and bill payment.

As the name implies, Consolidated Foods was born out of the consolidation of the St Lucian retail sector. In early 1990s Julie’Ns from Barbados entered the market but exited in mid-1994 when it sold its interests to local investors trading as Gable Woods Supermarket. Gable Woods invited equity participation from BS&T and then renamed the supermarket Julian’s. The firm soon expanded to four supermarkets with one franchise – Erolines Mini Mart. On the other hand, JQ’s Supermarkets belonged to the JQ Charles Group, which operated wholesale, and retail operations in the automotive, general consumer merchandise, food, and real estate sectors. By the early 2000’s, JQ Supermarkets had grown to five supermarkets with a franchise comprising of four Ultra Mart stores. In 2004, Consolidated Foods was formed out of a merger of Julian’s and JQ’s Charles Supermarkets. JQ Charles, Gable Woods, and the staff held the equity in the new company. The smaller Ultra Marts were franchised under their own names and the remaining mini-marts – Eroline Foods (1) and Greenfields (1) were also franchised. In 2005, the four remaining Julian’s and four JQ’s were re-branded to create a chain of eight Super J’s Supermarkets.

The creation of Consolidated Foods, with BS&T as a strategic partner, has provided the company with some critical mass for further investments in food distribution services in the OECS, and eventually in the larger CARICOM region. In this regard, the company has already acquired a small equity position in a retailer in another OECS state.

Source: Consolidated Foods

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Antigua and Barbuda Antigua and Barbuda is well-supplied with modern supermarkets. There are five leading supermarket operators – Epicurean Fine Foods (2), Bargain Centre Supermarket (1), Food City (2), O’Beez Food Store (2), and the Gourmet Basket (1) which is owned by a major importer Island Provision. Epicurean Fine Foods (Box 4.5) leads the quality / gourmet segment while Bargain Centre focuses on more price conscious customers. Many retailers import a significant part of their own requirements and supply smaller retailers and food service providers. The larger supermarkets account for 44 percent of food sales estimated to be US$520 million. Another 35 self-service food stores, 150 counter shops, and 150 mom and pop shops offering mainly staples and budget brands, account for 20 percent, 20 percent, and 15 percent, respectively. Apart from fish and bakery products for which specialty food vendors supply 75 percent and 60 percent of national consumption respectively, specialty shops account for between 5 and 15 percent of consumption of fruits and vegetables, chicken, beef, pork and dairy products consumed in Antigua and Barbuda. As such specialty food retailers and fresh markets are less important and there is significant importation of these products for sale through supermarkets. Box 4.5: Epicurean Fine Foods

Epicurean Fine Foods was established in Antigua and Barbuda in the 1970’s and is the leading supermarket, offering quality and gourmet foods in Antigua. In 2005, Epicurean operated two stores employing 250 people and generating over US$35 million in sales.

Epicurean Fine Foods is owned by a Canadian, Tom Bolieu, who opened a store to sell gourmet foods that he liked to eat. It began initially as a mom and pop store then expanded several times, and in 1975, the 2,500 SF store was replaced by a 15,000 SF supermarket located in the Woods Shopping Centre. In 1995, the store was expanded to 23,000 SF and in 2004, a second 10,000 SF store was established in the up-market Jolly Harbor Beach Resort.

Epicurean offers a wide range of internationally branded food items with strong fresh, chilled, and prepared foods departments. It has an extended specialty, ethnic food, and gourmet food offering. It carries the Hytop retail brand from South East Wholesalers in Miami. In addition to retail sales, it has an important niche of high-end hospitality industry customers. Grocery represents 45 percent of sales, fresh and chilled produce, meat, fish, bakery, and dairy approximately 15 percent and little frozen product at 5 percent. Ninety percent of all foods are imported on a weekly basis from extra-regional sources.

While Epicurean has no interest in trading its services, they have been approached by several regional food retailers, which have expressed an interest in investing in its operations.

Source: Epicurean Fine Foods

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St Kitts and Nevis St Kitts and Nevis is reported to be well-supplied with modern supermarkets in relation to the population size with the largest five firms - Rams Supermarket, C&C Superfoods, Horseford Value Mart, Best Buy Supermarket and Daniels Supermarket accounting for over 50% of food sales. Ram’s Supermarket has three stores of 10,000 SF, 15,000 SF, and 4,000 SF in size. Best Buy Supermarket has three stores and Cemaco Supermarket two stores. In addition, there are several independents such as Horseford’s Valu Mart which has a 14,000 SF store, Super Foods, Daniel Supermarket, Delice Walyn and Ocean Cold Storage. These together with another 20 to 30 smaller self-service food stores, are the main outlets where most consumers do their major shopping. There are few counter shops, and mom and pop shops provide neighbourhood convenience service. Emerging Food Retail Sectors In CARICOM, Grenada, and St Vincent fit into this category. Presumably based on income, Dominica and Montserrat would fit in this category, but the author was not able to visit these countries. St Vincent and the Grenadines There are five supermarket operators located in greater Kingstown. These are CK Greaves Supermarket, Bonnadie’s Supermarket, Aunt Jobe’s Market, Food City, and PH Vera’s Food Store. These supermarkets range from 8–12,000 SF. Sales of food by the five major supermarkets are estimated to be 47 percent of the US$ 140 million food purchases by consumers. Another 50 food stores ranging in size from 2,000–7,000 SF provide the major source of food in rural St Vincent, and in particular, in the Grenadines. Moreover, 150 counter shops and 150 mom and pop shops account for 20 percent and 15 percent of sales, respectively. There are three municipal markets and specialty vendors, which account for 90 percent of fruit and vegetables, 10 percent of meat, 10 percent of chicken, and 90 percent of fish purchased by consumers. The most important development in food retailing in St Vincent in recent times has been the entrance in 2006 of Aunt Jobe’s Market. This is a very modern supermarket with very large frozen, chilled, and fresh produce departments, targeting middle to upper income consumers and offering them very high quality, largely imported food products. The store also supplies a high-end food service to hotels and tourist homes that are keen on such products. Grenada There are five food retailers account for a large part of food sales in Grenada, four supermarkets and a cash and carry operation. Food Fair Supermarkets, Food Land Supermarkets, Real Value

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Supermarket, De Gaile’s, CK Super Value. The five largest food retailers account for an estimated 42 percent of US$105 million food sales. Both Food Land and Food Fair operate two stores each with each chain ranging from 15 – 20,000 SF of sales area, and stocking 6,000 to 10,000 SKUs per store. Real Value Supermarket store is 11,000 SF and stocks upwards of 14,000 SKUs which includes a wider range of local and foreign brands and frozen and chilled lines catering for tourists and students at the St. Georges University. It is located in the Spice Land Mall it opens for longer hours and provides speedy check-out service, and large parking facility. CK’s Super Valu operates one cash and carry store of 6,000 SF stocking 3,000 SKUs and offering both wholesale bulk items to smaller retailers and food service operators as well as retail packs to consumers. Three of the retailers belong to importer distributors. Food Land which has two stores is a subsidiary of Geo F Huggins (Gda) Ltd. Food Land is owned by Jonas Brown and Hubbard and CK Super Value by Independence Agencies, both of which are associated with the Goddard’s Enterprises Group. It is estimated that there are 30 self service food stores ranging in size from 2,000–5,000 SF in sales area in the larger towns and villages and 500 counter shops and 500 mom and pop shops account for the rest of the food sales. Over the last five years, the major changes have been the entrance of Real Value Supermarkets and CK’s Super Valu in the market. The acquisition of Food Fair and Independence Agencies Goddard’s Enterprises of Barbados. Dominica There are three major supermarkets in Dominica, Brizee’s, Whitchurch, and J. Astaphan, all of which are associated with major importer-distributors. In addition there are 20 to 25 smaller self-service mini-marts. Jamaica The Jamaican food retail market has a mix of traditional and modern characteristics. In the urban areas such as the Greater Kingston Area there are many characteristics of a more modern retail markets. Supermarkets chains (SuperPlus, Progressive Grocers, and Hi Lo Food Stores) have a high market share and offer a wide range of products and services. New formats such as discounters (e.g. PriceSmart and MegaMart) and convenience stores (eg Total gas station forecourts) are growing in importance, and there are some signs of saturation in supermarket expansion. On the other hand rural Jamaica continues to rely on wholesale/retailers, counter shops, “mom and pop” shops and fresh markets for a major part of their food needs. There are three major chains in Jamaica. Super Plus (See Box 4.6) is a stand alone supermarket with 36 stores. Progressive Grocers of Jamaica is an association of independent small chains which has purchased several other supermarkets and now has 21 stores which average 15,000 SF in size. Hi Lo Food Stores with 13 stores averaging 12,000 SF, is the subsidiary of one of the regions largest conglomerates, Grace Kennedy. The top five supermarkets, which include the two smaller chains – Lees and Empire, are estimated to account for 28 percent of grocery sales estimated to be US$1,250 million.

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In addition to the top 5 supermarkets there are 25 independent supermarkets accounting for a further 8% of food sales. Lower to middle-income neighbourhoods and rural Jamaica continues to be serviced by 100 wholesalers/retailers, 400 self service stores, and 2,000 “mom & pop” shops, which account for 15 percent, 15 percent and 10 percent of food sales respectively. Consumers continue to purchase 50 percent fruit and vegetables, 20 percent chicken, 40 percent meat, 50 percent fish, and 20 percent bread from fresh markets and specialty retailers, and this channel is estimated to account for 15 percent of retail food expenditure. The traditional food retail sector has been changing over the last 5–10 years. Two operations with international equity have opened large stores in the suburban areas of Kingston – PriceSmart Wholesale Club with one 50,000 SF store and Mega Mart Wholesale Club with two stores of 50,000 SF and 75,000 SF stores. They offer lower-priced food bulk items together with clothing, house appliances, and house wares to middle and upper-income consumers and smaller hotel and food service operators.

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Box 4.6: Super Plus Consolidates Position Through Growth & Diversification

Super Plus Food Stores Ltd is a privately held consumer retailing and wholesaling business owned and managed by eight siblings of the Chen family. It was established in Jamaica in 2001 when all five supermarkets belonging to the Chen family were merged to achieve economies of scale in purchasing, marketing, branding, and advertising. The chain quickly expanded in stores as more of the family members joined the management of the company, and in 1998, the chain had 10 stores grossing US$33 million. In 2003, Super Plus eclipsed Courts (J$4.8b sales) as the islands largest retailer44. In 2006, Super Plus remains a stand-alone supermarket chain operating 36 stores, employing 2,200 people and generating sales of over US$150 million.

Super Plus has several retail and wholesale formats. The main retail format is the traditional supermarket ranging in sales area from 4,000–26,000 SF with 4–24 cash registers, and averaging 50 staff per store. Super Plus is expanding the range of formats it operates to penetrate more segments of the retail market. It operates eight wholesale food outlets mainly in rural towns whose main customers are smaller counter shops, mom and pop stores, and smaller food service operators but also a significant amount of retail customers. In the mid-2000s it entered into a co-branding format with Total Jamaica Ltd to place convenience stores in 14 service stations. In 2004 Super Plus diversified into the variety discount store format – the Super Plus Home Store to go after the higher margin non-food retail business. The first of these experimental stores, which is based in Kingston, has 14,000 SF of sales area with 3,000 products of house ware, furniture, electronics, and children’s clothing lines. Super Plus also operates an electronic marketing service which targets foreign-based nationals and allows them to purchase groceries for their families in Jamaica as an alterative to cash remittances.

Apart from a mix of international, regional, and national manufacturers’ brands, Super Plus offers its customers several retailer brands including IGA and the Super Plus brand which now cover over 60 products. Super Plus is increasing revenues by expanding the percentage of it stores offering service such as rotisserie (24), and deli / restaurant (1); and non-food related services such telephone cards (24), lottery (24), Western Union remittances (20), foreign exchange cambios (11), pharmacy (5), and photo shop (1).

In 2005, Super Plus introduced the new Enterprise Management system to improve customer service across chain, lower long-term support and maintenance costs, allow for centralized pricing and promotions, and centralized storewide reporting. It is a member of IGA which provides access to international standards, training and training materials in retail and supermarket operations to allow the group to attain and maintain world class operations. It operates a distribution center and fleet of trucks and purchases most products from local distributors and only imports 10 percent directly. It actively promotes Jamaican products in its stores and seeks to strengthen local supply chains.

Since its establishment, Super Plus Food Stores has pursued an aggressive growth strategy, which has seen its store numbers grow by 700 percent with future growth to 45 stores by the end of the decade. Through a process of acquisition and construction, it is transitioning out of the original smaller stores to larger stores with expanded offerings largely in towns outside of the Greater Kinston Area. While this strategy has been focused on consolidating its position in its home market, it continues to explore opportunities for further growth, including occasional discussions with other retailers in the Caribbean and beyond.

Source: Super Plus Food Stores Ltd.

44 http://www.superplusfoods.com/customer/help.php?section=news

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Retailers have been entering new formats to increase sales into other segments of the larger retail market. This is best exemplified by SuperPlus, which has invested in over 14 Super Plus food marts in collaboration with Total (Jamaica) Ltd. Other service stations, led by the international gas retailers, have been increasingly constructing modern convenience food marts in the 200 gas stations across Jamaica to meet the growing demand for convenience shopping and to take advantage of growing car ownership and traffic on the roads. SuperPlus has also entered into Variety Discount store selling house wares and clothing, and electronic selling of food on the Internet. Hi Lo has developed a budget format called Hi Lo Basix and the Progressive Group has acquired the Shoppers Fare chain. There has been an increasing wave of concentration in the retail industry over the last 5–7 years as supermarkets are taking share from more traditional retail channels. This has been led by Super Plus Food Stores. This company increased its store numbers from 5 in 1995 to 36 in 2006 through construction of new stores (60 percent) and acquisition of independents (40 percent) with the larger part of its portfolio of stores located in primary and secondary towns and suburban areas. See Table 4.4. Progressive Grocers of Jamaica has also realized a significant increase in store numbers from 10 in 2000 to 21 in 2006, largely through acquisition of the 10 store Shoppers Fair chain which was previously the third largest chain, and the acquisition of several independents outside of Kingston. Hi Lo Food Stores which belongs to conglomerate and importer/distributor Grace Kennedy, has expanded their chain far less aggressively preferring to avoid increasing the number of supermarkets and rather to focus on rationalizing their store portfolio by purchasing independent supermarkets, moving to more strategic locations and refurbishing/rebuilding expanded stores with modern formats. Independents such as Lees, Empire and Lee Joong’s have constructed new stores to become small chains. Supermarket saturation in Kingston has led to increased price competition and this explains in part, the investment by the chains in operations in major and secondary towns outside of Greater Kingston Area. Table 4.6: Food Retail Store Growth in Jamaica

Retailer Stores 1990

Stores 1995

Stores 2000

Stores 2001

Stores 2002

Stores 2003

Stores 2004

Stores 2005

Supermarket Chains Super Plus Food Stores 0 5 13 16 17 20 23 27 Super Plus Wholesale Outlets n/a n/a n/a n/a n/a n/a n/a 8 Super Plus Variety Store 0 0 0 0 0 0 0 1 Progressive – Independent Stores 9 10 10 10 11 11 11 11 Progressive - Shopper Fair Chain 0 0 0 10 10 10 10 10 Hi Lo Food Stores 3/3 3/3 4/3 5/3 6/3 6/3 6/3 6/4 Hi Lo Basix 0 0 0 0 1 1 2 3 Lees /Xtra Food Fair 2 3 2 2 2 2 3 3 Convenience Formats Super Plus / Total C-Stores 0 0 0 0 0 5 5 14 Other Service Forecourts -- -- -- -- -- -- -- -- Discount Formats Megamart W/sale Club 0 0 1 1 1 1 2 2 Price Smart W/sale Club 0 0 0 0 0 1 1 1

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Source: Industry Interviews The restructuring and expansion of store sizes has allowed larger retail chains which are differentiating on consumer lifestyle and purchasing power, to offer customers more fresh produce, chilled meats and dairy, and frozen dairy and prepared foods. They have also expanded their brand offerings to include retailer brands such as Presidents Choice, IGA, and local retailer brands, and offer a wider array of food rotisserie, deli/restaurant, and non-food services such as telephone cards, lottery, remittances, cambio, pharmaceuticals, and photo development. Retailers have also begun to improve the refrigeration, logistics, and information technology in their stores. Key Food Retailers Operating in the CSME A profile of the selected leading food retailers in CARICOM, ranked by estimated sales area, and showing some employment and sales data is provided in Table 4.5. Nineteen of the top 20, based on size of sales area, are located in Jamaica, Trinidad and Tobago, the Bahamas, and Barbados, together with one located in St Lucia. The table does not list all the retailers with small chains (2– 4 stores) since it also includes at least one of the largest supermarkets in each territory. The sales levels were difficult to estimate for many of the operations, except the larger supermarkets which often reported their approximate sales in the press or for which industry leaders were more likely to provide estimates. The rough estimates here are provided simply to provide readers with an approximation of the relative sizes of the operations. It is estimated that the top five supermarkets have sales of over US$100 million with another 10 having sales over US$50 million. Most of the supermarkets are owned by local equity, with several having ownership from CARICOM investors outside of their domestic market, either by way of joint ventures or indirectly through the trading of their parent companies on regional stock exchanges. Several supermarkets in CARICOM have international equity. It is interesting to note that apart from Winn Dixie which has been in the Bahamas for some time now, most of the others have entered the region in the early 2000s.

• Bahamas Supermarkets – The oldest operation of this type is Bahamas Supermarkets 78 percent of which was owned, up till August 2006, by Winn Dixie Supermarkets of the US and the remaining shares (22 percent) are traded on the Bahamian stock exchange. See Box 6.4.

• Mega Mart – Operates wholesale club operations in Jamaica which was a joint venture

between Bashco Trading of Jamaica and Asian equity. See Box 4.7.

• PriceSmart – Operates wholesale club operations in three CARICOM states, two of which are joint ventures and one is now a wholly-owned subsidiary. See Box 4.8.

• KMart – Received approvals to establish stores in Trinidad and Tobago and Barbados

and began constructing a hypermarket in Trinidad, but this was eventually aborted when Kmart experienced financial difficulties in the US.

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Box 4.7: Megamart - Asian Equity Establishes Platform In Jamaica for Regional Expansion45

Megamart Wholesale club was established in 1999 as a joint venture between Gassan Azan of Bashco Trading Co Ltd. of Jamaica (51 percent) and investors from Hong Kong (49 percent). Bashco, is a chain of 12 low budget, hybrid wholesale stores located across the island employing 400 people. Megamart stores are supermarkets, offering grocery, meat mart, dry goods, and variety store offering including clothing, shoes, garden centre, tyre centre, pharmacy, and a wide range of consumer services under one roof. In 2005, the two Megamart’s operated two stores in the greater Kingston area and are reported to have 400 employees and generated sales of US$45 million (J$ 3.0 b) of which 60 percent is food.

Gazan Azan, the chief executive officer of Megamart Stores was reported in the Observer (18 July 2003) to have laid out the company strategy which included expanding further in Jamaica by constructing a third store at Catherine Hall, Montego Bay in January 2004, followed by a possible fourth store in central Jamaica. At this point in time he had hoped to have a revenue stream within the $5billion mark allowing him to raise money in the Jamaica equities market to finance further expansion into the rest of the Caribbean. This is especially important as the start-up costs for each store would be about US$8 million and it would not be feasible to support that level of debt at current interest rates of 15–25 percent. Megamart is currently constructing their third store in Montego Bay.

Source: http://www.jamaica-gleaner.com/gleaner/20030718/business/business5.html

In addition, several other international retailers such as Independent Grocers Association (IGA), Loblaw’s President’s Choice, Waitrose, and Tesco are exporting retailer branded products to the region. The Independent Grocers Association (IGA) is the world’s largest licensed supermarket network. It supplies its retailer brands to supermarkets in the Caribbean including Jamaica, Trinidad and Tobago, the Cayman Islands, Turk and Caicos, St Kitts, Grenada, Barbados, and St Lucia. Box 4.8: PriceSmart Becomes CARICOM’s Only Retailer Trading Services Across the Region

PriceSmart is a membership club for consumers (85 percent) and small food service, fast food and caterers and hotels (15 percent). It offers US and local merchandise and services at low prices achieved through efficient and aggressive volume based on low cost sourcing, distribution, and operations. PriceSmart’s stores a standard 50,000 SF no-frills warehouse type buildings, concrete flooring, high ceiling, and industrial steel racking to project a low cost look and feel to the customers. Isles are wide isls allowing room for large trolleys. It is located off hi-ways, and away from public transport with large car park facilities.

PriceSmart carries a limited assortment of between 2,750 SKUs focused on low-cost, bulk packaged, basic consumer items focusing on US and national brands and merchandise at low prices to PriceSmart members. The store assortment is divided into several sections: a section of the fresh foods section which gives the ambiance of a fresh market where there is a wide range of produce, deli meat, and bakery products offered in an attractive environment; a section with branded food and non-food grocery many of which are “rotated”. With non-foods merchandise, only approximately 33 percent of the items are basic everyday needs such as copy paper, folding tables, basic office supplies and so on. The remaining items are rotational – special buys, popular products, and seasonal merchandise. The product mix between food and non-food items is approximately 45/55 percent and most of the products are sold in bulk packaging.

45 http://www.jamaica-gleaner.com/gleaner/20030718/business/business5.html

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PriceSmart offer a services such as bakery, rotisserie, restaurant, food delivery, tyre shop, pharmacy, ATM, photo shop, wire transfers, and loyalty card. PriceSmart maximizes technology throughout the distribution and sales process to assure low price through volume buying, just-in-time flow of product to maintain in-stock and avoiding over-stock conditions. Inventory control is achieved by tracking merchandise on the system from the point of receipt at the store to the point of sale. Merchandise is pre-marked in the appropriate language and prepared for handling at the selling locations. It uses the Internet to feature merchandise.

Procurement for the Caribbean stores is coordinated through a buying office in Trinidad with about half of the merchandise being sourced from local and regional suppliers and the other half from the dedicated PriceSmart Distribution Centre Hub in Miami which consolidates and/or distributes merchandise from the US. Most stores import a significant proportion of their supply directly and purchase the rest from local manufacturers and distributors. Seventy percent of the food products are imported from extra regional sources and 20 - 30 percent comes from local and regional sources. Main categories purchased regionally are tinned foods, beverages, bakery products, chicken and pork, and fruit and vegetables.

PriceSmart entered the CARICOM market with joint ventures in Jamaica46 which included Restaurants of Jamaica (23.5 percent local shareholding), Barbados which included BS&T (49 percent local shareholding) and in Trinidad and Tobago with 10 percent local shareholding. In 2005, PriceSmart operated four stores in three CARICOM countries employing an estimated 600 people and generating sales estimated to be over US$120 million. Further stores in CARICOM are planned for Trinidad and Tobago and Jamaica, and eventually other CARICOM states.

PriceSmart was established by Sol Price, who created the discount store industry in the US by launching FedMart in 1954. In 1976, he founded Price Club, the first membership warehouse store and later sold it in 1993 to Costco Wholesale. Later he formed PriceSmart, which some industry analysts speculate that the Price family may eventually consider selling to Costco, or to Wal-Mart.

Source: http://www.pricesmart.com/ IR/ir_annrep.htm

46 http://www.jamaica-gleaner.com/gleaner/20060913/business/business2.html

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Table 4.7: Key CARICOM Food Retailers Profiles 2005/2006

Parent Group Format Name Equity Retail Country Store (No)

Estimated Sales Area

(SF) Staff (No)

Sales (US$ m)

Super Plus Food Stores Ltd Super Plus Food Stores Local Supermarket Jamaica 36 400,000 2,250 150Progressive Grocers Shoppers Fair/Others Local Supermarket Jamaica 21 325,000 1,350 100Neal & Massy Hi Lo /Alternatives Regional Supermarket T & T 20 250,000 1,500 150Bahamas Supermarkets City Mkts/ Winn Dixie Local Supermarket Bahamas 12 200,000 700 130Price Smart Inc PriceSmart (CARICOM Only) Loc/Int W/sale Club Jam/Bds/T&T 4 200,000 600 120Super Value Food Stores Super Value Food Stores Local Supermarket Bahamas 10 250,000 550 95Abaco Markets Ltd Solomon/ Cost Right Local S-Cent/WS Club Bahamas 8 200,000 1,000 85Grace Kennedy Ltd Hi Lo Food Stores Regional Supermarket Jamaica 13 150,000 550 60Megamart / Bashco Megamart Discount Loc 51 % W/sale Club Jamaica 2 120,000 350 45BS&T Super Centre Regional Supermarket Barbados 5 100,000 1,100 naConsolidated Foods Ltd Super Js, BJs W/sale Club Regional Supermarket St Lucia 9 100,000 850 naEastern Lands/ CL Financial TruValu/ DollarValu Local Supermarket T & T 8 90,000 250 50Trimart Incorporated Trimart Supermarket Regional Supermarket Barbados 3 70,000 325 55JTA Supermarkets Ltd JTA Supermarkets Local Supermarket T & T 4 60,000 na 50John Chea & Sons John Chea & Sons Local Supermarket Bahamas 8 50,000 160 naJordan’s Supermarket Jordan’s Supermarket Local Supermarket Barbados 3 45,000 250 naLees Food Fair Lees Food Fair Local Supermarket Jamaica 3 35,000 na naNaipaul’s Group Naipauls/ Xtra Foods S/market Local Supermarket T & T 2 35,000 na naEpicurean Supermarket Epicurean FineFoods Local Supermarket A & B 2 33,000 250 >30 Combe Markt Combe Markt Local Supermarket Suriname 1 31,000 na naJames Brodie Co Ltd SuperFoods Local Supermarket Belize 4 30,000 125 naBargain Centre Bargain Center Supermarket Local Supermarket A & B 2 30,000 150 naRams Rams Supermarkets Local Supermarket SKN 3 29,000 na naSantiago Castillo Save-U Supermarkets Local Supermarket Belize 2 25,000 100 naCK Greaves CK Greaves Supermarket Local Supermarket SVG 2 18,000 na naGlace Motors Glace Supermarkets Local Supermarket St Lucia 2 15,000 90 naFood Land Geo F Huggins (Gda) Local Supermarket Grenada 2 15,000 100 naBest Mart Mest Mart Local Supermarket Suriname 1 12,000 na naBonadie’s Supermarkets Bonadie’s Supermarkets Local Supermarket SVG 2 12,000 na naJohn Fernandes Group Bounty Meat Centres Local Supermarket Guyana 4 10,000 120 naChois Supermarket Chois Supermarket Local Supermarket Suriname 1 10,000 na naLaparkan Group Wm Fogarty’s Supermarket Local Supermarket Guyana 1 10,000 60 naNigel’s Supermarket Nigel’s Supermarket Local Supermarket Guyana 1 8,000 50 naCaribbean Supermarket Caribbean Supermarket Local Supermarket Haiti 1 na na na

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CRNM Assessment of CARICOM Agri-food Distribution Services.doc

While the major retailers in the larger CARICOM states are captured above, Table 4.6 shows the largest supermarkets in the OECS by country.

Table 4.8: Leading Supermarkets in the OECS

Country Format Name Parent Group Stores (No)

Estimated Sales Area

(SF) A&B Epicurean Fine Foods na 2 33,000 Bargain Centre Supermarket Bargain Centre Group 2 27,000 Food City na 2 25,000 DOM Brizee’s Supermarket na na na Whitchurch’ Supermarket Whitchurch na na J. Astaphan Supermarket J. Astaphan na na GDA Food Land Supermarket Geo F Huggins (Gda) 2 20,000 Food Fair Supermarket Jonas Browne Hubbard/ GEL 2 20,000 Real Value Supermarket Hadad Group 1 11,000 SKN Ram’s Supermarkets na 3 29,000 Horseford Supermarkets na 1 14,000 National Supply Minimarkets na 2 10,000 STL Super J Supermarkets/ BJ’s Consolidated Foods 9 100,000 Glace Supermarkets Glace Motors 2 15,000 Dilly’s n/a 4 16,000 SVG CK Greaves Supermarkets CK Greaves Group 2 18,000 Bonadie’s Supermarket Bonadie’s 4 10,000 Aunt Jobe’s Market 1 9,000

Source: Industry Interviews The Competitiveness of CARICOM Food Retail Industry National retailers, especially the market leaders in each territory, and more so in the more modern food retail markets, have been taking steps to address the challenges of new entrants from the region and aboard and those posed by the implementation of the Caribbean Single Market. These have been explored before on a country-by-country basis and are summarized once more below. Differentiation Strategies Expansion of store sizes through acquisition, refurbishment, rebuilding or new construction, and upgrading of store equipment to accommodate expanded offers of products and services and the introduction of new formats such as discount supermarkets, hypermarkets, wholesale clubs, and convenience stores.

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Expanded Presence Expansion of stores beyond the capital city into primary and secondary towns; in new locations, such as gas stations; and through the establishment of Internet sales facilities allowing customers aboard to purchase food for friends and relatives at home as an alternative to remitting funds. Expanded Product Assortments Development of higher margin food categories such as fresh, chilled and frozen lines; expansion of international retail brand portfolios; development of local private retailer label ranges; and the expansion of non-food product lines to grow sales in non-food retail markets Expanded Service Offerings Expanded service offerings in food service (in store dining, deli and take away food service, food delivery, customer shuttle, Internet purchasing), financial services (bank machines, bill payment, money transfer, and gambling) and other retail services (pharmacies, eye care, telephone sales, and tire servicing) Price Oriented Strategies Introduction of discount supermarket formats (Wholesale Clubs, Hypermarkets, Discount Supermarkets) but also extending presence of wholesaler formats that offer similar services to retail customers. Operation of every day low prices in discount formats, but also increased purchasing of limited offer “deals” from manufacturers and extra regional retailers, and the maintenance of a range of key price sensitive products within quality supermarkets to attract price sensitive customers. Greater use of Modern Retail Technology Investment in information technology to improve marketing, store productivity, new product introductions, operations management, procurement, and profitability. Investment in new logistic and procurement capability by expanding warehousing and distribution fleets, but also by consolidating volumes through alliances/joint ventures and acquisitions to increase economies of scale in purchasing. Consolidation In the more developed food retail markets, the larger retailers are adopting strategies to increase scale and invest in technology to improve store productivity, reduce procurement costs, and improve prices therefore ultimately profit margins. This is leading to increasing consolidation as a result of both organic growth through the building of new stores, the acquisition of others and the acquisition of equity in other. Table 4.9 reviews the merger and acquisition activity which has led to increased consolidation which has been most notable being in the more developed retail markets of the Bahamas, Trinidad and Tobago, Barbados, St Lucia and in Jamaica. Consolidation is concentrating buying power in the hands of the larger supermarkets (Table 4.10). In St Lucia, Bahamas and Barbados, the top five supermarkets account for over 50% percent of the food retail markets. In some OECS States, there is also a high concentration, largely because of the smaller sizes of the market in relation to the volume requirements of a modern supermarket suchas St Vincent and the Granadines, Antigua and Barbuda and Grenada where the top five account for between 40 and 50%. St Kitts Nevis which was not visited by the

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author is also reported to have a similarly high concentration. Otherwise the concentration is lower, especially in the more traditional food retail markets of Belize, Guyana and Suriname.

Table 4.9: Mergers & Acquisitions in Selected National Food Retail Markets, 1998–2006

Year Country Activity Target Investors 1998 T & T Acquisition Budget Foods Supermarkets (3) Hi Lo / Neal & Massy1999 Jamaica Association Progressive Group of Jamaica 5 Independent Supermarkets Na Bahamas Market Entrance Solomon’s Hypermarket Abaco Markets 2000 Jamaica Acquisition Independent Chains (3) Progressive Group of Jamaica 2001 Jamaica Acquisition Shoppers Fair Supermarkets (10) Progressive Group of Jamaica 2001 Barbados Merger Big B, Super B Super Center/ BS&T 2002 Jamaica Joint Venture Total Service Station Food Marts (10) Super Plus 2002 Barbados Acquisition Julie’Ns.Supermarket/Trimart Int Goddard’s/ANSAMcAl&Others 2004 St Lucia Merger Consolidated Foods JQ’s Charles / Gable Woods 2003 T & T Divestment Dollar Value to Video Associates Tru Valu / CL Financial 2004 T & T Acquisition Food Masters & LB’s Supermarket Hi Lo / Neal & Massy 2004 Guyana Acquisition Bonny’s Supermarket New Thriving Restaurant 2000-6 Jamaica Acquisition Independent Supermarkets (6) Hi Lo/ Grace Kennedy 2006 Bahamas Acquisition Bahamas Supermarkets BSL Holdings Source: Industry Interviews

Table 4.10: Market Share of Five Leading Food Retailers in CARICOM, 2005/ 2006

Country Leading Food Retailers Estimated

Market Share (%)

St Lucia Super J’s, Glace Supermarkets, Uptown, Wintrades, Ultra Mart 69Bahamas Bahamas S/markets, Super Value, Abaco Markets, J. Chea, Budget Foods 63 Barbados Super Centre, Julian’s, Trimart, PriceSmart, Carlton Group 51 SVG CK Greave’s, Bonnadie’s, Aunt Jobe’s, PH Veras, Food City 47 A & B Epicurean, Bargain Centre, Food City, O’Beez Foodstore, Gourmet Market 44 Grenada Food Fair, Food Land, Real Value, De Gaile’s, CK Super 42 Jamaica SuperPlus, Hi Lo, Progressive Group, PriceSmart, Megamart 32 T & T Hi Lo, Tru Valu, Naipaul’s Group, JTA Supermarkets, PriceSmart 28 Belize SuperFoods Supermarkets, Sav-U Supermarkes, Extra House, Publics 28 Suriname Combe Markt, Choi’s, Best, Sunnit, Bissesar’s Supermarket 25 Guyana Wm Forgaty’s, Nigel’s, Bounty Meat Centers, Bonny’s, Mattai’s 15 SKN Rams S/markets, Horsefords S/market, C&CSuperFoods, Daniel’s Supermarket n/a


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Retailer Profitability

Supermarkets interviewed for this survey indicated varying levels of profitability. Several reported lower levels of profitability as a result of restructuring programmes and new investments and others as in the case of Jamaica reported challenging economic environment arising out of the King Fisher anti-crime operation and the TCL cement supply crisis. Others, such as Abaco Markets and PriceSmart, which were in the process of refocusing and restructuring their operations, reported challenging financial performances. As the interviews were focused on the leading industry firms, they did not include firms likely to exit the market. On the whole, most reported profits in line with the performance of the leading global industry leaders. Table 4.8 profiles several leading global retailers whose profitability (EBIT) ranges from 4.0 to 6.1 percent of sales. This is far higher than the average of the US for 2004–05 which was 1.16 percent. In CARICOM, most of the leading retailers have reported positions at or above the average of the US.

Table 4.11: Global and Caribbean Food Retailer Profiles, 2004/2005

Supermarket HQ Markets (No)

Stores (No)

Sales Area (SF)

Food (%)

Staff (m)

Sales (US$ B)

Home Market Share (%)

Profit EBIT (%)

US Avg.47 1.16Wal Mart US 11 5,300 60.8 45 1.2 285.2 80 6.10Carrefour FR 32 10,386 13.7 75 0.44 79.6 51 4.40Tesco UK 13 2,318 4.2 75 0.335 50.3 80 5.80Ahold NL 21 5,066 7.4 85 — 63.3 16 4.00Cencosud CHI 2 132 0.5 — — 1.5 65 3.00PriceSmart US 14 22 1.1 45 0.0003 609 0 --BahamasSMkt BAH 1 13 0.25 80 0.00007 130 28 6.09

Source: IGD, Retailer websites, Bahamas Supermarkets It was not possible to independently confirm these positions since only three supermarkets in the region, Bahamas Supermarkets, Abaco Markets and PriceSmart, publish financial statements which allow for analysis of their operations. Other retailers, which do belong to publicly-traded companies, and are not stand-alone food retail companies, do publish financial results which are normally aggregated with those of other related food distribution affiliates. These include subsidiaries of Grace Kennedy, Neal & Massy, Barbados Shipping & Trading, ANSA McAl Group, and Goddard’s Enterprises. It is possible to gauge their profitability from their annual reports, extracts of which are reflected in Box 4.9.

47 Food Marketing Institute

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Box 4.9: Extracts of Annual Reports of Regional Food Retiling Groups

• Hi Lo Food Stores Division/ Retail & Logistics Group/ Neal & Massy - Reported for 2005 “another outstanding year of significant growth in revenue and profits and further growth is expected to continue with the re-opening of refurbished stores in St Ann’s and St Augustine” during 2006. In addition “The Alternative Format Stores, LB’s and Food Masters, solidified their market positions in the East/West Corridor.”

• Trimart Incorporated/ Goddard’s Enterprises - Reported for 2005, that Trimart had an improved year from a bottom-line perspective due mainly to better control over gross margins, inventory, and operating costs. However, sales suffered from increased competition and a lack of a sustained marketing effort.

• Jonas Browne and Hubbard (Grenada) Ltd. / Goddard’s Enterprises - Goddard Enterprises reports for 2005 that “Wholesale and retail food also showed increased sales as well. This has resulted in a much improved profit position for this financial year.”

• Hi Lo Food Store / Grace Kennedy - Reported that over the last three years, Hi Lo has continued to operate in an environment of reduced consumer purchasing power and increased in competition which has caused it to restructure its operations by (1) “realigning its portfolio of store locations” through a series of store disposals, acquisitions, refurbishing, and rebuilding to increase penetration of secondary towns with larger stores; (2) diversifying its formats to include a new Ho Lo Basix targeting the price sensitive segment of the markets; (3) launched its own brand (60 key items), mostly food or household products, that would be guaranteed to be priced lower than any similar products in the market; (4) approaching its suppliers of goods and services to renegotiate prices so as to be able to offer the lowest retail prices possible to their customers; (5) improving customer service through training and a voluntary redundancy programme; (6) the installation of a new US$2 million information systems “to assist in increasing efficiency throughout the division”. As a result, the company has reported continued losses because of the operating environment and the ongoing restructuring, but projects that the company will be in a profit position by the end of 2006.

• PriceSmart Wholesale Club - Has been going through some difficult years since 2002 over which it has accumulated US$120 million of losses. These were largely associated with the restructuring of its operations to exit the Philippine and Mexican markets to focus on the Central American and Caribbean markets. In 2005, PriceSmart realized US$235 million sales in the Caribbean markets accounting for 38.9 percent of revenue from eight operations [DR, (2), Jamaica (1), Trinidad and Tobago (2), Barbados (1), US Virgin Islands (1), and Aruba (1)], i.e., an average of US$29.4 million per store. Source: Adapted from Company Annual Reports

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Impact on Other Food Retail Services This concentration of supermarkets in the industry has led to reports of supermarket saturation of some markets such as in the Bahamas, where no new supermarkets have been built as retailers have chosen to rebuild and relocate stores instead; in the north-western peninsula in Trinidad and Tobago where there are reports of smaller groceries exiting the industry; in Barbados where there are reports that smaller industry members are being displaced or are exiting the market; and in Kingston where the industry reports significant price competition in the capital city. In addition, there are reports of a decreases in counter stores, and “mom and pop” stores as supermarkets and new convenience formats expand into rural areas and offer greater convenience shopping. Specialty retailers and fresh markets are also said to be in decline in some states as supermarkets expand their offering of fresh food. Industry specialists suggest that these trends are likely to continue in keeping with the experience of other more developed international markets.

Impact on Consumers Consumers have generally benefited from the changes taking place in the industry in several ways, mirroring the global market trends identified in Chapter 2. The entrance of price leaders has caused the higher-end quality supermarkets to restructure their operations to more clearly differentiate their offers from the new discount formats. Several locally-owned operations have also introduced discount formats and expanded the offering of budget products to more price conscious consumers. Convenience shopping is becoming more widely available. However, as seen before, the extent of the impact on the consumer has varied depending on the level of development of the retail industry, with consumers in more modern industries appearing to realize greater gains.

In some markets, there has been increasing consolidation, and this may lead to higher pricing in some cases. In particular, it must be noted that one trend has been for supermarkets to import increasing amounts of higher value international foods. Also, it has been reported that several of the international manufacturer brands set differing prices in each market, presumably based on the consumer buying power and competitive landscape of the distribution industry. However, consumers also have much more choice of formats, products and services, the provision of which is associated with differing price structures. Greater analysis would be needed to measure the impact of supermarket concentration and international food manufacturer pricing strategies on pricing structures across the region.

Impact on Agri-Food Supply Chains The changes taking place in consumer purchasing and food retailer industry seem to be impacting on agri-food supply chains in several ways. Leading supermarket chains across the region (Table 4.12) tend to have a high import component in their product assortments and many report that these levels are increasing. This may be so for differing reasons. First of all, most of

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the leading supermarkets are targeting middle to upper income consumers and differentiating themselves from the smaller food retailers, at least in part, by offering leading international brands, quality lines, and value added perishable products. Even PriceSmart has a strategy to provide leading international brands, although it aims to do so at more attractive prices. Second, where the domestic food manufacturing base or agricultural production is limited, such as in the Bahamas and the OECS, the extra-regional import component tends to be understandably higher. In Belize and Suriname, where there is a stronger agricultural base, but perhaps a smaller manufacturing base, the extra-regional component is still high in the leading supermarkets because there are only a limited number of major supermarket stores in the capital, and they still need to differentiate their offer from the smaller and informal food retail channels which focus on staple commodities, basic budget brands, and perishable products. Interestingly, the highest levels of sourcing from the region were by several leading OECS supermarkets. Also, the highest levels of local sourcing were in the MDCs which have both stronger manufacturing and agricultural bases, often supported by higher tariff regimes in key commodities. Table 4.12: Source of Food Sold in Leading Supermarkets in Selected CARICOM States

CARICOM State

Leading Supermarket

Food Sales (%)

Extra Regional Sources

(%)

CARICOM Sources

(%)

Local Source

(%)

Antigua & Barbuda Epicurean 85 90 5 5 Bahamas City Markets -- 90 5 5 Suriname Combe Markt 90 75 15 10 CARICOM PriceSmart 45 75 25 St Vincent & Grenadines CK Greaves -- 65 30 5 St Lucia Super Js 85 65 25 10 Belize Super Foods 90 60 20 20 Barbados Super Centre 90 50 5 45 Guyana Fogarty’s 90 50 10 40 Trinidad & Tobago Hi Lo 85 50 10 40 Grenada Food Land -- 45 50 5 Jamaica Hi Lo 85 35 15 50

Source: Industry Interviews When questioned about the local and regional component, most supermarkets heads were quite positive about their desire to source locally but spoke about challenges in supply, especially quality, reliability, and seasonality in perishable foods. This analysis would benefit from further work in a representative selection of CARICOM states to disaggregate purchases by product category, as well as a wider cross-section of store types to allow for a more meaningful assessment of the impact of the changes on the food distribution services industry on agri-food food manufacturers, primary processors, and producers.

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Trade In Food Retail Services There is only one supermarket, the international supermarket chain PriceSmart Wholesale Club, trading in retail services in more than one CARICOM country. However, several conglomerates have invested equity in supermarkets beyond their domestic markets.

• Super J Supermarkets of Consolidated Foods Ltd in St Lucia has equity shareholding from the JQ Charles Group and Gable Woods Supermarkets which in turn, includes equity by BS&T.

• Trimart International in Barbados was established after its predecessor Julie’Ns closed and is now a joint-venture between two Goddard’s Enterprises companies and the ANSA Mc Al Group (Box 4.10).

• Goddard’s Enterprises has equity in several food distribution and food retail operation across in Barbados and the OECS. These are listed in Box 6.4 in Chapter 6.

Box 4.10: Regional Food Distribution Services Firms Acquire Food Retail Customer

Trimart was formed by the acquisition of Julie’Ns Supermarkets in Barbados in 2001 by ANSA Mc Al (40 percent) of Trinidad and Tobago and Goddard Enterprises Ltd. (20 percent), RL Seale (20 percent), Tweedside (20 percent) of Barbados. Its shareholders are involved in food production or distribution – Goddard Enterprises Ltd which is involved in retail, distribution, and catering in the greater Caribbean and Central America, RL Seale Ltd. which is involved in wholesaling and rum manufacturing in Barbados, and Tweedside Ltd. which is involved in fruit and vegetable production. It is headquartered in Haggart Hall, Barbados, and in 2005, Trimart’s three stores employed 325 people with sales of US$60 million (B$ 120 million).

Trimart has three traditional supermarkets ranging in size from 12,000 to 40,000 SF. The largest supermarket is located in a mall which was originally all one Julie’N supermarket. After acquisition, Trimart reduced the size of the supermarket to 40,000 SF. Trimart stocks 15,000–18,000 SKUs including a full range of foods and some GM and HBC lines. Trimart tends to maintain three brands strategy – international premium brand leader, international/CSME budget brand, and national brand. No international retail, national retail brands, or no-name brands are offered. It offers a modest range of services.

Trimart has been focused on rationalizing its operations and as such, has not increased store numbers. Rather it has focused on restructuring and refurbishing its stores and in particular the Haggart Hall store. This strategy has yielded steady same-store growth over the last five years. Growth in the short to medium term is to come from further store reorganization by adding more SKUs and services to offer greater choice. Longer term growth may come from store acquisition within Barbados or within the CSME where the chain’s shareholders have related food production, food manufacturing, and/or distribution operations.

Source: Trimart Inc.

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In addition to consolidation in their home markets, food retailers have been taking interests in other markets in the region. Table 4.13 lists some notable competitive activity, including market entry and exit in CARIFORUM food retail markets beginning with the entry of Carrefour to the Dominican Republic market in 1999, up to the acquisition of shares in Bahamas Supermarkets by Winn Dixie Supermarkets in August 2006. Neal and Massy and BS&T have purchased shares in each other “to have a greater presence” in each other’s markets.

Table 4.13: Entry and Exit Activity in Selected Caribbean Food Retail Market, 1998–2006

Year Country Activity Target Investors 1999 DR Market Entrance Carrefour Hypermarket Carrefour 1999 Jamaica Market Entrance Mega Mart Bashco Stores & Asian equity n/a Bahamas Market Entrance Solomon’s Cost Right W/sale Club Abaco Markets 2003 Jamaica Market Entrance PriceSmart PriceSmart & Rest. of Jamaica 2001 Barbados Market Entrance PriceSmart PriceSmart & BS&T 2001 T & T Market Entrance PriceSmart PriceSmart & Local Equity 2001 St Lucia Market Entrance JulieNs Supermarket Julian’s, Barbados 2002 Grenada Acquisition CKs/ Independence Agencies Goddard’s Enterprises 2003 T & T Market Entrance K Mart (Construction abandoned) Kmart & Local Equity 2004 Grenada Acquisition Food Fair/ J. Browne & Hubbard Ltd Goddard’s Enterprises 2006 Bahamas Divestment Bahamas Supermarkets BSL Holdings

Source: Industry Interviews

Interviews with retailers across the region suggest that there continues to be ongoing discussions between retailers, exploring opportunities for acquisition and mergers which presumably will intensify as CSM and the integration of capital markets across the region develops.

The entrance of international retailers in the region suggests that the region is considered attractive for external investment. Food retailers across the region have expressed the view that many of the CARICOM markets are too small for the international retailers. This, however, is not supported by the presence of PriceSmart in the US Virgin Islands and Aruba which have small populations; Carrefour in the Dominican Republic which has a food retail market as large as Jamaica; and the recent acquisition of Wal-Mart chains in four Central American countries. As the value of CARICOM food retail markets increase, it is likely that international retailers will enter either with their global standardized format and/or the acquisition of local supermarket chains.

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Trade In Agri-Food Products Several databases were reviewed in exploring the impact of the developments in the agri-food distribution services and the trade in agri-food products – the CARICOM database, the COMTRADE database, the FTAA database, and the US FATUS database. Only the latter was able to give a time series for all of the CARICOM states by tariff lines that allowed for more meaningful identification of trends. The exports of agri-food products, from the US, for agri-food products, 1996 to 2005, for HS chapters 1–24, at the 2 digit are presented in Table 4.14 which shows that total imports of these categories increased over the ten year period to 2005 by 16.7 percent, albeit at a slower rate over the last five years. Figure 4.1 selects the sectors which exhibited the strongest growth, namely, products that tend to be high value branded or perishable products.

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Table 4.14: US Exports of Agri-Food Products (HS Chapter 1-24) to CARICOM, 1000 US$, 1996 - 2005

HS Chapter Heading HS Code 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Growth

96 - 05Growth 01 - 05

CEREALS 10 265,522 214,772 198,459 206,631 201,043 190,583 211,487 246,908 269,960 272,369 2.6% 42.9%MEAT, EDIBLE OFFAL 2 93,672 104,819 122,614 110,896 84,522 93,334 80,124 88,537 88,574 117,963 25.9% 26.4%MISC EDIBLE PREPS 21 79,143 62,557 51,289 63,525 76,987 68,768 60,832 50,174 54,198 68,103 -13.9% -1.0%RESIDUES, WASTES 23 52,565 69,561 61,354 54,146 53,294 61,443 60,399 66,591 64,378 57,546 9.5% -6.3%BEVERAGES, VINEGAR 22 25,111 31,070 32,922 32,433 32,500 33,652 32,703 39,352 43,028 53,718 113.9% 59.6%CEREAL,FLOUR,STARCH 19 36,004 33,365 34,581 31,097 30,228 47,954 38,764 36,525 44,878 50,808 41.1% 6.0%DAIRY PRODUCTS 4 21,222 27,521 27,761 25,028 24,836 31,859 30,221 32,519 60,926 47,246 122.6% 48.3%VEGIE, FRUIT, PREPS 20 35,772 36,986 38,722 38,998 40,958 42,857 46,281 45,694 42,825 43,905 22.7% 2.4%FATS, ANIMAL, VEGGIE 15 57,548 68,901 72,829 79,686 56,716 51,831 46,724 49,444 43,574 38,756 -32.7% -25.2%EDIBLE VEGETABLES 7 21,960 23,594 28,592 23,882 31,299 29,482 25,136 30,634 32,233 31,629 44.0% 7.3%OIL SEED 12 40,550 28,895 17,998 20,045 29,160 30,966 29,615 25,213 42,856 31,242 -23.0% 0.9%MEAT, FISH, PREPS 16 6,554 9,598 10,062 7,101 11,177 18,948 19,546 17,199 20,132 20,360 210.6% 7.5%MILLING PRODUCTS 11 56,119 47,833 49,387 31,770 22,847 18,008 13,592 13,657 23,408 19,061 -66.0% 5.8%EDIBLE FRUIT, NUTS 8 5,662 7,150 7,447 6,825 7,752 13,228 11,480 12,741 16,206 18,975 235.1% 43.4%SUGARS 17 39,859 32,639 27,649 27,808 23,598 24,248 21,296 12,493 13,798 16,998 -57.4% -29.9%FISH, CRUSTACEANS 3 4,272 4,118 5,775 6,408 4,186 5,114 4,460 5,977 6,785 8,548 100.1% 67.1%COCOA & COCOA PREP 18 3,667 3,937 3,750 4,196 4,957 5,650 6,554 6,088 7,603 8,547 133.1% 51.3%LIVE TREES, PLANTS 6 1,552 1,840 5,791 7,175 5,681 7,248 2,489 3,216 4,117 4,661 200.3% -35.7%LIVE ANIMALS 1 2,033 986 1,609 964 5,145 2,282 2,758 3,249 3,318 3,646 79.3% 59.8%COFFEE, TEA, SPICES 9 1,321 1,786 2,592 2,491 2,263 2,259 1,674 3,100 2,491 3,076 132.9% 36.2%LAC, GUMS, RESINS 13 4,930 2,455 2,494 2,217 1,721 3,102 3,071 1,052 1,598 1,794 -63.6% -42.2%ANIMAL PRODUCTS NES 5 235 216 336 390 1,346 914 824 1,694 2,538 1,595 578.7% 74.5%TOBACCO 24 9,295 12,694 8,184 6,733 4,448 2,999 3,378 3,648 1,312 1,322 -85.8% -55.9%VEGETABLE PLAITING 14 218 134 3,496 5,368 4,831 3,611 3,025 1,694 2,356 686 214.7% -81.0%TOTAL 864,786 827,426 815,693 795,815 761,497 790,340 756,435 797,399 893,093 922,553 6.7% 16.7%Data Source: FATUS, Department of Commerce, U.S. Census Bureau, Foreign Trade Statistics

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0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

BEVERAGES,VINEGAR 22

CEREAL,FLOUR,STARCH 19

COCOA ANDCOCOA PREP 18

COFFEE, TEA,SPICES 9

VEGIE, FRUIT,PREPS 20

EDIBLEVEGETABLES 7

EDIBLE FRUIT,NUTS 8

LIVE ANIMALS 1

Figure 4.1: Growth in US Agri-Food Exports to CARICOM, 1996 - 2005 A closer examination at the 4 digit tariff line level (Appendix 3) points to strong growth in bovine and porcine meats; fish; meat and fish preparations, cheeses; and fresh and frozen vegetables and fruit; all of which are associated with the expansion of supermarket store sizes to accommodate expanded refrigerated facilities and offer consumers wider perishable product ranges. Other categories experiencing high growth include snacks, sugar and chocolate confectionary, bakery products, and pasta and cereals, all of which are the categories dominated by the leading international food manufacturer and to a lesser extent international retailer brands. In summary, the trade data for agri-food products seems to support the observations made by the industry leaders in the field interviews. The database allows for a more detailed analysis by tariff line and country and given more time and resources, can demonstrate how countries at differing levels of food retail market development have differing import mixes. CARICOM Restrictions on Trade CSME countries do not have in place measures to restrict the activities of food retailers such as supermarkets. This is illustrated in Table 4.15 below which outlines restrictions identified during the process of implementing the Single Market for services. Measures, such as they are, relate to sales of certain products or in certain areas (e.g., Duty-free areas). This open environment provides retailers with freedom to operate in accordance with their business imperatives. The Bahamas, which is not part of the CSME, does place quantitative limitations on the access of foreign supermarkets. Further, its authorities can restrict the location of foreign supermarkets. Another option available to the authorities is to limit hours of operation to give preference to local operations.

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Table 4.15: CARICOM Restrictions on Retail Trade Country UNCPC Code/Measure Services Affected

Specific Restrictions Summary Description of Measure Barbados 62 RETAIL TRADE SERVICES

Small Business Development Act An approved small business is provided with tax and other incentives S. 3(1)(b) provides that a small business is an enterprise that has 75% of its shares locally owned.

Grenada 62126 Non-specialized store retail trade services, of beverages

Liquor Dealers Licences Act (Cap 174)

Act prescribes the requirements for obtaining a liquor licence [Discretionary grant of licence possible]

Saint Lucia 621 Non-specialized store retail trade services

Tourist (Duty Free Shopping System) Act No.23 Of 1986

Act prescribes for the registration, licensing and grant of permits for Duty Free Shops and to operators. [Discretion possible in grant of licence; policy dictates that retail sales and operation of agencies and distributorships be restricted to St Lucian nationals]

Saint Lucia 62273 Specialized store retail trade services, of pharmaceutical and medical goods

Druggists And Poisons Ordinance No. 9 Of 1960

Act prescribes the requirements for regulation of Druggists [potential for use of discretion in registration process exists]

Saint Lucia 62291 Specialized store retail trade services, of solid, liquid and gaseous fuels and related products

Petroleum Act (Cap.84) Act prescribes the requirements to obtain a licence to sell petroleum. [Potential for use of discretion exists]

St. Vincent and the Grenadines 621 [Non-specialized store retail trade services]

Tourist (Duty Free) Shopping Act The Act requires the licensing of tourist duty free shop operators, permits for agents and licences for shop premises and gives the Comptroller the discretion not to grant or renew a licence or permit where the applicant is not a resident of St. Vincent & the Grenadines. [This restriction entered into force after July 1998 and hence violates Art 36]

Source: CARICOM Secretariat (2006) Conclusion The CARICOM food retail service sub-sector is made up of more than 15,000 stores, close to 85,000 employees, and estimated sales of more than US$4.5 billion. Though CARICOM countries are at different stages of market development, an attempt is made to group them into three categories, more traditional, modern, and emerging, for the purposes of understanding how development strategies and trade negotiating strategies might differ between the categories. Guyana, Belize, Suriname, and Haiti can be easily described as more traditional food retail markets which would be less attractive for international investors at this time. The markets in the Bahamas, Trinidad and Tobago, Barbados, Antigua and Barbuda, and St Kitts and Nevis exhibit characteristics that allow them to be more easily termed as modern and more attractive to inward competition. The other countries are more difficult to categorize as they display features of both traditional and modern retail sectors, and might be, with great hesitance, described as emerging retail markets. For example, Jamaica clearly demonstrates modern food retail marketing features in the more urban areas

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such as the larger Greater Kingston Area, but still has strong traditional elements in the rural communities. Smaller OECS states have elements of the modern food retail industry concentrated in the capital city, and although the rural areas are less developed, their small size allows most of the population to access the modern food retailers in the city. Also, although international QSR brands have not penetrated these smaller island markets, it is not uncommon to find a healthy population of independent local food service operators meeting the needs of local residents and tourists alike. Most of largest food retailers in the region are located in Trinidad and Tobago, Jamaica, the Bahamas, and Barbados. It is estimated that eight of these supermarkets have sales of over US$100 million while up to six of them sell more than US$50 million each year. There is increasing penetration of foreign food retailing formats such as Winn Dixie, and PriceSmart and foreign equity such as in Mega Mart. These firms bring new practices to the markets, including offerings to the consumer and greater use of information technology. PriceSmart owns and operates 8 stores in the Caribbean at the moment and has become the only trans-Caribbean food retailer in CARICOM operating in 3 states. Several international food retail operators have a presence in the region through the export of their branded products. National retailers have responded with alacrity to the challenges of new entrants. They have engaged in differentiation strategies, enhanced product assortment, increased offering of related services, developed discount and convenience formats, improved the customer experience, sought to use technology to advantage and consolidated, primarily in the larger markets. Despite the paucity of restrictions on services trade within the CARICOM, domestic supermarkets tend to concentrate on their home market as far as establishing retail formats is concerned. An increasing trend worthy of note is the investment in equity by regional conglomerates in supermarkets in other Caribbean countries. This activity should increase as the Caribbean Single Market takes root and capital markets are integrated.

Generally, retailers who were interviewed expressed concern about the likely impact of the entrance of international retailers to the regional market, but went on to express their opinion that CARICOM markets were too small to be of interest to global retailers. This does not seem to be supported by the presence of PriceSmart in CARICOM, the US Virgin Islands, and Aruba, and Wal-Mart in Puerto Rico, the Dominican Republic, and in Central America. Nor does it seem to recognize that several CARICOM countries have experienced very high growth rates in GDP per Capita which increases the attractiveness of the food retail markets to global retailers.

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5. CARICOM FOOD SERVICE SECTOR:

PROFILE, TRENDS AND TRADE RESTRICTIONS

Introduction This chapter briefly describes the CARICOM food service sector and segments and then goes on to focus on the quick service restaurants (QSR) sub-sector. It identifies trends in the QSR industry and their impact on consumers, other food service firms and the agri-food supply chain. It examines competitiveness for the QSR sub-sector in the context of global industry trends and reviews the policy and regulatory framework for the sector.

CARICOM Food Service Sector It is estimated that there are over 4,250 firms in the regional food service industry (Table 5.1) as defined by this project. Similar statistics were not collected for the full service and street vendor sectors as the project was focusing on firms engaged in franchising services.

CARICOM Quick Service Restaurants Sub-sector The sub sector of the food service industry most likely to be involved in trade in services is the quick service sub-sector, which is profiled in Table 5.2. There are an estimated 2,100 firms operating in the sub-sector employing over 27,500 people and generating sales of over US$1,000 million.

Tables 5.3 and 5.4 profile distribution across the region of the 35 largest QSR brands in the region, which are predominantly international brands and major national brands. The top 36 QSR chains are estimated to operate over 550 stores, employing over 16,750 people and generating a revenue of over US$380 million or approximately 35 percent of the total sub-sector sales. Of these, the largest number are found in Jamaica (188), Trinidad and Tobago (159), Bahamas (81) and Barbados (39) with other CARICOM countries having between 1 and 23 stores each.

The estimated numbers of store, employment, and sales by QSR brand are shown in Table 5.4 and are provided to give the reader a sense of relative size of brands. Sales are derived by multiplying Annual Unit Value (AUV) of sales per store by the number of stores belonging to each brand. The AUV for international brands are taken from US averages provided by QSR Magazine (Table 2.12), most of which are considered to be conservative as many CARICOM QSRs in the More Developed Countries (MDCs) have sales above the US average. The AUVs for local brands were not actually received from the firms, but are largely estimated by the consultants based on discussions with a cross-section of industry members. Store numbers and employment were compiled largely using employee per store estimates made during interviews with industry leaders and applying these to the number of stores.

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Table 5.1: CARICOM Food Service Store Numbers by Country

CARICOM State

Full Service Restaurants

in Hotels (No)

Independent Full Service Restaurants

(No)

Quick Service

Restaurants (No)

Commercial Caterers

(No)

Street Vendors

(No)

Food Service Firms (No)

Jamaica 205 175 425 15 – 820 Bahamas 252 100 235 15 – 602 T & T 37 135 260 20 – 452 Barbados 74 140 150 20 – 384 Belize 176 65 135 5 – 381 A & B 92 140 110 10 – 352 Guyana 67 25 195 5 – 292 STL 35 80 80 5 – 200 SVG 42 65 60 1 – 168 Grenada 28 – 50 – – 78 Suriname 22 25 400 1 – 448 SKN 30 – – – – 30 Dominica 19 – – – – 19 Haiti – – – – – 0 Total 1,079 950 2,100 97 0 4,226

Source: Caribbean Tourism Report, Industry Interviews NB: Figures rounded Table 5.2: Profile of CARICOM Quick Service Restaurant Sub Sector by Country

CARICOM

State

Quick Service

Restaurants

(No)

Quick Service

Restaurant Employment

(No)

Quick Service

Restaurants Sales

(US$ million) Jamaica 425 8,100 325 Bahamas 235 3,425 200 T & T 260 6,500 155 Barbados 150 1,625 110 A & B 110 750 55 Suriname 400 1,200 40 Guyana 195 3,250 40 Belize 135 925 35 STL 80 925 30 Grenada 50 450 30 SVG 60 450 25 Dominica - - – SKN - – – Haiti - – – CARICOM 2,100 27,600 1,045


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Table 5.3: Distribution of Stores of Selected Key CARICOM QSRs by Country, 2006 Market QSR A&B BAH BAR BEL DOM GDA GUY HTI JAM MON SKN STL STV SUR T&T Tot Segment Brands (No) (No) (No) (No) (No) (No) (No) (No) (No) (No) (No) (No) (No) (No) (No) (No) Chicken KFC 2 15 12 Exit 1 3 4 -- 31 -- 1 8 2 2 47 128 Chicken Royal Castle Exit 0 0 0 -- 1 2 -- 0 -- -- Exit Exit Exit 29 32 Chicken Chester Fried 0 0 0 0 -- 0 3 -- 14 -- -- 0 0 0 0 17 Chicken Cheffettes 0 0 14 0 -- 0 0 -- 0 -- -- 0 0 0 0 14 Chicken Island Grill 0 0 0 0 -- 0 0 -- 14 -- -- 0 0 0 0 14 Chicken Churches 0 0 0 0 -- 0 1 -- 0 -- -- 0 0 0 9 10 Chicken Popeye’s 0 0 0 0 -- 0 1 -- 5 -- -- Exit 0 1 2 9 Chicken Qik Serv 0 0 0 0 -- 0 7 -- 0 -- -- 0 0 0 0 7 Chicken BBQ Barn 0 0 6 0 -- 0 0 -- 0 -- -- 0 0 0 0 6 Chicken Naskip 0 0 0 0 -- 0 0 -- 0 -- -- 0 0 3 0 3 Chinese New Thriving 2 0 1 0 -- 0 2 -- 0 -- -- 0 0 0 0 5Chinese VIP Chinese 0 5 0 0 -- 0 0 -- 0 -- -- 0 0 0 0 5 Chinese Chinese Wok 0 0 0 0 -- 0 0 -- 0 -- -- 0 0 0 4 4 Chinese Golden Harvest 0 0 0 0 -- 0 0 -- 0 -- -- 3 0 0 0 3 Caribbean Juici Beef 0 0 0 0 -- 0 0 -- 44 -- -- 0 0 0 0 44 Caribbean Tastee’s 2 0 0 0 -- 0 0 -- 25 -- -- 0 0 0 0 27 Caribbean Mother’s 0 0 0 0 -- 0 0 -- 22 -- -- 0 0 0 0 22 Caribbean Ramroop Roti 0 0 0 0 -- 0 0 -- 0 -- -- 0 0 10 0 10 Burger Burger King 0 7 0 0 -- 0 0 -- 21 -- -- 2 0 0 3 32 Burger Wendy’s 0 7 0 0 -- 0 0 -- 2 -- -- 0 0 0 0 9 Burger HL Burger 0 0 0 9 -- 0 0 -- 0 -- -- 0 0 0 0 9 Burger McDonald’s 0 4 Exit 0 -- 0 0 -- Exit -- -- 0 0 1 Exit 5 Burger Wolly’s 0 0 0 0 -- 0 0 -- 0 -- -- 0 0 5 0 5 Pizza/ Pasta Pizza Boys 0 0 0 0 -- 0 0 -- 0 -- -- 0 0 0 18 18 Pizza/ Pasta Pizza Hut 0 5 0 0 -- 0 1 -- 5 -- -- 0 0 1 5 17 Pizza/ Pasta Mario’s 0 0 0 0 -- 0 0 -- 0 -- -- 0 0 0 17 17 Pizza/ Pasta Papa Johns 0 5 0 0 -- 0 0 -- 0 -- -- 0 0 0 3 8 Pizza/ Pasta Dominos 0 4 0 0 -- 0 0 -- 2 -- -- 1 0 0 0 7 Pizza/ Pasta Pizza Man 0 0 6 0 -- 0 0 -- 0 -- -- 0 0 0 0 6 Pizza/ Pasta Sbarros 0 3 0 0 -- 0 0 -- 0 -- -- 0 0 0 0 3 S/wich Subway 1 16 0 1 -- 1 Exit -- 3 -- -- 1 0 0 12 35 S/wich Blimpie 0 0 0 0 -- 0 0 -- 0 -- -- 0 0 0 7 7 S/wich Francianes 0 6 0 0 -- 0 0 -- 0 -- -- 0 0 0 0 6 S/wich Quiznos 0 4 0 0 -- 0 0 -- 0 -- -- 0 0 0 1 5 Seafood L/John Silver 0 0 0 0 -- 0 0 -- 0 -- -- 0 0 0 2 2 Seafood Captain D's 0 0 0 0 -- 0 0 -- 0 -- -- 0 0 0 1 1 Caricom Major Brands 7 81 39 10 1 5 21 0 188 0 1 15 2 23 159 552

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Table 5.4: Profiles of Selected Key CARICOM QSR Brands, 2006

Market Segment

QSR Brand

Brand Owner

Company Origin

International Staff/Store

(No)

International Sales / Store (USD/Year)

CARICOM States

(No)

CARICOM Stores (No)

CARICOM Employment

(No) CARICOM

Sales (USD) Chicken KFC Yum Brands Int 40 896,000 9 128 5,120 114,688,000 Chicken Royal Castle International Castle T&T 40 500,000 3 32 1,280 16,000,000 Chicken Chester Fried Chester Fried Int 30 450,000 2 17 510 7,650,000 Chicken Island Grill Island Grill Jam 40 800,000 2 + UK 14 + 1 560 11,200,000 Chicken Cheffettes Cheffettes Bar 40 1,250,000 1 14 560 17,500,000 Chicken Churches Churches Int 40 620,000 2 10 400 6,200,000 Chicken Popeye’s AFC Int 40 949,000 4 9 360 8,541,000 Chicken Qik Serv Demico/DIL Guy 30 600,000 1 7 210 4,200,000 Chicken Chicken Barn Chicken Barn Bar 40 750,000 1 6 240 4,500,000 Chicken Naskip Naskip Sur 30 400,000 1 3 90 1,200,000 Chinese New Thriving New Thriving Guy 15 500,000 3 5 75 2,500,000 Chinese VIP Chinese Vip Chinese Bah 15 500,000 1 5 75 2,500,000 Chinese Chinese Wok Chinese Wok T&T 15 500,000 1 4 60 2,000,000 Chinese Golden Harvest Golden Harvest St L 15 500,000 1 3 45 1,500,000 Caribbean Juici Beef Juici Beef Jam 20 500,000 1 44 880 22,000,000 Caribbean Tastee’s patties Tastee's Jam 20 500,000 2 27 540 13,500,000 Caribbean Mother’s Mother's Jam 30 500,000 1 22 660 11,000,000 Caribbean Roopram Roti Roopram Sur 20 350,000 1 + NDL 10 + 2 200 3,500,000 Burger Burger King Burger King Int 25 995,000 4 32 1,280 31,840,000 Burger Wendy’s Wendy’s Int 40 1,300,000 2 9 360 11,700,000 Burger HL Burger HL Burger Bze 8 200,000 1 9 72 1,800,000 Burger McDonald's McDonald's Int 40 1,900,000 2 5 200 9,500,000 Burger Wolly’s Wolly’s Sur 8 350,000 1 5 40 1,750,000 Pizza/Pasta Pizza Boys Pizza Boys Group T&T 20 750,000 1 18 360 13,500,000 Pizza/Pasta Pizza Hut Yum Brands Int 60 794,000 4 17 1,020 13,498,000 Pizza/Pasta Mario’s Mario's T&T 20 750,000 1 17 340 12,750,000 Pizza/Pasta Papa John's Papa John's Int 20 674,000 2 8 160 5,392,000 Pizza/Pasta Dominos Dominos Pizza Int 20 634,000 4 7 140 4,438,000 Pizza/Pasta Pizza Man Pizzaman Bds 20 500,000 1 6 120 3,000,000 Pizza/Pasta Sbarros Sbarros Int 40 674,000 2 3 120 2,022,000 Sandwich Subway Subway Int 12 366,000 6 35 420 12,810,000 Sandwich Blimpie Blimpie Int 10 200,000 1 7 70 1,400,000 Sandwich Francianes Francianes Int 8 400,000 1 6 48 2,400,000 Sandwich Quizno's Quizno's Int 10 422,000 2 5 50 2,110,000 Seafood L/John Silver Yum Brands Int 30 652,000 1 2 60 1,304,000 Seafood Captain D's Captain D's Int 30 902,000 1 1 30 902,000

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Market Segment

QSR Brand

Brand Owner

Company Origin

International Staff/Store

(No)

International Sales / Store (USD/Year)

CARICOM States

(No)

CARICOM Stores (No)

CARICOM Employment

(No) CARICOM

Sales (USD) CARICOM 552 16,755 382,295,000

Source For Table 5.3 & 5.4: Co Websites & Interviews, QSR Magazine*, Authors Estimates +. NB:St Kitts Nevis & Dominica were not visited by project.

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The largest brand (not QSR firm) in terms of stores, sales, and employment is KFC (US$115 million), which has had a long presence in the region, has achieved penetration into nine CARICOM markets and its menu is based on chicken. Burger King (US$31 million) is a far second followed by a number of longer standing national brands – Juici Patties (US$22 million), Chefette’s (US$17 million), Royal Castle (US$16 million), Pizza Boys (US$13 million), Tastee’s (US$12 million), Island Grill (US$12 million). After this, there is a mixture of smaller international and national chains. Notably, the Chinese sub-sector has not produced any significant chains of any size. CARICOM Quick Service Restaurant Market Segments The sector can be broken down into several sub-sectors based on the main menu focus of the QSR–Chicken, Chinese/Indonesian, Caribbean, Burger, Pizza/Pasta, Sandwich, Sea Food, Snacks & Beverages, and Casual Dining. These are described below (Table 5.5) with less emphasis on Snacks & Beverages and Casual Dining. Table 5.5: CARICOM Quick Service Restaurant Sub Sector Profile By Market Segment 2005/2006

Market Stores Employment Sales Market Share Segment (No) (No) (US$ m) (%) Chicken 460 11,100 400 38 Chinese/Asian 670 4,500 165 16 Caribbean 380 3,900 145 14 Burger 160 3,000 140 13 Pizza/ Pasta 180 2,850 110 11 Sandwich/Salads 150 850 55 5 Seafood 100 1,400 30 3 Snacks/Beverages -- -- -- -- Total 2,100 27,600 1,045 100


Chicken

This sub-sector is estimated to have a turnover of over US$390- 410 million generated from 450 – 475 QSRs, employing over 11,000 people. It is estimated to account for over 38% of QSR sales. Growth rates for this sub-sector vary across the region and tend to be moderate to strong, but are projected to be slowing in some markets. Several international QSR brands, namely, KFC, Church’s, Popeye’s, and Chester Fried dominate the sub-sector and achieve a regional presence through a variety of franchise arrangements. For the largest brand, KFC, there are several independent franchises, the most notable of which would be Restaurants of Jamaica, Bahamas Restaurants, KFC in St Lucia, Prestige Holdings in Trinidad and Tobago, DIDCO Trading in Guyana, and Cirkel in Suriname.

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Box 5.1: Island Grill Explores Extra regional Markets, Returns to Focus on CSME

In 1991, Thalia Lyn established the Chicken Supreme chain in Jamaica. In 1998, she reinvented the company to create Island Grill, a new concept which combined healthier, indigenous food products with elements of Jamaican cuisine and culture. The menu offered grilled jerked chicken and fish meals, along with Jamaican side orders such as ripe and green fried plantain, pumpkin/callaloo rice, bammy and fish soup. The company has continued to develop new products as new introductions are often copied by competition, both local and international. Consumer research has positioned its offering competitive in comparison with international and local patty chains often ranking as a second favorite for lunch and dinner and third for breakfast. The company purchases most (80 percent) of its supplies locally from local agri-food producers (chicken, tilapia, and F&V) and manufacturers (bread, bammy, frying oil, and packaging) and service providers. In the first 10 years to 2001, the company expanded to 10 stores. In 2006, it added two stores in May Pen and Kingston to make the total 14 outlets employing 500 people and generating revenue in the order of US$11.2 million per annum.

Island Grill has made several efforts at exporting its service brand. In 2001, Island Grill established it first store in Fort Lauderdale Florida. However, in September 11, 2001, six months after the Ft Lauderdale opening, terrorist attacks in New York sent the US economy into a minor recession and the customer traffic dwindled. The company opened a second restaurant in May 2002 to try to improve economies of scale, but eventually one year after opening, when 50 percent of its customer base was eroded, the US stores were closed. All the equipment was brought to Jamaica to open the Portmore and Sangster Airport stores. Island Grill has also established a store in London in partnership with Walkers Woods called Bamboula which is primarily a testing store for Walkers Woods products.

The company learnt a lot from the short-lived export experience. It was able to establish that Jamaican jerk QSRs could cross over from ethnic niche markets into mainstream markets. This was evidenced by sales levels that grew steadily towards the US$2 million per store per annum level, making the sales in the US store higher than the flagship Twin Gates, Kingston restaurant.48 The operational systems of the company needed to be strengthened to comply with the tightly regulated (health and safety, environment, building design, and the environment) US Food Industry. There was a need to standardize the technical and human resource operations to allow for franchises to be managed at a distance and to install modern Information Technology (IT) systems to maximize store profitability. Moreover, elements of branding, marketing, and menu elements needed to be strengthened. Fortunately, the company was able to access grants from JAMPRO/EU49 and low interest funding from the World Bank to implement these programs. Since 2002, the company has focused its energies and resources on the Jamaican markets while preparing for further expansion aboard. The opportunity for exporting came once more when a local catering company with whom Island Grill had established a partnership in 2000 to operate stores in the Montego Bay and Norman Manley airports, proposed an expansion of the strategic partnership. In 2006, Island Grill agreed to give the rights to Goddard’s to develop the Island Grill brand in all 18 Caribbean and Latin America markets where its strategic partner, Versair, a subsidiary of the Goddard’s Enterprises operated. They are also partners with Sky Chef which offers the possibility of further market development in Europe. The first store is set to open in the Grantley Adams Airport in December.50

Source: Island Grill

48 Jamaica Observer.com - 23 October 2005 49 http://www.intracen.org/ec/welcome.htm 50 http://www.nationnews.com/story/299611164384708.php

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Popeye’s has a presence in four states through two operations, Guyana Stock Feeds in Guyana and through Restaurant Associates in Jamaica, which established operations in Trinidad and Tobago and St Lucia over the last two years. Church’s has a presence in two states through Pizza Boys in Trinidad and Tobago.

There have been several successful indigenous chains (Box 5.1), some of whom have developed local brands, namely, Royal Castle in Trinidad and Tobago; Island Grill in Jamaica; Chefettes51 and Chicken Barn in Barbados; Bamboo Shack in the Bahamas; Qik Serv and VIP in Guyana; and Naskip and Tappie’s Golden Wings in Suriname. There are also several independent QSRs in the OECS such as Belizean Fried Chicken; Papi’s Chicken Grill in Antigua and Barbuda; Chicken Roost in St Vincent and the Grenadines; and Big John’s in Barbados.

Chinese/ Indonesian This sub-sector is estimated to turn over in the order of US$150 - 175 million from 650 -675 restaurants employing over 4,500 people. It is estimated to account for over 16% of QSR sales. The Chinese sub-sector includes some full service restaurants but the majority of operators offer predominantly take away and even fast food delivery options. It is dominated by a large number of family-run restaurants, which have always been part of the Caribbean food service landscape. However, the industry reports that since the late 1990s, there has been a wave of new immigration from China, and this explains in part, the growth of the sector and its ability to penetrate both the urban and rural landscape more effectively than the leading international or local brands. In addition, Chinese restaurants are also very competitive because they have low overheads, utilize family labor, open for long hours, maximize the use of seasonal local ingredients, and operate informally outside of the tax net.

There are no international restaurant brands in the Chinese sub-sector in the region. However, one regional restaurant, New Thriving Restaurant from Guyana, is reported to have established two stores in Antigua and one in Barbados. Other restaurants which are developing chains in their home markets include VIP Chinese with five stores in the Bahamas; Golden Harvest with three stores in St Lucia; Chinese Wok with four stores and Wok & Roll with three stores in Trinidad and Tobago; and Fa Tai with two stores in Suriname. The sector also includes the Indonesian fast food sold by stores like Sarinah Indish, Jawa restaurants and the many traditional “Warung” restaurants in Suriname.

Caribbean This sub-sector is estimated to turn over in the order of US$140 - 150 million from 375 – 400 restaurants employing approaching 4,000 people. Menus in these restaurants vary significantly and reflect the rich mix of cultures in the Caribbean and tend to be dominated by the local cuisine such as Hispanic food in Belize, jerk in Jamaica, Indian/Creole52 food in Trinidad and Tobago and Guyana, and Indonesian food in Suriname. While the majority of Caribbean food is sold by smaller independent QSRs and street vendors, several national chains have been

51 www.chefette.com

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developing such as Mother’s, Tastee Patties, Juici Beef (Box 5.2) and Captain Bakery in Jamaica; Grant Towns and Beverly’s Kitchen in Grenada; Desmond’s in Barbados; Home Restaurant, Hosein’s Roti, and Amin’s Roti in Trinidad and Tobago; and Salt & Pepper and VIP in Guyana; and Roopram’s and Jsooje Roti in Suriname.

Box 5.2: Juici Beef Develops Franchising & Manufacturing Platform

Juici Beef was established by Juki Chin in Maypen, Jamaica in 1980 and since then has become Jamaica’s leading patty restaurant chain. The company manufactures and sells a wide range of Jamaican Patties and other Jamaican edibles. It also operates two manufacturing plants, one in Clarendon, Jamaica and the other in Ontario, Canada. In 2006, the QSR chain (not the manufacturing plants) operated 50 stores employing over 850 people and generating an estimated US$22 million in sales.

After the establishment of the first shop, growth was slow until the 1990’s, when the company entered into several ‘franchising’ partnerships and a number of new stores were opened. A centralized manufacturing plant was built in 1994, to ensure consistency in the products offered at all locations. The late 1990’s saw another set of franchising arrangements opening up new stores. In 2001, the opening of the Juici store in Trelawny brought the number of Juici stores up to 34 and made Juici the only chain of restaurants/fast food stores to take its service to all fourteen parishes in Jamaica. The product line also grew over the years, to include a wide array of patties and loaves, soups, jerk, porridges, and traditional breakfast dishes. The company has continued to innovate and over the last two to three years, the company has been experimenting with 10,000 Juici Super Stores which can seat 2,000 people at a time.

In 2002, a new 90,000 SF plant built to international specifications and located in Clarendon, Jamaica, was opened together with a retail outlet with drive through facilities. This was later expanded to a 105,000 SF facility. In 2001, Juici Patties acquired a manufacturing plant in Ontario, Canada and now supplies Juici beef, chicken, vegetable and shrimp patties to some of Canada’s major supermarket chains. The establishment of the factory provides the platform for the establishment of Juici restaurants in North America.

Source: http://www.jamaica-gleaner.com/gleaner/20050727/business/business2.html ; www.juicipatties.com

Pizza/Pasta This sub-sector is estimated to turn over in the order of US$100 - 120 million from 175 - 200 restaurants employing over 2,500 people. Growth in this segment is reported to be slow to moderate. International brands in this sector include Pizza Hut, Domino’s, Papa John’s, and Sbarro’s. Until 2006, only the international brands had a regional presence, largely through independent franchises. Pizza Hut, which is present in five CARICOM states, is normally operated by the domestic KFC franchisee. Dominos Pizza is independently established in the Bahamas, Jamaica, and St Lucia. However, a new operation will be set up in Trinidad and Tobago as a joint effort between the St Lucia franchisee and the Venezuelan master franchisee for the region. There are a number of developing national brands which include Peppers’s Pizza in Belize; Big Banana in Antigua; Tony’s Pizza and Rick’s Pizza in St Vincent; Pizza Man Doc, New York Pizza, and Pizzaz in Barbados; Mario’s Pizzeria, Pizza Boys and Joe’s Pizza and Hoagies in Trinidad and Tobago; and VIP Pizza and Idaho Pizza in Guyana. Mario’s Pizza of Trinidad

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established a store in the Grenada in 2006 (Box 5.4), and Pizza Boys is likely to establish their other brands such as Pizza Boys in Guyana on the heels of the Church’s operation.

Box 5.4: Mario’s Pizzeria Prepares for Export of Services

Richard Harford introduced the locally developed pizza concept, Mario’s Pizza, in 1972 in Trinidad and Tobago. Since then, Mario’s has become the leader in the pizza sub–sector, and in 2002, it expanded its portfolio to include the international QSR brand Blimpie Subs and Salads. All the stores are company owned, include several (6) co-brand locations and can be found in a mix of stand-alone and mall locations offering a mix of both dining, take-away and delivery. In 2006, the company operated stores in 18 locations (17 Mario’s and 7 Blimpie’s) in Trinidad and Tobago, employing over 500 people and generating US$10 million in sales.

Mario’s has been upgrading its operations to improve efficiency, and also to prepare for exporting of the format. These improvements have included upgrading of the information system which includes EPOS, inventory management, and electronic ordering; construction of a 20,000 SF (2000) commissary to pre-prepare more of its ingredients to greatly reduce in-store labour utilization and improve store productivity and consistency.

The company purchases most (70 percent) of its supplies locally from local agri-food producers (chicken and F&V) and manufacturers (bakery products, beverages, condiments, and paper products). Cheese and chips represent two major cost items which are imported.

Mario’s sees export of service as key to its growth strategy and established its first store outside of Trinidad in Grenada in August 2006 with plans to open in Guyana soon thereafter.

Source: Mario’s Pizzeria; www.mymariopizza.com

Burger This sub-sector is estimated to turn over in the order of US$125 - 150 million from 150 - 175 restaurants employing over 3,000 people. Growth in this segment is reported to be slow to moderate. The Caribbean is not a major beef-consuming region, and burger operators have had to extend their ranges into chicken, fish and vegetarian sandwiches to build sales and compete with other QSRs. The sub-sector is dominated by the international brands - Burger King, Wendy’s, and McDonald’s. Over the last 10 years, McDonald’s, the global QSR leader, has attempted entry into Jamaica, Trinidad and Tobago, and Barbados, but without success. It was forced to withdraw within several years of establishment in each of these markets. The main franchise for Burger King in the region is Restaurants Associates of Jamaica, which has the rights to develop the eastern Caribbean, and has entered Trinidad and Tobago and St Lucia over the last two years. There are small chains of local brands such as HL’s in Belize, Bos Burger and Grillers in Trinidad and Tobago, and Wolly’s in Suriname (Box 5.3).

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Box 5.3: Wolly’s Grill Plans For Exports May Be Constrained by Domestic SPS Infrastructure

Wolly’s was established Paramaribo Suriname in the 1990s by Martin Wollen involved in meat production, butchering, and vending together with the sale of a small amount of cooked food on the side. In early 2000, the menu was expanded to include burgers, kebabs, steaks, and wraps and three more stores opened. The restaurant was established to add value to the existing meat business by offering ready-to-eat meat product and meals to consumers. Four of the restaurants, based in urban Paramaribo, offer dine-in and take-away service while one offers, in addition to the take away service, casual dining with an expanded menu of meat dishes such as steaks. In 2005, Wolly’s operated four stores employing 50 people and generating an estimated US$1.25 million in sales.

Wolly’s is planning, in the short term, to export its brand to the greater Caribbean beginning with Dutch speaking Aruba, followed by CARICOM (Trinidad and Tobago and Barbados) in the medium term and eventually the Netherlands. It is currently in the process of strengthening its operational systems and standardizing technology manuals to support the export strategy.

Wolly’s which uses a high proportion (80 percent) of local food products in its food preparations, especially meats, fish, vegetables, bakery products, and beverages. However, while it will be able to export condiments and sauces, it anticipates that it will be constrained in its ability to export Surinamese meats by the lack of SPS infrastructure in Suriname.

Source: Wolly’s Restaurants; www.wollys.com

Sandwich & Salads This sub-sector is estimated to turn over in the order of US$50 - 60 million from 140 - 160 restaurants employing over 800 people. Growth is moderate to slow in most markets. The sector is largely populated by international brands–Subway in seven CARICOM states, operated predominantly by independent franchisees; Quizno’s in the Bahamas and Trinidad and Tobago; Blimpie’s in Trinidad and Tobago; and Franciane’s in the Bahamas.

There are few local independent competitors of significance in this sub-sector such as: Super Subs and Amirs Subs in Belize; Bean & Bagel and Café Blue in Barbados; and Kombi and Lecki in Suriname. Goddard’s Catering has developed a “Grab and Go” concept where sandwiches, salads and soups are prepared in their catering kitchens and it is experimenting with this service in several CARICOM and Latin American markets. Recently, Kiss Bakery in Trinidad and Tobago launched Fresh Express, which offers similar daily-made sandwiches, salads, and soup products delivered daily to dispensers placed in over 300 food retailers nationwide. It is conceivable that both firms may eventually develop a QSR restaurant format in this sub-sector, or become a franchisee of a Subs and Salads brands. In this regard, Goddard’s has recently attempted to introduce the Subway brand into Barbados and is receiving opposition from the local QSRs and agri-food producers associations who prefer to develop more indigenous formats (Box 5.5).

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Box 5.5: Goddard’s Catering Explores New Market Segments in Regional and Export MarketsGoddard’s Catering, in an effort to grow sales and increase the productivity of their kitchen operations in CARICOM, the Greater Caribbean (Cayman Islands, St Lucia, St. Maarten, Bonaire, Margarita, Curacao, St Thomas, and Bermuda) and Latin America (El Salvador, Guatemala, Venezuela, Colombia, Ecuador Uruguay, and Paraguay) has been expanding in new food service market segments:

• Food on the Go Food Service – It has developed a “Grab & Go” concept where sandwiches, salads, and soups are prepared daily in their catering kitchens and delivered to dispensers placed in many food and non-food retailer locations nationwide. It is experimenting with this service in several Caribbean and Latin American markets.

• Subs and Salads QSRs – It is contemplating entering the Subs and Salads QSR market either by developing its own indigenous brand, or by becoming a franchisee of an international Subs and Salads brands. In this regard, in 2006, it applied for permission to introduce the Subway brand into Barbados. However, this move is receiving opposition from the local QSRs and agri-food producers associations who would rather give preference to developing more indigenous formats.

• Caribbean Chicken QSRs – In 2006, it expanded its strategic partnership with Island Grill to develop the QSR brand in all 18 territories in the Caribbean and Central America where it had operations.

Source: Goddard’s Enterprises; www.goddardenterprisesltd.com

Seafood This sub-sector is estimated to turn over in the order of US$25 - 50 million from less than 100 restaurants employing over 1,400 people. This sub-sector is smaller and is less developed in QSR brand formats. There is a significant number of independent local operators in CARICOM states such as Conch Salad Bar & Grill in the Bahamas where “cracked conch” is popular, in the Helshire fish shops in Jamaica, in the Oistens fish shops in Barbados, and the emerging fried fish shops in Guyana such as Francine’s and White Castle. Smaller independents exist such as Fish & Grill in Grenada, Jokes Crab in Suriname, and Papa Zouk in Antigua and Barbuda.

International brands have only just entered the region as local chicken QSRs adopt multi-brand strategies to hedge their bets against a possible Avian Flu outbreak. Two leading international seafood QSRs were established in Trinidad and Tobago-Long John Silver’s of Yum! Brands (2005) which is franchised to Prestige Holdings, and Captain D's53 (2006) which is franchised to

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Pizza Boys Group, both of whom have secured franchise rights for up to 17 stores in the region (Box 5.6).

Box 5.6: Long John Silver’s Seeks to Develop Supply Chain to Support QSR Growth

In 2005, the first Long John Silver’s franchise in the Caribbean and Latin America region was introduced into Trinidad and Tobago by Prestige Holdings. The brand is somewhat of a cross between casual dining and the QSR concept and although the menu is predominantly fish, it includes a variety of other items like chicken, shrimp, lobster, stuffed crab cakes, and a range of salads and desserts together with a few local dishes such as 'Accra bites'. Consumer response to the brand has been strong and it expects to significantly expand the numbers of stores in the short term in Trinidad and Tobago, and in the medium-to longer-term in Greater Caribbean.

Prestige Holdings, which has a history of developing strong backward linkages with agri-food supply chains has been exploring various sources of supplies for its fish and shrimp. It has begun exploring linkages with seafood processors in Guyana and livestock producers in Trinidad and Tobago to produce a range of seafood products for the LJS brand. This is seen as an important step in preparation for exporting the brand.

Source: Prestige Holdings

Snack & Beverage This sub-sector is smaller and includes food stores offering ice cream, donuts, pastries, coffee, and other beverages. Operators focusing on coffee include Rituals with 27 stores in Trinidad and Tobago; Italia Coffee House and Windham’s Coffee in Barbados; and the Coffee Mill with three stores in Jamaica and one in China. Operators focusing on ice cream include the international brands Haagen Dazs, Gelato’s Ice Cream, TCBY, Baskin Robbins, Crazy Jim Lee Ice Cream, Nestle, Dairy Queen, and the Original Dairy Bar but also local brands such as Willie’s Ice Cream. This sub-sector was not reviewed in this project.

Fast Casual Dining As the market develops, casual dining formats are moving to offer the consumer expanded members combined with reasonably quick service. This is being led by international brands such as TGI Friday’s, Tony Romas, and Ruby Tuesday. However, several local formats such as Anthony’s in the Bahamas, Cuddy’s in Jamaica, Sticky Wicket in Antigua, Trotters in Trinidad and Tobago, and Mambo Inn in Suriname are offering consumers more local alternatives. This-sub sector was not reviewed in this project.

Key CARICOM QSR Firms Involved in Services Trade

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There are several fast food firms currently involved or which will soon become involved in the trade in restaurant services within CARICOM. These are Prestige Holdings (US$72.5 million in 2004), Pizza Boys (US$40–45 million), Restaurants Associates (US$34.2 million), International Castle (US$16.5 milion), Mario’s Pizza (US$10 million), Island Grill (US$12.8 million), Tastee Patties (US$13.5 million), Mainstream Foods (US$4.8 million), Roopram’s Roti (US$4.2 million), and New Thriving Restaurant (US$2.5 million). By the end of 2006, the Prestige Group will have the largest number (16) of brand locations outside of its domestic markets followed by Restaurant Associates, International Castle, New Thriving Restaurant, Roopram Roti, Tastee Patties, Pizza Boys, Mario’s Pizza, Island Grill, and Mainstream Foods (Figure 5.1). Several others are exploring options.

Several of the regional QSR service traders–Prestige Holdings, Pizza Boys, Restaurant Associates, and Mario’s Pizzeria pursue a multi-brand strategy and operate QSR concepts in several of the fast food segments while the remaining QSR’s–International Castle Ltd., Mainstream Foods, and Island Grill, operate only one concept and focus on one segment only. Table 5.6 shows the portfolios of the leading regional brands, which are briefly profiled below in order of their stores outside of the domestic market:

• Prestige Holdings – Prestige Holdings is based in Trinidad and Tobago and currently has over 80 (2006) stores in four countries in the Greater Caribbean (Trinidad and Tobago, Jamaica, Dominican Republic, and Puerto Rico) and is set to enter Barbados in 2006. It has several international brands (KFC, Pizza Hut, Long John Silver, TGI Friday’s, and TCBY) in its portfolio and continues to acquire new franchise rights in the greater Caribbean and Central America (Box 5.7).

• Restaurant Associates – Restaurant Associates is based in Jamaica and currently has 35 stores in three countries in CARICOM (Trinidad and Tobago, Jamaica, and St Lucia). It has two international brands (Burger King and Popeye’s Chicken) in its portfolio and is seeking to acquire new franchise rights and expand its trade in services.

• International Castle - International Castle is based in Trinidad and Tobago and currently has 32 stores in three countries in CARICOM (Trinidad and Tobago, Grenada, and Guyana). It was previously in four other OECS states, but has since closed those franchises. It has one regional brand (Royal Castle) in its portfolio and sees trade in services as a strategic growth area. Guyana is planning to open a second store in 2006.

• Pizza Boys - Pizza Boys is based in Trinidad and Tobago and is estimated to have over 6554

locations, many of which are multi-brand locations. In 2006, it exported its Church’s Chicken brand and now operates in two countries in CARICOM (Trinidad and Tobago and Guyana). It hopes to enter two more CARICOM states (Antigua and Grenada) in the short term. It has four international brands (Church’s Chicken, Captain D’s, Gellato’s Ice Cream, and Vie De France) and four regional brands (Pizza Boys, Burger Boys, Donut Boys, and Wok & Roll) in its portfolio and is seeking to acquire new franchise rights and expand trade in services.

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Table 5.6: Fast Food Segments Serviced by Regional CARICOM QSRs QSR Company

Burger Sand- wich

Chicken Pizza Pasta

Mexi -can

Snack Seafood Chinese /Asian

Carib- bean

Casual Dining

Prestige Holdings

-- -- KFC Pizza Hut

-- TCBY L/John Silver

-- -- TGI Friday’s

Restaurant Associates

Burger King

-- Popeye’s Chicken

-- -- -- -- -- -- - -

International Castle

-- -- Royal Castle

-- -- -- -- -- -- - -

Pizza Boys

Burger Boys

-- Church’s Chicken

Pizza Boys

-- Rituals Gelato’s

Captain Ds

Wok & Roll

-- Imperial Garden

Mario’s Pizza

-- Blimpie’s Subs

-- Mario’s Pizza

-- -- -- -- -- --

Island Grill

-- -- Island Grill

-- -- -- -- -- -- --

Mainstream Foods

-- Subway -- -- -- -- -- -- -- --

Juici Beef

-- -- -- -- -- -- -- -- Juici Beef

--

Restaurants of Jamaica

-- -- KFC Pizza Hut

-- -- -- -- -- --

Tastee Limited

-- -- -- -- -- -- -- -- Tastee Patties

--

Roopram Rotishop

-- -- -- -- -- -- -- Roopram Roti

-- --


2

12

10

14

17

25

29

25

60

62

3

0

2

3

10

2 16

1

1

1

1

2

0 20 40 60 80 100

New Thriving Res.

Mainstream Foods

Roopram Roti

Island Grill

Marios Pizza

Tastee

International Castle

Restaurant Assoc.

Pizza Boys

Prestige Holdings

Domestic Stores

CSME Stores

International Stores

55 Figure 5.1: CARICOM QSR Chains Exporting Services

55 Apart from Prestige Holdings sales turnover was estimated as described earlier in the Foreword

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Box 5.7: Prestige holdings Leads in Export of QSR Services Prestige Holdings was incorporated in Trinidad and Tobago in 1972 and is the largest QSR chain in terms of sales in CARICOM. It adopts a multi-branding strategy focusing on international brands which currently include three of the Yum! Brands − KFC, Pizza Hut, and Long John Silver, the Carlsons group casual dining restaurant TGI Friday’s franchise, and the Mrs. Fields TCBY frozen yogurt and Pretzels franchises. All the stores are company owned. In 2004, the company operated 76 stores in the four countries employing 2,250 people and generating US$72.5 million in sales. Originally, the company, one of the earliest restaurant concepts in Trinidad operated through an independent franchise agreement with KFC. In 1991, it was acquired by an affiliate of PepsiCo, and in 1994, the Pizza Hut Brand was introduced. In 1997, KFC/PepsiCo Holdings Ltd. sold its entire shareholding to Victor E. Mouttet Limited, a privately-owned company. The Trinidad operation, along with several other KFC, Pizza Hut, and Taco Bell businesses elsewhere in the world, were sold and re-franchised by PepsiCo. Prestige Holdings now operates under franchise agreements for 10 years from 1997 for both KFC and Pizza Hut Brands with a right of renewal for a further 10 years. In 2000, the company made an Initial Public Offer on the local stock exchange trades a limited amount of stock on the exchange. The company purchases 90 percent of its product from local manufacturers or distributors with most (80 percent) of the food, non-food products, and services used in the chain being manufactured locally. These include chicken, vegetables, condiments, beverages, and paper products. French fries, frying oil, and ice cream represent significant food items which are imported. Prestige has also been instrumental in developing local service providers to supply specialized restaurant construction, restaurant equipment, and information systems. Stores operate on an information system which includes delivery management, EPOS, inventory management, and electronic ordering. It operates a centralized warehouse and delivery fleet for those major items such as chicken not delivered directly to the store by suppliers. The company's long-term strategy is focused around key areas of strength and opportunity. The company implements this strategy by developing a multi-branded portfolio of category-leading international brands, supported by regional expansion, strong innovation, and cash generation. Its aim is to be the favourite restaurant brand always providing great food, great experience and great value for its customers. The company has experienced healthy same store sales growth over the last 10 years and has often outperformed many other KFC and Pizza Hut operations in major international markets. Prestige Holdings has been acquiring new brands and franchise rights in the Caribbean and Central American region. In May 2000, the Company acquired 50 percent ownership with management control of Kentucky Foods Group Limited, incorporated in the British Virgin Islands, with responsibility for the operations of KFC restaurants in the Dominican Republic securing rights across the region (KFC – Nicaragua & Haiti). In 2004, it operated 14 restaurants abroad and plans to expand to over 50 restaurants by the year 2009. In May 2001, the Company acquired the development rights for the TGI Friday’s Casual Dining Restaurants for CARICOM, Aruba, and the Dominican Republic. It opened its first TGI Friday’s restaurant in Jamaica in late 2004. In 2004, it acquired TCBY operations in Trinidad and Tobago with rights to the English speaking Caribbean. It is hoping to open its first TGI Friday’s in Barbados in 2006. In 2006, Prestige Holdings had 61 stores in Trinidad and Tobago including 45 KFCs, 6 Pizza Huts, 2 TGI Friday’s, 2 Long John Silvers, and 6 TCBY stores. The remaining 18 stores are in the greater Caribbean with 14 KFCs in the Dominican Republic, and 2 TGI Friday’s each in Jamaica and Puerto Rico. Source: www.phl.com; http://www.stockex.co.tt/stockex/downloads/profiles/Prestige%20Holdings%20Limited.pdf

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• Mario’s Pizza – Mario’s Pizzeria is based in Trinidad and Tobago and currently has 18 stores in one country in CARICOM (Trinidad and Tobago) and opened one store in Grenada in 2006. It has one regional brand (Mario’s) and one international brand (Blimpie’s) in its portfolio and is seeking to increase its trade in services

• Island Grill – Island Grill is based in Jamaica and currently has stores in 14 countries in one

CARICOM country (Jamaica), one store in the UK, and is set to open a store in Barbados in 2006. It has one regional brand (Island Grill) in its portfolio and another (Bamboula Restaurant) which it operates in the UK in conjunction with Walkers Wood. In 2006, Island Grill signed an agreement to give development rights to Goddard’s Enterprises wherever it currently has operations in the Caribbean, Central and Latin America.

• Tastee Limited – Tastee Limited is based in Jamaica and currently has 27 stores in two countries in CARICOM (25 in Jamaica and two in Antigua) and is reported to soon be establishing stores in Barbados and Trinidad and Tobago. It has one regional brand (Tastee Patties) in its portfolio and is seeking to expand its trade in services

• New Thriving Restaurants – New Thriving is based in Guyana and is reported to have five stores in three countries in CARICOM (Guyana, Antigua, and Barbados). It has one international brand (New Thriving Restaurants) in its portfolio.

• Roopram’s Roti – Roopram’s Roti is based in Suriname and currently has 10 stores in one country in CARICOM (Suriname) and 2 in the Netherlands. It has one international brand (Roopram’s) in its portfolio. In Suriname, it has seven stores under the Roopram’s name and three associated stores in Suriname with independent names. Roopram’s is reported to be planning to export services to CARICOM (Trinidad and Tobago) in the near future.

It is useful to note here that there are other initiatives to export these services. Big John’s (Box 5.8) in Barbados is transforming the experience gained at Chefette’s in Barbados into a QSR format with the specific intention of exporting services. Franchise Holdings Ltd. (Box 5.9) of St Lucia is collaborating with other investors to develop the Dominos brand in the southern Caribbean. The Coffee Mill (Box 5.10), in the snack and beverage sub-sector which was not covered by this report, has exported its format to Asian markets demonstrating, if successful, that there is potential for Caribbean QSR formats across the globe.

Box 5.8: Big John’s Restaurants Develops Format to Focused on Export in Services Big John’s Restaurants was established in 2004 in Barbados, by John Naime, previously General Manager of Chefette’s Restaurants. Big John’s has a wide menu of Caribbean meals such as roti, Chinese meals, and grilled chicken, pork and fish dishes. Sixty-five percent of its food supplies are of Barbadian origin. In 2006, Big John’s operated one store in Bridgetown with 35 employees and generating sales in excess of US$1m.

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Big John's has been developing programs to standardize its menus, operations and procurement to support aggressive plans56 to expand across Barbados in the short term and across the Caribbean region, including Central America in the medium term.

Source: Big John’s

Box 5.9: Franchise Holdings Ltd. Collaborates to Develop Domino’s in Southern Caribbean

Franchise Holdings Ltd. opened its first Domino’s Pizza in St Lucia in 1999 and will open its second store in 2006. In 2005, Franchise Holdings procures 80 percent (meats, cheese, tomato paste, and toppings) of its food requirements from extra regional sources, 10 percent (flour from St Vincent) from the CSME and 10 percent (beverages, onions, and sweet peppers) locally. Greater sourcing of local foods is limited by the reliability and consistent quality of supply from domestic producers who must meet Dominos Pizza Inc.’s global standards.

Dominos Pizza currently has a presence in the northern Caribbean states of Dominican Republic, Puerto Rico, Jamaica, Bahamas, St Thomas, St Croix, and Aruba. Franchise Holdings is collaborating with other investors to develop the Dominos brand in the southern Caribbean beginning with the opening of a store in Trinidad and Tobago in 2006. Source: Franchise Holdings Ltd.

Box 5.10: Coffee Mill Becomes First Caribbean QSR To Explore Asian Markets In 2006, the Coffee Mill of Jamaica invested US$250,000 (J$15.5 million) in China to become the first Caribbean island's first totally foreign-owned investment in this Asian country. It is located in the lobby of the Tong Mao Hotel, decorated with African-inspired art décor, reggae music playing softly in the background, shelves lined with Walkers Wood spices and seasonings, and of course, the familiar brown bags of Blue Mountain Coffee. Source: The Jamaica Observer, April 5, 2006

Moreover, the two patty franchises from New York–Golden Krust Caribbean Grille and JerkQzine, report that they have been receiving inquiries from investors in the Caribbean to introduce these brands into CARICOM. It is likely that these franchises will enter the market shortly.

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CARICOM Quick Service Restaurant Industry Competitiveness & Trade Trends Improved Offering for Consumers Consumers in the more developed food retail markets, have benefited from healthy competition between QSR brands which has led to greater choice in QSR brands and fast food categories; expanded menus within brands; increased services such as drive-through service and home delivery; more event and children’s playground facilities, and longer opening hours. Stores have expanded geographically beyond the capital cities into the suburbs and secondary towns, into urban lower income areas, and into several unconventional locations such as public institutions, to provide increased access to a greater segment of the population. In several large markets, notably Jamaica and Trinidad and Tobago, price competition has intensified with brands pricing their “meal deals” in relation to competitors within the sub-category and often between sub-categories. These trends also exist to varying degrees in other markets. The improved offering and promotion by the industry, together with other larger economic and geo-demographic trends, have led to an increase in consumption of foods eaten away from home. Impact on Other Food Service Providers Larger QSRs report that food service companies as a whole, have benefited from the growth of the larger QSR chains over the last few decades. The increased advertising and promotional activity is reported to have educated and stimulated consumers to experiment with new foods and food service formats. Most industry members report that so far, this has not been to the detriment of smaller local QSRs and food service operators who have learnt new business strategies, and adopted technologies and management systems from the larger companies. In particular, chains pointed out that other food service operations have benefited from the strengthening of the supply chain of larger QSRs allowing them to now access related goods and services that meet international standards that might otherwise have to be imported. Moreover, other food service operators and smaller QSRs are able to recruit the staff of the larger chains to facilitate the adoption of more modern technology and management systems, and the creation of stronger management and technical staff teams. There were several different views and an observation by the consultants which need to be considered in conjunction with the above. First, most indigenous brands interviewed pointed out that in addition to the benefits above, international brands have access to significant capabilities and resources from their international principals, which may create an unlevel playing field for developing local brands. Also some states, notably Barbados and Belize seem to be adopting a sector development policy, which favours indigenous solutions. Barbados, by way of a Franchise Act requires consultation with related stakeholders before international QSRs are approved for entry, and this has led to limited introduction of external chains57. Belize, on the other hand, seems to require that international QSRs maximize the use of the local supply chain, and as such, there have been only a few attempts (KFC and Subway) to establish international chains in Belize. Moreover, the consultants have noted that while there is not a large presence of QSR chains in some OECS member states, there tends to be a large number of independent food 57 http://www.nationnews.com/story/295906504544178.php

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service outlets, which one might argue can benefit SME development and build on the Caribbean nature of the food service component of the tourist product. Development of Agri-Food Supply Chains The strong growth of the QSRs has had a positive impact on the supply chains for the industry. Firstly, the larger international and local QSRs (Prestige Holdings, Restaurants of Jamaica, Restaurant Associates, Chefettes, Marios, and Qik Serv) who have been in the business for several decades procure most (60–80 percent) of their major supplies from local agri-food and non-food suppliers. These include primary products such as chicken, fish, fruit and vegetables, and beef to a lesser extent, as well as manufactured products such as bread and pastry, condiments, beverages, and in some cases, frying oil. Some major products that are not produced locally, such as some beef for burgers, cheese for pizzas, French fries, and some specialty vegetables for salads tend to be imported. However, while there is a reported preference for working with local suppliers, because over time, they can deliver higher levels of reliability, delivery service and become strategic partners in quality, safety, and new product development, most of the major QSRs pointed out that this was only feasible if the agricultural tariffs on these products were maintained. As the food service industry develops, it also improves the manufacturing and logistical base of the food supply chain. Fast food chains have been making significant investment in manufacturing capacity such as the Juici Beef manufacturing plants, Pizza Boys Bakery, Mario’s Commissary, and Subway’s bakeries, to improve their competitiveness. This is being supported by the development of multi-temperature centralized warehousing and distribution fleets. They encourage similar investment in suppliers especially in the areas of value-added meats; fresh cut, prepared and packed vegetables; customized condiments; value-added bakery products; beverage delivery systems, and specialized frying oils. Recently, at least one chain is considering strategic relationships with producers to significantly increase aquaculture output to meet the demand for fish menus. Smaller QSRs especially those using high value ingredients, such as Papa John’s and Subway, for whom high quality ingredients and/or a wide variety of ingredients are central to their marketing proposition, report difficulty in sourcing desired ingredients from local suppliers of value-added products. They were critical of the differential impact that tariffs on agro-food products had on their competitiveness. Development of Non Agri-Food Supply Chains Non-food supply chains have benefited from the development of the industry. These include product suppliers such as paper products, equipment, and furniture and signage, as well as services such as construction, information technology, and advertising. Larger QSRs report that they have promoted the formation of new service firms and development of new “service” expertise in these areas.

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QSR Competitiveness The larger international QSR chains in the region–KFC, Burger King, Subway, and McDonalds in the French DOMs, have reported that they have met or excelled in the sales, customer service, and operational benchmarks/averages set for their international brand. For example, KFC in Jamaica and Trinidad and Tobago, prior to the opening up of the Asian markets, have had stores which have recorded some of the highest sales per unit in the world. Subway in Trinidad and Tobago is presently reported to be in a similar position. This performance is reflected in the strong store, margin, and earning per share growth reported in the financials for Prestige Holdings until the “Bird Flu Outbreak” in 2006, which impacted negatively on performance. Other major QSRs have reported similar levels of performance. The larger chains confirmed that they had, over the years, adapted menus, built strong consumer brands, strong supply chains, strong management teams, developed in-depth knowledge of the operating environment, and secured many strategic locations, all of which would allow them to compete against incoming competition. Several operators pointed to the experience of McDonald’s in Jamaica, Barbados, and Trinidad and Tobago as evidence that larger brands can be challenged by a lack of understanding and adaptation to the local tastes and operating environment. Indigenous brands and smaller international chains, on the other hand, were more cautious, tending to be less willing to dismiss the entrance of a major international QSR brand in their market segment. Local brands also pointed out the challenge of competing with international chains which supported their franchises with international advertising on cable and satellite TV, international promotions, store location research and design, standardized product and operations development, management training and coaching services, and performance benchmarking. The lack of similar support was identified as a major challenge toward the development of indigenous formats, and an area of lower competitiveness. Trade in QSR/ Catering Services As QSR firms grow in size and as QSR sub-sectors such as the chicken sector begin to mature, firms have sought to grow sales by increased market penetration through (1) adding services such as delivery, (2) exploring more rural and unconventional locations for stores (3) adding new QSR concepts to their chains, and (4) and entering new markets. Table 5.7 lists selected market entry/exit activity across the region since 1995.

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Table 5.7: Market Entry/Exit and Merger/Acquisition Activity in Caribbean Quick Service Restaurant Markets, 1995–2005

Year Country Activity Target Investors 1995 Jamaica Market Entry/Exit in 2005 McDonalds McDonalds Corporation

1989 Barbados Market Entry/Exit in 1994 McDonalds Mc Donald’s Corporation

1998 Grenada Market Entry Royal Castle International Castle, T&T

1999 Guyana Market Entry Royal Castle International Castle, T&T

2000 Guyana Market Entry KFC DIDCO Enterprises, Guyana

2000 DR Acquisition KFC Prestige Holdings, T&T

2001 T&T Market Entry/Exit in 2003 McDonalds Mc Donald’s Corporation

2001 Jamaica Acquisition TGI Friday’s Prestige Holdings, T&T

2000 PR Acquisition TGI Friday’s Prestige Holdings, T&T

2002 Antigua Market Entry/ Exited Royal Castle International Castle, T&T

n/a Antigua Market Entry Tastee Patties Tastee, Antigua

n/a Antigua Market Entry New Thriving New Thriving, Guyana

2002 St Vincent Market Entry/ Exited Royal Castle International Castle, T&T

2002 Guyana Market Entry Pizza Hut DIDCO Enterprises, Guyana

2004 T&T Market Entry Church’s Pizza Boys, T&T

2004 T&T Market Entry Burger King Restaurants Associates, Jamaica

2004 T&T Market Entry Popeye’s Restaurants Associates, Jamaica

2004 Guyana Market Entry Popeye’s Guyana Stock Feeds, Guyana

2005 St Lucia Market Entry Burger King Restaurants Associates, Jamaica

2005 St Lucia Market Entry Popeye’s Restaurants Associates, Jamaica

2005 Belize Market Entry Subway Subway (Belize) Ltd

2005 Grenada Market Entry Subway Mainstream Foods, T &T

2005 Antigua Market Entry Subway Subway Antigua

2006 St Lucia Market Entry Subway Subway St Lucia

2006 T&T Market Entry Captain D’s Pizza Boys

2005 T&T Market Entry Long John Silver Prestige Holdings

2006 Guyana Market Entry Church’s Pizza Boys, T&T

Planned Guyana Market Entry Subway Mainstream Foods, T &T

Planned T&T Market Entry Dominos Pizza N/a

Planned Barbados Market Entry Island Grill Island Grill/ Goddard’s Ent. Ltd

Planned Grenada Market Entry Mario’s Pizza Mario’s Pizzeria

Planned Barbados Market Entry Subway Mainstream Foods/ Goddard’s

Planned Barbados Market Entry TGI Friday’s Prestige Holdings

Source: Field Interviews

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Prior to the late 1990s, most of the trade in services was through the introduction of international brands through separate franchises across the region with the international franchises. In 1998, Royal Castle became the first brand to export services to six CARICOM states, but has since had to exit four markets. Prestige Holdings and Tastee Patties followed this in the early 2000s. Since then, coinciding with the implementation of the CSME, there have been increasing trade in services, by both international franchisees and indigenous brands. Several more firms have reported interest in exporting services into the CSME in the short to medium term such as Restaurants of Jamaica; Big Johns of Barbados; Qik Serv of Guyana; Roopram’s, Wolly’s, and Mambo Grill of Suriname.; and no doubt several firms from the OECS, but the researchers were unable to meet enough QSRs to identify potential exporters.

There are the beginnings of some extra regional trade in CARICOM food service (QSR and catering) services–Island Grill and Roopram’s Roti have operations in the EU. One QSR which preferred not to be named is considering operating their existing international franchise in North America. Juici Beef which has a manufacturing plant in Ontario and has developed franchising in Jamaica, is well placed to consider exporting franchises to North America. Prestige Holdings has operations in the Dominican Republic and Puerto Rico and franchise rights in Central America. Goddard’s Catering has catering operations and plans for QSR operations in several Latin American countries. Lastly, CARICOM food service firms need to address the likely entrance of extra regional Caribbean restaurants such as Golden Krust, JekQuizine, and Bahamas Breeze which have positioned themselves to compete in the international Caribbean food sector and who are poised to offer franchises within the CARICOM Single Market. Challenges to Export of Services to CSME and Extra Regional Markets Apart from trade barriers dealt with in other parts of this study, several challenges face firms exporting agri-food distribution services.

• Supply Chain Reliability - Fast food chains have well defined menus, often with customized signature items, supported by demanding product specifications and quality assurance programmes of the principal brand. These must be maintained even in new and fledgling export markets. The QSRs in Trinidad and Tobago and Jamaica involved in the trade in services have reported that the development of QSR service exports requires a robust supply chain to reliably supply the smaller volumes of products needed in the start-up phase of market entry. As such, they have lamented the weak air and sea freight service in the region, characterized by indirect and infrequent shipping routes with higher cost and less reliable freight services. In particular, there tends to be weak refrigerated freight and port services. This is reported to be a significant challenge for exporters who have to respond to dynamic customer demand and competitive activity. This has explained in part the slow movement and consolidation of QSR services across the region. It may also explain why it may be more logical to establish independent franchises out of the US/Miami where the shipping links are stronger rather than looking at our neighboring CARICOM countries.

• Standardization - The development of these standardized systems is a significant investment for indigenous QSRs.

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• Franchising - Notably, franchising has not been used by indigenous QSRs with the exception of

Jamaican patty formats and Royal Castle with variable success. In contrast, both Golden Krust and JerkQuizine have clearly identified this strategy as key to strong growth in sales and market share.

• SPS Limitations - In some product categories such as meat products there are still SPS limitations (as opposed to restrictions) to the trade in supplies for QSR stores. Several CARICOM states are not able to upgrade their SPS infrastructure to allow them to export meats. Therefore, Wolly’s Burgers from Suriname and DIDCO Trading/KFC from Guyana would have difficulty exporting beef and chicken, respectively.

Impact of Agricultural Policy on Trade In Services The impact of agricultural trade policy on the supply chain choices that QSRs make can be seen by looking at the tariff structure (Table 5.8) for one of the key ingredients, i.e., chicken meat in the larger fast food sub-sectors, the Chicken, Caribbean, and Chinese sub-sectors. Chicken is also one of the most sensitive products in the tariff schedules of several member states. There is a strong correlation between the levels of utilization of domestic supply and the levels of the tariffs of the most sensitive product–leg quarters. Several clusters exist within the region: Table 5.8: Relationship Between Tariff Levels and QSR’s Agri Product Use

CARICOM Member State

HS Tariff Leg Quarters

(%)

Estimated Domestic Market Share

(%) Leading QSR Brand

Local Supply

To QSRs (%)

Jamaica 260 75 KFC/ Island Grill/ Burger King 100 Barbados 184 80 Chefette/ KFC/ Chicken Barn 100 Guyana 100 95 KFC/ Qik Serv/ Royal Castle 100 Belize 100 95 Independent QSRs 100 T & T 80 95 KFC/ Royal Castle/ Church's 100 Bahamas 35 50 KFC/ Bamboo Shack 0 Suriname 20 40 KFC/ McDonalds/ Naskip 0 OECS 5 - 10 5 - 15 KFC/ Papi’s Chicken/ Royal Castle Low Haiti 5 10 n/a n/a Source: CRNM – Applied HS Tariffs, QSRs and Poultry Industry Interviews

• Jamaica, Barbados, Guyana, Belize, and Trinidad and Tobago – These states all have high tariffs for leg quarters and/or whole birds which makes the local supply more attractive in terms of price to the food service industry. In addition, suppliers in these states have invested in modern 9-piece cut machines to deliver the precise sizes required by the fast food industry.

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• The Bahamas - The Bahamas is a higher cost producer and has moderate tariffs which make imported leg quarters approximately equal in price to the local product. Local QSRs based in Nassau, such as Bamboo Shack, used to purchase local chicken before the poultry operation in New Providence was closed. However, the international QSRs such as KFC report that local production is not large enough or efficient enough to deliver the requirement of specialized parts58. KFC continues to purchase local product in Freeport where there is still a local supply.

• Suriname & Haiti – These states have low tariffs. In Suriname, the major QSRs purchase US leg quarters and Brazilian chicken for their operations. Most of the local supply, which is more expensive, is sold on the live market. Haiti is one of the largest importers of US leg quarters in the region and presumably these are used in the domestic food service industry.

• OECS - In the OECS where the industry is less developed, tariffs on leg quarters range from 5–10 percent and are used to generate tax revenue rather than to defend the local industry, and as such, QSRs use predominantly imported product.

Table 5.9: CARICOM CET on Selected Key Products Used by Major QSRs

Product

HS Classification Common External Tariff

% MEAT, FISH & MILK Meats (Chicken & Pork) – Raw & Preserved 02 15 - 40 Meats (Beef & Goat) – Raw Preserved 02 15 Seafood (Fish & Shrimp) - Raw 03 20 – 40 Meats, Fish – Preserved/ Processed 0210, 1601/2 20 Cheese 04 5 FRUIT & VEGETABLES Vegetables 07 0 - 40 Fruit 08 15 - 40 Potatoes/ French Fries 08 0 MANUFACTURED FOODS Condiments 09 20 Frying Oil 15 20 - 40 Bakery Products 19 20 Beverages (Aerated Beverages & Juices) 22 20

Source: Customs Act Chapter 7801, Laws of T&T

However, the study did not investigate the extent to which similar trends existed for other agri-food supply chains, although it is quite likely that this was so. Table 5.9 presents the Tariff

58 Restaurant Fryers – Each fast food chain has a specified narrow range of broilers which fits their cooking equipment and for KFC only 25 – 30% of all birds slaughters in a plant cant ever meet this criteria. This requires that total local production be large enough to meet the productivity requirement for KFC volumes. In addition KFC requires a chicken “cut in 9” which is normally different from the “cut in 8 “ requires by supermarkets. This requires investment in two sets of automated equipment.

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Schedule for Trinidad and Tobago which is indicative of the Common External Tariff (CET) for the main products used in fast food operations. However, member states may have significantly different tariffs as can be seen in the chicken case below (Table 5.10).

Agri-food Product: Export Opportunities International QSRs have provided some export opportunity for regional agri-food suppliers. International QSRs have rigorous standards for certification of suppliers. However, once certified, suppliers receive clearance to sell these products or services to any store within the international chain, thereby creating opportunities for exports. Table 5.10 gives some examples of regional firms that have been certified to sell products into international chains. For example, • Arawak in Trinidad and Tobago is certified to supply McDonald’s with chicken products and

as such, exports chicken to Suriname. • The Content Division of Jamaica Broilers is certified to supply fish patties to Burger King,

beef patties to Wendy’s, and chicken patties to Mc Donalds. Burger King has certified Jamaican suppliers for cassava bammy products.

• Roberts Manufacturing (Barbados) produces frying oil for export to Jamaica, Trinidad and Tobago, and Suriname;

• Flavorite Foods (Trinidad and Tobago) exports ice cream to Suriname, the Dominican Republic, Aruba, and Curacao; Arawak (Trinidad and Tobago) exports chicken to Suriname; and

• Cariflex (Trinidad and Tobago) exports paper products to Curacao, Aruba, and South Florida.

Table 5.10: Selected Products Sourced and/ Exported by QSRs From Local Supply Chains

QSR Brand Customer

Product Product /Service Supplier

Royal Castle Royal Castle, Grenada, Sauces Royal Castle, T&T Wendy’s Wendy’s, Jamaica Beef patties Content, Jamaica Broilers Burger King Restaurants Assoc., Jamaica Casava Bammy n/a Burger King Restaurant Assoc., Jamaica Fish Patties Aquaculture Jamaica McDonald’s McDonalds, Suriname Chicken Patties Arawak & Co, T&T McDonald’s McDonalds, T & T Buns and Biscuits Kiss Bakery, T&T McDonald’s Suriname, DR, Aruba, Ice Cream Flavorite Ice Cream, T&T McDonald’s Jamaica, T&T, Suriname Cooking Oil Robert Manufacturing, Barbados McDonald’s Curacao, Aruba, South Florida Paper Products Cariflex, T&T


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Box 5.11: McDonald’s Facilitates Trade in CARICOM Goods In Greater Caribbean McDonald’s59 entered the CARICOM market in 1989 establishing a onestore franchise in Barbados, followed by a four-store franchise in Trinidad and Tobago (1991) and by a fourteen- store joint venture in Jamaica (1995). However, the chain was not successful in several markets and eventually exited Barbados (1994), Trinidad and Tobago (2003) and Jamaica (2005). Stores were also opened in the Bahamas (4) and Suriname (1). In 2006, McDonald’s had 151 stores in the greater Caribbean i.e. in the Dominican Republic (7), French Territories (18), Dutch Territories (8), US Virgin Islands (6), and the largest number in Puerto Rico (110) where it has its regional offices. The company reports that some smaller territories (such as the French islands) in the region have had a history of out-performing international and US stores since they tend to be destination stores where consumers go to eat as well as for other entertainment outings, such as family gatherings. As such, McDonald’s is hoping to re-enter the CARICOM markets in the short- to medium-term and reports that since leaving Barbados, it has applied for re-entry without success. Some major challenges identified in establishing operations in smaller territories are the smaller size of the market; the refrigerated sea, air freight and port holding rooms; tariffs on food and supplies for start-up operations where the local supply base is not yet developed, and security. While each operation has to offer the core McDonald’s menu, it does incorporate local items such as in Jamaica, McDonald’s expanded beyond the core McDonald’s menu to include cassava pancakes and guava syrup. McDonald’s tends to source chicken, beef (occasionally), F&V, bread, beverages, ice cream, frying oil, and paper products locally, once it can find certified products and suppliers for use in the McDonald’s chain. Its standards for selecting suppliers include food safety, quality systems, new product development capability, good agricultural practices, social responsibility, and fair wages. Often, as it the case with meat patties and bakery products, local manufacturers need to make substantial investments in technology and quality systems to meet the international standards. However, once McDonalds has certified a supplier, it opens opportunities to supply good to other markets. For instance, McDonald’s is still purchasing products such as Content (Jamaica) beef and chicken patties for use in Jamaica; Roberts Manufacturing (Barbados) frying oil for export to Jamaica, Trinidad and Tobago and Suriname; Flavorite Foods (Trinidad and Tobago) ice cream to the Suriname, the Dominican Republic, Aruba, and Curacao; Arawak (Trinidad and Tobago) chicken to Suriname; and Cariflex (Trinidad and Tobago) paper products to Curacao, Aruba and most recently, this year to South Florida. While these CARICOM suppliers meet the larger McDonald’s standards, export opportunities are often defined by cost competitiveness and logistic constraints as the products can often be sourced extra-regionally. In this regard, the Caricom Single Market and Economy (CSME) tariff structures define the extent of intra-regional trade. Source: McDonald’s

59 www.mcdonalds.com

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Indigenous QSRs can also provide similar opportunities for suppliers as franchises are often required to source custom-made ingredients (condiments and seasoning). A good example of this is Royal Castle, which exports its seasonings and sauces to its regional franchises. While there is not extensive information to support this, the McDonalds experience described in Box 5.11 where local manufacturers of food and non-food products were certified to supply the global chain and then asked to export products to store outside of their domestic market. Currently, such experiences are limited to the larger international firms in the region, but presumably will take place with indigenous firms when they begin to substantially export QSR services.

CARICOM Restrictions on Trade Given the amount of franchising activity underway in the region, one would expect a certain degree of regulatory activity to be present. As indicated below, the reality is quite the opposite. Only three CSME countries have any type of restrictions relating to this sub-sector, two of which relate primarily to Mode 4 (Movement of Persons). Again, as in the case of food retailers, the situation in the Bahamas varies slightly. Here, the authorities tend to favour joint venture operations. In addition, nationals can object to the presence of new market entrants triggering a consultation process before a final determination is made on the desired entry and location of the restaurant. In this process, consideration is given to the effect on small service suppliers of national origin. Table 5.11: CARICOM Restrictions on Food Services Country UNCPC Code/Measure Services Affected

Specific Restrictions Summary Description of Measure Barbados 63 LODGING; FOOD AND BEVERAGE SERVING SERVICES

Small Business Development Act An approved small business is provided with tax and other incentives S. 3(1)(b) provides that a small business is an enterprise that has 75% of its shares locally owned.

Barbados 632 Restaurant services

Administrative Small scale tourism related activities such as restaurants are usually reserved for Barbadian nationals therefore work permits may not be granted.

Guyana 85990 Franchising

Trade marks Act: Chapter 90:01; Patent and Designs Act; Chapter 90:03

Work Permit

Suriname 63300 Beverage serving services for consumption on the premises

Licensing "Wet op drankhuizen en huizen van Openbare vermakelijkhenden" of 1872 does not include a discriminatory practice. However, the District Commissioner has the power to prohibit categories of persons to pour, serve or hand out alcoholic beverages.

Work Permit The Granting of licences is not restricted to Surinamese, but Article 9 gives the Minister the power to grant licences under specific conditions in the case of companies: vide other sub-sectors.

Source: CARICOM Secretariat (2006)

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Conclusion

It is estimated that almost 4,250 firms operate in the food service sector in CARICOM. Over 2,100 firms operate in the quick service sub-sector employing around over 27,500 persons and generating sales of almost US$1,045 million. The KFC brand is by far the largest QSR brand in the region. In terms of market segments, the Chicken segment generates about one-fourth of sales followed by the Chinese/Asian, Caribbean, Burger and Pizza/Pasta segments. A number of regional companies have or are planning to engage in trade within the CSME. These include Prestige Holdings, Pizza Boys, Island Grill, Mario’s Pizza, Restaurant Associates, Tastee’s and New Thriving Restaurants, Wolly’s, and Big John’s. In contrast, there is limited experience of extra-regional exporting of services. Roopram’s Roti of Suriname operates in Europe, Island Grill from Jamaica aborted an attempt to enter the United States market but continues to cooperate with Walkers Wood in a QSR in London as well as developing strategic alliances to export extra-regionally, and Goddard’s Catering is developing the Grab and Go concept in several markets in the greater Caribbean and Latin America. Lessons learned of relevance to other Caribbean brands include the need to improve branding, menus and marketing; strengthen technical and human resource operations; strengthen operating systems; and maximize store profitability through IT use. Another Jamaican company, Juici Patties, operates a manufacturing plant in Ontario, Canada which could be used as a platform for new restaurants in that market. Coffee Mill, again of Jamaica, is currently testing the market in China. Caribbean QSR formats developed by Caribbean peoples in extra-regional markets are also taking root and experiencing strong growth rates, and are likely to enter the region in the short term. Consumers have benefited from greater choice, expanded menus, increased services and even some price competition in some markets. There has been a strong trend towards greater consumption of food away from home stimulated by increased incomes and changing demographics, but also by the introduction of new QSR brands, menus, promotion, services such as delivery and improved price competitiveness by the industry. Larger regional companies, in larger CARICOM states, operating in this sub-sector tend to make a high use of local inputs and services. Further, other large QSRs are also making significant investments in manufacturing capacity; improving warehousing and distribution fleets, and prompting similar modernization in the domestic and regional agri-food supply chains. Larger QSRs have also worked to strengthen their supply chains (food and non-food) and this has, in turn, helped smaller QSRs as well. In some cases, as they move within the region, they introduce these agri-food product suppliers to new export markets as well. Many indigenous QSRs tend to utilize a high percentage of local ingredients and the larger ones work closely with suppliers to develop the supply chain. Smaller international QSRs tend to differentiate themselves on the ingredient quality in their menus and rely heavily on imports. Larger QSRs are confident that their investments in branding, adaptation of menus, strong supply-chains, local knowledge and strategic locations equip them well to compete with international brands. Indigenous brands are more wary of new competition. Of particular concern was the marketing strength of international QSR’s as well as the latter’s accepted capabilities in research and design, standardized product and operations procedures and stronger management.

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Indigenous QSRs, which lack the marketing, operational and developmental support of international brands, have expressed greater concern about the impact of inbound competition, and point to the need for greater policy support to improve their competitiveness. The possible entry into the Caribbean of extra-regional Caribbean restaurants such as Golden Krust and Bahamas Breeze must also be considered as a real possibility.

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6. CARICOM FOOD WHOLESALE SECTOR

Introduction This chapter briefly identifies trends in industry and competitiveness for the CARICOM food wholesale sub-sector in the context of trends in the food retail sub-sector and reviews the policy and regulatory framework for the sector. Food Wholesale Sector As defined in Chapter One, there are several types of firms involved in food wholesaling, of which two are involved in trade in services, importer/distributors and commission agents. The numbers and importance of the various types of wholesalers in a market depends on the stage of development of the retail markets and the level of local food self-sufficiency. More developed markets consume a higher proportion of international branded products and the role of importer distributors increases in these food retail markets. More traditional markets are more self-sufficient in local production and tend to be less reliant on distributors. Most CARCOM countries have a few (5–10) leading distributors who represent major international and regional brands together with a larger number (20–40) of smaller distributors who either represent secondary brands or are involved in the importation of commodities. Most of the larger distributors across the region belong to larger conglomerates and are associated with food manufacturing, retailing or catering operations belonging to the group. Larger distributors operate out of a home base in one CARICOM country with subsidiaries or affiliates in other countries. Several have buying operations out of the region, normally based in the US. Table 6.1 provides a view of the scope and spread of several major operations across the region. Often there are companies operating in different countries with similar names, as is the case for Bryden’s and Geddes Grant which were once part of one company, but which have since changed ownership. Several companies maintain a number of distribution companies because of the long-standing relationships with different international brands with that particular distributor or in order to secure agencies for competing international brands. Most of the distributors interviewed imported over 90 percent of their volumes traded of which 10–40 percent originate from within CARICOM. Many had 20–60 distribution agencies with regional and international principals many of which were long-standing. Most have actively expanded their warehouse facilities. Products are sourced globally directly from manufacturers except when consolidation is required and this often done by large wholesalers such as Southern Foods in Florida. Fresh produce import and export distribution is described in some detail by Vassell Stewart in Box 6.1.

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Box 6.1: CARICOM Fresh Produce Distributors The formal domestic sub-sector comprises registered companies including retailers, wholesalers, importers, and exporters. In the case of fresh produce wholesalers who are nearly always also importers, these comprise the foreign owned mega retail stores and about thirty (30) small to medium-sized family-owned businesses which focus mainly on the imports of selected temperate fruits such as apples, grapes, and pears and mainstream vegetables such as white potato, tomatoes, cabbage, carrots, lettuce and beet roots. These companies establish cool storage facilities and import a few reefer containers loads of produce on weekly or fortnightly basis primarily from Miami, but also from the UK in the case of the Organizaiton of Eastern Caribbean States (OECS) countries. The Mega-stores,which operate as both retail and wholesalers, sell both domestic and imported fresh produce, whereas the formal family-owned wholesalers sells almost exclusively imported produce. They also provide very limited distribution service, with buyers having to visit their warehouses or their outlets in the main public wholesale and retail markets. In the case of the exporters, these are also small individually-owned or family-owned businesses. It is estimated that there are about 60 such companies in the Region. These firms are engaged in exporting a range of non-traditional fruits, root crops vegetables, ornamentals, and fish. The fruits include mostly mangoes, paw-paw and golden apples; the vegetables are mostly pumpkins, hot peppers, spinach, and bodi beans. They ship to small importer distributors in the major Caribbean Diasporas such as New York, Miami, Atlanta, Toronto, Montreal, London, and Rotterdam. A significant percentage of the importers are family members of the exporters, who like the other importers, operate wholesale outlets in the main public markets in these cities or operate ethnic shops. The trade is characterized by frequent entries and exits of traders both on the import and export side of the trade, and is often plagued with problems relating to regularity and quality of supplies and payments to exporters, particularly when the importers are not family members. The regional fresh produce trade, is dominated by over 200 individual Hucksters or Traffickers, mostly from Dominica, St. Vincent, Grenada, St. Lucia, and Guyana and to a far lesser extent, Jamaica and Haiti. Those from the OECS and Guyana purchase a wide range of produce particularly fruits and root crops directly from farmers, clean and package the products, usually at home, and then ship the products by the several small boats that provide intra-regional transport service. They then travel, usually by plane and occasionally by the boats, to the market destinations where they or their agents clear the products through Customs. The traders then take the products to the major retail and wholesale markets in the cities where they and their agents carry out wholesale actives over 1 or 2 day period. The major regional markets for the OECS traders are Trinidad and Tobago, Barbados, Antigua, St. Kitts-Nevis, St.Maarten, Guadeloupe and Martinique. In the case of Jamaica and Haiti, there are a few dozen such persons. The Haitians generally source products in Curacao and Aruba and more rarely in Miami, unlike the Jamaicans who source mainly in Miami. These individuals generally are engaged in trading in non-food products such as clothing, shoes, cosmetics, and electronics, but also purchase high value fresh vegetables such as lettuce, broccoli, tomatoes, sno-peas, mushroom, particularly during the tourism season and period of scarcity when demand is high. These fresh products are generally shipped by air cargo service and are most often pre-sold to small wholesalers, small supermarkets, and hotels and restaurants, and are generally delivered as soon as they are cleared. Source: Personal Communication, Vassel Stewart

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Table 6.1: Profile of Selected Food Distributors in CARICOM Parent Company Head Office

Distribution Subsidiary/Affiliate

Countries of Operation

Main Product Categories

Neal & Massy Trinidad & Tobago

Marketing & Distribution.

Trinidad and Tobago, Guyana Food and beverages

T. Geddes Grant Trinidad and Tobago, Barbados Food and beverages

HD Hopwood Jamaica Food and beverages

Neal & Massy Inc Miami, USA Food and beverages

ANSA Mc AL Trinidad & Tobago

Alston’s Marketing Company Ltd.

Trinidad & Tobago, Barbados, St Kits Nevis, St Lucia, Guyana, Grenada, USA

Food and beverages

A S Bryden & Sons (Barbados) Ltd.

Barbados Antigua Grenada Guyana St Lucia

Branded Food Beverage

Grace Kennedy Jamaica Grace Foods CARICOM Food & Beverages

G F d B d Grace Foods International

Canada, USA, UK Food & Beverages

G F d B dGoddard’s Enterprises

Barbados Independence Agencies Ltd.

Grenada Food & Beverages

Coreas Hazells Inc St Vincent & the Grenadines Fine wines, meats, fresh vegetables,

Goddard St Vincent St Vincent & the Grenadines Food, liquor

Hanschell Inniss Ltd.

Barbados

Food stuffs and rum

Hutchinson Ltd

OD B i b & C

Antigua & Barbuda Food and beverages

Jonas Browne &

H bb d

Food & Beverages

OD Brisbane

& S

St Kitts and Nevis Agricultural produce

Peter & Company Ltd.

St Lucia Dry, frozen, liquor household goods

Cirkel Suriname United Distributors Suriname, Guyana Food & Beverages

Source: Company Websites

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Food Import Distribution Industry Competitiveness & Trade Trends Food distributors are faced with several challenges coming from three main sources: (i) international, (ii) domestic retailers, and (iii) smaller distributor. Large global retailers like PriceSmart and Wal-Mart operate a business model which makes them the price leaders in their markets by taking the cost out of the supply chain, and giving the surpluses to the consumer by way of lower prices. This in turn increases their market share which then strengthens their economies of scale. Most international manufacturers have special arrangements with these global retailers, which allow them to bypass the local distributor’s agreements. Larger domestic retailers, also faced with the challenge of the entrance of global retailers, need to improve their economies of scale in procurement, and decrease their supply chain costs in order to compete. They often consider direct buying, but this requires a different skill set and balance sheet structure from that of a dedicated retailer. Distributors pointed out here that they were making efforts to improve cost. Retailers compete directly with the distributors by developing a portfolio of retailer brands to deliver value and increase margins. This is done by either importing international retailer brands such as IGA, Tesco, Waitrose, Presidents Choice, and/or developing their in-house local retailer brands. The IGA brands are now in stores in over seven CARICOM countries and other larger international retailer brands can be found in at least four states. Several of the larger CARICOM retailers have established their own brands, such as Hi Lo, Super Plus, and Hi Lo Food Stores. This has increased the competitive pressure on the distributors to deliver value through their international brand for the top-end supermarkets, and to source budget brands with which the independent supermarkets can compete against the quality supermarkets. CARICOM distributors are responding to these trends in several ways. 1. Consolidation of Importer Distribution Agencies – Distributors have been consolidating their positions through acquisitions and mergers to strengthen their portfolios of distribution agencies and world-class manufacturers brands so that they could secure a greater share of retailers’ shelf space. In addition, consolidation would increase their volumes, help to reduce operating costs, and dedicate more resources to improving customer service levels. At national levels notable examples of this would be the merger of Spring Garden Foods Inc., Interage Limited, and Supermarket Investments Inc., which traded as MER Bourne together in Barbados to form SBI Distribution Inc. and allow for increased brand representation including the addition of a core of international brands. Similar activity is taking place at the regional level. Examples of this includes Neal & Massey’s expansion of its operations to Guyana (Geddes Grant Guyana Ltd) and Jamaica (Hopwood); Goddard’ Enterprises’ expansion of food distribution in the OECS (see Table 6.1); Grace Kennedy’s establishment of distribution companies in several CARICOM states; and Cirkel’s establishment of an operation in Guyana. The most important advantage in consolidating operations domestically and regionally seems to be an increased negotiating power for the securing of agencies rather than cost improvements. Consolidation is often associated with the establishment of a buying office in Miami to take advantage of the differential pricing that some manufacturers have domestic US customers as

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opposed to customers in export markets and to allow for consolidation of some cargo. However, several distributors have reported that in most instances when full containers are being ordered directly form the manufacturers; there is no cost advantage to moving product through Miami. Another reason for establishing operations in Miami would the inadequacy of cargo service in the region. Box 6.2 explains the challenge faced by fresh produce distributors in this regard. Box 6.2: Transportation Constraints For CARICOM Fresh Produce Trade Exporters of fresh produce to the regional and extra-regional market have often complained about the inadequacy of cargo and related transport service to the regional and extra-regional export market destinations. A pending study commissioned by the CARICOM Secretariat60, which has quantified the volumes of fresh produce trade, has reported that most extra regional fresh produce is sourced from Miami and the UK due to the regular and reliable nature of refrigerated transport service from these sources. In the case of Miami, there are two regular sea-freight service providers (Bernuth and Tropical Shipping Line) which provide weekly or fortnightly service from Miami to nearly all CARICOM countries. In the case of the OECS countries, the Geest Line which transports bananas from the Windward Islands to the UK on a weekly basis also provides a weekly or fortnightly service to the OECS countries. It must be noted that while for most CARICOM states, there is adequate sea and air freight capacity to and from the US, Canada and EU markets, the intra-regional service is limited and infrequent because of a restricted agri-food product supply and the lack of organised marketing programmes around which the freight lines can plan shipping routes. Source: Personal Communication, Vassell Stewart 2. Vertical Integration – Investment in food retail and food service operations to have greater

control of customer base and therefore be in a position to influence the procurement of their distributors brands. This has been a traditional approach of many importer–distributors within their own domestic markets, but several larger distributors across the region are expanding this strategy across the region. The Goddard’s Enterprises experience is profiled in Box 6.3.

Box: 6.3: Goddard’s Enterprises Invests in Vertical Integration in Food Distribution & Retailing

In the 1960s, Goddard’s Enterprises Limited – Distribution and Retail Division owned Goddard’s Food Fair Supermarket. However, in the 1980s, it exited the food retail industry to concentrate on other business units. In the 1990s, it re-entered the sector and pursued a series of strategies to grow its food

60 The Concerns of Shippers and Other Issues that Impact on the Trade and Transportation of Agricultural and Other Products Within the CARICOM Community and Beyond, Vessel Stewart and Mark Forgenie, CARICOM Secretariat, Report pending

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distribution and retailing business, and to improve the ability of its food distribution operations to compete.

Three core strategies were pursued. The company expanded the GEL “Eve” food distributors brand into a leading regional brand by making investments in regional food manufacturing complemented by custom manufacturing where feasible. Second, the company integrated forward by investing in food retail operations across the region to increase share of regional market and build volume for their portfolio of international and regional brands and by extension improve negotiating power with the grocery brand manufacturers. Third, Goddard’s consolidated volume through a regional distribution hub to improve economies of procurement and logistics. This was manifested through the following initiatives: -

* 2001 St Vincent & the Grenadines – GEL Purchases the Diamond Dairy Commercial Centre which includes food wholesale and retail facilities.

* 2002 Barbados – Trimart Inc. -GEL enters into joint venture arrangements to purchase the JulieNs supermarket chain of three stores. The joint venture partners included the two ANSA McALs companies Stokes & Bynoe and Brydens (40 percent), Goddard’s Enterprises (20 percent), RL Seale (20 percent) and Tweedside (20 percent).

* 2002 Grenada – GEL purchases Independent Agencies, which operates the CK Super Cash and Carry. Plans are afoot to expand the operation in Grenada.

* 2003 Barbados – The GEL subsidiary, Hanschell Iniss, opens a cash and carry outlet and convenience store, which retails the brands belonging to the Hanschell Innis distribution agencies.

* 2003 St Kitts and Nevis – GEL, which previously owned the importer–distributor OB Brisbane in Antigua (1980s) acquires OB Brisbane in St Kitts.

* 2004 Grenada – GEL acquires 100 percent interest in Jonas Browne Hubbard which operates two Food Fair supermarkets in St Georges and Grand Anse.

* 2005 St Vincent & the Grenadines – GEL subsidiary Correa’s Hazels opens a Correa’s Mini Mart retailing the brands wholesaled by their import-distribution company to complement their other mini marts in Canouan and Mustique.

Source: Goddard’s Enterprises Ltd.

Box 6.4: Bahamian Food Distribution Consortium Acquires Winn-Dixie SharesIn 1967, Winn-Dixie purchased City Markets stores in the Bahamas and established Bahamas Supermarkets as an independent subsidiary of Winn-Dixie Stores Inc of the USA. In 2005, Winn-Dixie owned a 78 percent share of the company with the remaining 22 percent being owned by 1500 shareholders who trade the stock on the Bahamas International Stock Exchange (BISX). The Company is headquartered in Nassau, Bahamas and in 2005, it operated 12 stores employing a staff of 325 people and generating sales of US$132 million.

Bahamas Supermarkets operates two traditional supermarket fascias, City Market Food Stores which has nine outlets in New Providence and Winn Dixie Stores which has three outlets in Grand Bahama. The average store size is 20,000 SF with sales areas ranging from 5,000 – 40,000 sq ft stocking 15,000 – 25,000 SKUs of which 85 percent is food. The company purchases 00 percent of its product locally from local manufacturers or distributors. Most (95 percent) of the products sold in the store are manufactured and imported either from extra regional sources (50 percent) or from CSME sources (45 percent). Main categories purchased locally include beverages, bakery products, canned foods, chicken, eggs, fruit (citrus) and vegetables (such as tomatoes and onions).

In February 2005, Winn-Dixie Stores Inc., which operated 960 stores mostly in the southern USA, and is the company’s largest shareholder, filed voluntary petitions for reorganization under Chapter 11 of the

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United States Bankruptcy Court. In August 2006,61 a federal bankruptcy court in the U.S. approved the sale of 78 percent stake that Winn-Dixie Holdings had in the company to BSL Holdings Ltd. which submitted the winning bid of US$54 million, beating out rival Bahamian investor group BK Foods in an auction held in the U.S. BSL Holdings, which is reported to have originally included a 40 percent shareholding by Neal & Massy and BS&T62, comprises a group of several leading Bahamian businesspersons, including Craig Symonette, whose local interests include Abaco Markets, Bahamas Ferries and Lucayan Tropical; Anwar Sunderji, chairman and CEO, Fidelity Group of Companies, and includes Franklyn Butler, president of the food wholesaler Milo Butler & Sons as well as a corporate director on several boards including Commonwealth Bank and Vaughn Higgs, president, Nassau Paper Co., and a corporate director of both Abaco Markets63 and Commonwealth Bank. The rest of BSL's common shares will remain publicly traded in the Bahamas. All 12 stores will stay open under their new owners.

Source: Bahamas Supermarkets

3. Distributors Brands – Others, like Grace Kennedy, have learnt from the retailers’ efforts to build brands without owning manufacturing plants and are developing distributor’s brands, which are made by a wide range of manufacturers to the specifications of the Grace Brand. Other traditional distributors were also in the process of developing similar strategies such as Geddes Grant in Jamaica (Nupak brand) and Goddard’s Enterprises (Eve brand). Products are sourced either from investment into food manufacturing capacity as in the case of Goddard’s but also by contract manufacturing as in the case of Grace Kennedy. These brands allow distributors to develop a more permanent response to the international manufacturers brands by making their own proposition directly to consumers. Distributors brands are also better placed to respond to the country specific pricing practised by many international manufacturers, which set different prices in each national market.

Table 6.2: Forward Integration by Selected CARICOM Food Importer Distributors Distributor

Retail Formats Markets

Island Provision Gourmet Supermarket Antigua/ Barbuda Thompson W/Sale Bahamas Supermarkets/ Abaco Markets/ Dominos Bahamas BS&T Super Centre/ Super J’s Barbados/ St Lucia Goddard’s Ent. Trimart/ Food Fair/ Coreas/ Goddard’s Catering Barbados / OECS James Brodie SuperFoods Supermarket Belize Geo. F Huggins Food Land Supermarkets Grenada Laparkan Fogarty’s Supermarket Guyana Grace Kennedy Hi Lo Food Stores Jamaica Boyea Group Aunt Jobe’s Market, KFC SVG

61 http://www.jonesbahamas.com/?c=47&a=8904

62 http://www.thenassauguardian.com/bixex/295986898537319.php 63 http://www.abacomarkets.com/financialdata.htm

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Cirkel KFC, Mambo Grill Suriname Neal & Massy Hi Lo Food Stores T & T

Source: Industry Interviews Smaller retailers and distributors also challenge the distributors by engaging in parallel trading as they seek to become more cost competitive. Two sources of product for parallel traders were identified:

• Consolidators - These are normally large wholesalers in the US with an export division consolidating cargo for manufacturers normally located in large US ports such as Miami, which is strategically located for trade with Latin America and the Caribbean. Most consolidators from the US concentrate on one or two major categories such as meat, fish produce, or specialty foods and only the largest offer a full line. Often size can allow them to compete with manufacturers agents on price. They offer wholesale, distribution, consolidation export management, freight forwarding, and product representation. Larger consolidators also manage their own private labels. Although these consolidators were often participating in supplying domestic firms with product for parallel trading, the major CARICOM distributors did not see them as a major threat. One of them, Associated Grocers of Florida (AGF), has established an operation in Bahamas as a platform to wholesale into the Caribbean and Latin America as elaborated in Box 6.6.

Box 6.5: Grace Kennedy Develops its Distributor Brands as a Platform For Trade in Goods

Grace Kennedy was established in 1922 and has since become one of the largest conglomerates in Jamaica and CARICOM. It has several business units in the food industry in food retailing (Hi Lo Food Stores); food manufacturing – National Processors Ltd. (soups, seasonings and drink crystals), Dairy Industries Ltd. (dairy products), Grace Food Processors Ltd. (Grace, Tropical Rhythms, Grace Tomato Ketchup, Grace canned beans), Grace Food Processors Ltd. (Vienna Sausages, frankfurters, ham and bologna); and the Grace Kennedy Food Trading Division ,which develops, manufactures and distributes a wide range of food and non-food products under the Grace brand, as well as the brands of their international principals. Their distribution network covers strategic markets throughout the Caribbean, Latin America, North America, Europe and Asia.

Grace Kennedy began developing the Grace food brand when it entered the food manufacturing business in the 1960s. With the structural adjustment and market liberalisation programs of the 1970 and 1980s the company sought to promote the Grace Brand to strengthen its export sales to extra regional markets where Jamaicans and other Caribbean peoples lived. Eventually the brand developed cross over appeal in metropolitan and Latin American markets. Grace has three subsidiaries in food distribution:-

Grace Foods & Services Company – GFSC distributes the exclusive range of Grace branded food and non-food products in Jamaica. It focuses on product development, procurement of products in and outside of Jamaica, as well as marketing and distribution of a wide variety of Grace-owned food and non-food items in Jamaica. It sources product from its own manufacturing operations, and from 3rd party contract manufacturing across the CSME and the world, taking advantage of economies of scale in manufacturing across the world while focusing on investing in the long term consumer franchise provided by its own brand. Grace Foods & Service is reported to be the largest food distributor in Jamaica and represents a

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significant proportion of the Grace Kennedy food distribution portfolio. Grace Kennedy has established subsidiaries in Belize and distribution agencies in several CARICOM states. World Brands Services – WBS is an importer distributor with agencies for major international manufacturing brands i.e. non-Grace Kennedy brands for sale predominately in Jamaica. There are plans to eventually trade these brands in CARICOM. Grace Foods International - Exports and distributes Jamaican products under the Grace label to over 25 countries in North America, Europe, Asia, and Latin America. Grace manages the exports of its distribution services through several vehicles: - subsidiaries in Belize, Canada, Haiti and T&T; Joint ventures in Barbados; resident market officers in USA, UK, Central America and the OECS. The development and promotion of the Grace brands for products manufactured by Grace Kennedy (manufacturer brands) and contract packed (distributor brands) for the company is considered to be a key investment in developing a consumer franchise in response to the growing power of the large international brands which are the basis of food distribution service agencies. Source://www.gracekennedy.com/GRACE/blurbFood.htm

Box 6.6: Associated Grocers of Florida Establishes Platform in the Bahamas

Associated Grocers of Florida (AGF) was established in 1944 and is a food wholesaler based in Miami focusing on food products for food retailers. It caries over 30,000 SKUs of which approximately 90 percent are food and 10 percent non-food. Of these 60 percent are Named Brands and 40 percent Private Label. The food sales are roughly broken into Dry goods (40 percent), Dairy products (25 percent), Meat and Seafood (20 percent), Frozen Foods (10 percent), and Bakery Products (5 percent). AGF offers its customers a range of services including Export Management, Cross Dock/Drop Shipment, Broker Services and Distribution Services. The customer base is distributed over more than 42 countries of which the larger number are in the Caribbean and to a lesser extent in Latin, with no one country accounting for more than 10 percent of sales.

In 2006 AGF acquired a 20 acre site in Freeport, Grand Bahamas and invested in a 30,000-square-foot consumer products wholesale/ distribution warehouse with the objective of expanding the facility to over 100,000 sq ft where it will take advantage of the lower tax regime, and developing modern port facilities and shipping lines to establish a platform to expand its business in the Caribbean and Latin America.

Sorce: Adapted from http://www.cbato.fas.usda.gov/Full%20Retail%20Line.doc • Diverters: One distributor pointed to a new type of wholesaler-exporter in the US called

diverters. These firms dispose of extra product ordered by a global retailer, over and above their planned requirement, simply to take advantage of economies of scale, and with no intention to try to retail the surplus product in their own stores. The disposal of the surplus is therefore planned in advance, more often than not to export markets.

Distributors reported that they experienced difficulty with unfair competition arising out of parallel trading, where firms in their regional markets were importing from a wholesaler in an

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exporting country, rather than from the manufacturers with whom there was a distribution agreement. Distributors reported that parallel trading for brands accounted for 5–50 percent of the sales of some brands. In one case in Guyana, the international manufacturer based in the North Atlantic had stopped shipping its products because the same brand made in Latin America and labelled in Spanish was entering the market. Other issues affecting operations would be the poor enforcement of product standard by the Bureau of Standards, in efficiencies at the port.

On the issue of competition from external wholesalers-distributors, most firms expressed confidence in being able to compete with as distributors in the local markets because they had already made significant investments in distribution assets, had developed strong relationships with the trade, and a good knowledge of the market and the working of the public sector.

Distributors operate in several CARICOM States, but this is less for building economies of scale and more for increasing market share across the region to be able to strengthen the relationship with the principal suppliers. Although some savings in marketing and administrative expenses were derived from regional organisations, distributors claimed that it was difficult to achieve economies of scale in logistics, because the international freight system could often deliver cargo to CARICOM states at rates as competitive as consolidating cargo in Miami.

Several distributors had considered developing an export business, but were unable to secure agencies from local manufacturer-distributors to export. Others in Guyana pointed to the opportunities arising out of the proposed Brazil-Guyana Highway to source new products for the Caribbean and to represent Caribbean brands in Latin America.

CARICOM Restrictions on Trade Table 6.3 shows the restrictions on wholesale trade in CARICOM, which is limited to Grenada and Barbados.

Table 6.3: CARICOM Restrictions on Wholesale Trade Country UNCPC Code/Measure Services Affected

Specific Restrictions Summary Description of Measure

Barbados 61 WHOLESALE TRADE SERVICES

Small Business Development Act An approved small business is provided with tax and other incentives

Grenada 61 WHOLESALE TRADE SERVICES

The Act requires the licensing ofexporters of fresh produce and theapproval of the packing house.

The Act requires the licensing of exporters of fresh produce and the approval of the packing house.

Barbados 672 Storage and warehousing services

Small Business Development Act An approved small business is provided with tax and other incentives

Source: CARICOM Secretariat (2006) Once again, the environment for trading wholesale services within CARICOM is relatively open. Grenada’s restriction identified above relates to Market Access while Barbados’s impacts on the national treatment obligation. Conclusion

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Wholesaling in the region is carried out by manufacturer distributors, importer distributors, importer retailers and domestic wholesalers. Importer distributors tend to be more important in the more developed markets in the region which tend to import higher proportions of internationally branded products. Less developed food retail markets such as Belize and Guyana, which produce more of their own food, rely more on local manufacturers and wholesalers to distribute the greater part of food supply. Distributors import on average more than 90 percent of their volumes of which 10–40 percent originate from the CARICOM region. Only a small number of distributors operate in more than one country in the region.

CARICOM distributors are coming under increasing competitive pressure from new international retailers, regional retailers, and consolidator wholesalers out side the region. A growing problem in the region identified by distributors is the growth of “parallel trading”, where regional firms import from a wholesaler in an exporting country rather than from the domestic manufacturer’s agents. In response, CARICOM distributors have been developing several strategies to address growing competition: consolidating the distribution base (BS&T SBI Distribution), rationalizing portfolio of firms, brands and improving service levels (Geddes Grant Guyana and Jamaica), integrating backward, developing retail brands (Grace-Kennedy’s Grace brand, Goddard’s Enterprises–Eve brand), integrating forward (Goddard’s Enterprises acquisitions in food retailing and distribution in Grenada, St Vincent and Barbados and joint venture with Island Grill and franchise with Subway).

Generally, larger distributors considered themselves able to cope with external competition due to their investments in distribution assets, strong trade relationships, local market knowledge, and ability to deal with local public-sector agencies. Distributors were well acquainted with trade in goods issues, but were largely unaware that their sector might be the subject of international services negotiations. The environment for trading wholesale services within CARICOM is relatively open.

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7. DOMESTIC POLICY FRAMEWORK AND RECOMMENDATIONS FOR CARICOM FOOD

DISTRIBUTION SERVICES INDUSTRY Introduction Previous chapters described the composition of the sector in the region and activities and interests of various providers of distribution services. This Chapter seeks to address some of the issues impacting on the policy for the development of this sector. The industrial policy recommended should be crafted in the interest of increasing the competitiveness of the sector and its supply chains and mitigating the negative effects of new competition in the internal market on the economic prospects of local service providers. Summary of Business Activity The review undertaken of this sector identifies significant pockets of dynamism. In the wholesale sector, there are few signs of new foreign investment, although certain regional concerns appear to be increasing functional collaboration as well as consolidating of shareholding through private transactions. This is happening largely outside the public eye, due to the region’s underdeveloped capital markets and the predominance of closely held family businesses in the Caribbean which are not yet publicly listed. Many of these firms do not wholly concentrate on food distribution, but engage in other types of distribution activities as well as non-related businesses as well. In addition, larger CARICOM food producers often have their own distribution channels to wholesale their products. Retailers are also very active in investing in expansion of their holdings, improving information systems, improving human resources, and improving service delivery. The majority of new external trading activity in the Food Sector is occurring in franchising with some equity investments in food retailing and wholesaling. Industry growth is being led by both regional and international franchises. While all exporting activity by these service providers is laudable, the export activities of local franchises should be a particular focus of policy-makers. These franchises develop the Caribbean brand, and can lead to spin-offs in additional tourist arrivals, use of local raw material and manufactured goods, spreading of Caribbean culture, and diffusion of music and other cultural service exports. Technical assistance could be directed toward improving standardization of production methods, marketing (including presentation), upgrading of management practices, creating related documentation, and replication of practices throughout the chain to achieve an improved standard of delivery to the customer. Further, the entire sector could benefit from assistance to comply with international standards such as Hazard Analysis and Critical Control Point (HAACP) through programmes leading to HAACP certification. Product standards can be improved and the region is devoting new attention to occupational health and safety. Frequently, these require new investment by firms to adjust to new legal requirements. Governments in the region also must devote more resources to national and regional standards bodies.

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In the retail sector, three specific phases are identifiable, viz., traditional, modern, and emerging. Each has different characteristics and challenges. This situation is described in some detail earlier in this study. Nonetheless, it is true that major international retailers are largely not present in the region at this time, with the exception of Carrefour in the Dominican Republic despite an open regulatory environment. This situation will not persist for long as incomes rise and trading agreements remove restrictions to business. To date, examples of regional retailers operating in more than one market are rare. This situation is likely to also change soon. Most retailers of a certain size interviewed, suggested that they were interested in new acquisitions or involvement through increasing equity in other regional enterprises. There appears to be a healthy preoccupation with the Caribbean Single Market process, which is viewed as creating new business opportunities. Importantly, retailers report little concern that the new activity expected as a result of CSME implementation will lead to declining home market shares and consequently declining revenue. Their concentration on the regional market means that little focus is being placed on foreign markets. Overall, governments tend to be open to foreign investment in the Distribution Sector. Most generally offer available incentives to foreign investors. No instance was found where the Distribution Sector was specifically targeted for new foreign investment in contrast to other sectors. As far as employment is concerned, the sector makes a significant contribution in this regard. Quantifying the exact contribution or trends over time is complicated by data deficiencies. Some statistical agencies in the region have not been able to collect such statistics for several years, one in as long as 10 years. The information on employment in this report has therefore been largely garnered from private sector operators. Case for Food Distribution Industry Policy The food distribution services industry in CARICOM is a significant player in the food supply chain for resident food consumers and for consumers of the tourism industry, which is itself the largest sector in the Caribbean. The food distribution services sector, even with our limited definition, is a large employer of persons within the region. Our estimates suggest the food distribution services sector embraces over 17,000 firms employing well over 112,000 persons in the region with an annual turnover of over US$5.6 billion. • Furthermore, the distribution sector has a significant domestic impact. Inefficiency can

lead to increases in final prices to the consumer, hindrances in downstream processing especially for export, and losses in revenue for governments through foregone economic activity. Employment can also be enhanced and the skills of workers in the field can be enhanced. The distribution sector is also responsible for ensuring that the food that reaches the consumer is both safe and of an acceptable quality.

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• The food distribution sector also is important in terms of development of small and medium-sized companies. These companies are either directly involved in the sector or act as key components in the distribution supply chain.

Supermarkets and QSR chains are becoming dominant channels for food retail and food service distribution in the Caribbean region. Quick service restaurants also play their part, by among other things, creating linkages with other services and goods. For example, Prestige Holdings has increased capacities and brought new business to a range of goods producers and services suppliers, from carpenters to architects to primary food producers. Primary food producers are especially important as local food production is enhanced. As suppliers gain quality approval from the global franchisor, they gain a status that will allow them to supply to other QSRs including externally-operated formats, thus increasing export revenue to the food sector. More of this is occurring, as CARICOM tariff walls remain high and local QSRs become more comfortable with the quality of the locally-sourced inputs. Examples of this phenomenon in the case of Wendy’s, KFC, and Subway were provided in Chapter Five. This all encourages local agricultural production and stands as a counterpoint to the growing food import bill. The sector also allows for the servicing of the huge numbers of tourists arriving in the region including those who arrive via the cruise ship sector. The points above support the assertion that the sector needs specific policy guidance and initiatives to be developed by the CARICOM Member States in a collaborative manner. The objectives of the industrial policy advocated here are: - Development of Export Opportunities: • Indigenous QSRs - The development of more Caribbean QSR formats able to compete

effectively against international brands within the CARICOM region for the business of local consumers and tourists, and to take advantage of opportunities to export services to North America, Europe, Latin America, and Asia.

• International QSRs & Supermarkets - The development of increased Caribbean menu

items, the certification of more local agri-food manufacturers and input service suppliers to the international QSRs operating in the region, as a basis for selling Caribbean agri-foods and services into the global QSR supply market. Likewise the listing of agri-food products and suppliers in the international supermarkets to allow them to access their larger global networks.

Improving Food Distribution Service Competitiveness: • Pan-Caribbean Food Distribution Enterprises - Promotion of the new opportunities

created by the CSME and the development of regional capital markets. • Food Distributor Service Providers - Preparing local food distribution enterprises to

cope with expected new entrants into the sector due to increasing market attractiveness of the Caribbean and the commitments on access that may arise from current and future international trade negotiations. Improving the productivity of human resources and increasing in employment in the sector. Improving uptake of technology in the sector.

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• SME Food Distributor Service Providers - Improving business opportunities for small and medium-sized CARICOM food distribution service firms (small food retailers, fresh food vendors, specialty retailers and small food service operators)

• Strengthening the Agri-Food and Non-Food Supply Chains - Promotion of local

supermarkets as a major and growing outlet for value added agricultural production alongside efforts to develop exports markets.

• Developing Capacity of Suppliers – This is to meet the higher procurement standards of

modern supermarkets. • Improving Capability – This is to quickly develop value added agri-food products. Constraints Industry stakeholders have identified a number of constraints to optimal performance of the agri-food distribution sector, many of which were explored in Chapters 4, 5 and 6. These can be summarized as follows: • Gap in practices and policies between indigenous and international quick service chains. • Competitiveness challenges. • Insufficient knowledge of new export market opportunities. • Supply-chain issues including backward to the source of agricultural products and port and

customs inefficiencies. • Social issues such as crime. • Labour challenges. • Dated food safety regulations vary by country and are overseen by under-funded and

under-staffed agencies. • Lack of focused Government support, including from statistical agencies. • Restricted advocacy activity. Domestic Policy Responses and Recommendations Improve Industry Competitiveness In order to improve the competitiveness of the industry in the region, there is need for focused training to service providers. The human resources active in the sector have to be enhanced at all

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levels. Governments have to demand better statistics to assist in decision-making. Specific support should be provided to smaller operators to allow them to safeguard their positions in market and fill their niche. A key element will be improving the linkages backward to the producers, making it more efficient and responsive to market needs. Transportation and support infrastructure (e.g., Ports and Airports) have to be improved and customs authorities must play a more facilitative role. Industry players themselves have to organize themselves better, cooperate to mutual gain, and improve their advocacy arrangements and performance. In the society at large, governments have to address issues such as crime, which impacts consumers, service companies, and employees. Gather Better Statistics and Enhance Routine Reporting There is a pressing need to provide a much better data set on the sector both for the development of public sector policy, and to support largely, the development of SME enterprises. Poor data result in policy-making that is not informed by the realities of the sector, and likely has contributed to the dearth of national policies in the sector. In view of the fact that businesses in the region do not have a tradition of contributing to data collection, governments in the region should investigate means employed by other jurisdictions to ensure accurate and regular reporting. One means to consider might be to link regular reporting to the continued receipt of benefits by the firm or provide incentives for on-time return of survey requests. This might best be accomplished through a regional project in light of the challenges for resources (human, financial and technical) faced by the smaller national administrations in the region. The data to be collected should include establishment, employment, exports sales, value-added, and GDP statistics on the following sectors and sub-sectors. For the restaurants and QSRs, it would be useful to have them broken down into full service, quick service, viz., chicken, Chinese, Caribbean, Pizza, Sandwich, Burger, Fish, and Other. Such classifications would be useful in the Household Budgetary Surveys when assessing expenditure on food consumed at home versus food consumed away from home.

Table 7.1: Statistics Required of CARICOM States for Food Distribution Services Sector

Sector Sub-Sector

Food Retail Supermarkets & Superstores Wholesale Clubs & Discount Supermarkets Modern Convenience Stores Counter Shops and Mom & Pop Shops Fresh Markets & Specialty Retailers–F&V, Meat, Fish, Dairy, Bakery, Beverages Street Vendor of Grocery/ Hucksters

Food Service Independent & Hotel Full Service & Casual Dining Restaurants Quick Service Restaurants – Segregated by Main Menu Type Caterers Street Vendors

Food Wholesale Importer Distributors

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Service Manufacturer Distributors Domestic Wholesalers

Logistics Service

Maritime Service

Food Distribution Competitiveness Enhancement Facility

In the distribution sector, there must be a continuous emphasis on improving the quality of the service to the end user, while improving productivity and reducing costs. While international brands get strong support for benchmarking and process improvement, this is not available for local brands. It may therefore be useful to consider replication of the Jamaica Promotions Corporation’s proposal to develop a service incubator facility to focus on providing:

• International Benchmarking/Operational Retooling: Improving Distribution Service

Competitiveness of indigenous formats.

• New Food Distribution Service & Product Development Facility: Promoting New “Indigenous” Services and Product/Menus for all operators to develop new services and products especially those which have export potential.

The idea would be to focus on new local start-ups and new ideas in international formats, and provide technical and business develop support in product development, branding, management techniques, menus, etc. In addition, the programme concessions to import duties for equipment for retooling and the development of new products should also be available to the service sector.

Identify Food Distribution Export Opportunities

Apart from the focus on domestic opportunities, including within the Single Market, exporting activity outside of CARICOM can bring significant benefits to local firms. On the other hand, many operators in distribution (e.g., local food distributors) have little knowledge of export markets for their services, except perhaps those in the North Atlantic for which information is in English and easy to obtain. Specific information is needed with respect to the costs of services, activities of competitors, market requirements, private or public standards, key players in the market, market specificities, and legal frameworks.

It may be useful for Governments to support further public and perhaps even more confidential work to capitalize exploration of export opportunities. This point should arise in all trade negotiations where access for distribution services is being sought as regional Governments often lack capacity in this regard.

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Adopt Franchise Best Practice

As can be seen from the practices of international quick service brands and Caribbean food QSR’s in the US, franchising can be an important vehicle to drive growth. Further, it could be a means of increasing the exports of Caribbean fast food operators. It might be useful for the regional industry and governments to develop best practice franchise contracts such as are promoted by the International Franchise Association64 to support and encourage indigenous QSRs to utilize the business for to grow their operations. These involve elements such as: -

• Control of the Products or Services the Franchisee can Sell – as a means of maintaining quality control and a uniform image.

• Control of Operating Assets, Goods, and Services Utilized and Sold by Franchisees – for quality control of final services and products and uniform image, ensuring high quality inputs and as source of profits.

• Control of the Franchisee's Business Premises – an option used by some franchisors to keep ownership of the premises of a franchisee even if the franchisee changes.

• Grant of Exclusive or Protected Territories – to facilitate sales and promote orderly market development.

• Control of the Geographic Scope of the Franchisee's Business.

• Exclusive Relationships.

• Restricted Rights of Transfer – in order to maintain the control of the franchisor

• Expiration Clauses – for orderly transitions and setting preconditions for continuations. Address Food Distribution Human Resource Deficiencies

Many interviewees noted that an inadequate and underproductive human resources base exercised limiting effects on the performance of the industry. Some respondents in several countries reported that staff (line and managerial) turnover, particularly in the quick services sector, was high and affected their growth prospects. At the lower staffing level, firms faced competition from Government work programmers, including export hotel programmes, and were faced with poor work habits. At higher levels, the shortages in the area often led to poaching of skilled managers. The sector would benefit from collaborative programmes between the industry and government, similar for those that exist for the tourism sector, to classify, train, and certify workers in basic food preparation and handling, packing, meat-cutting skills, customer service skills, food safety and first aid skills, and to reward the certified workers with higher levels of remuneration.

64 www.franchise.org

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Retool Traditional and Specialty Food Distribution Formats: to Mitigate Impact of Modernization on Small Traditional Retailers and Specialty Retailers The impact of supermarket concentration on the smaller food distributors is well documented. Already the modernization of the food retail and food service sectors is impacting on smaller- and medium-sized businesses in some member states, where the construction of larger supermarkets has led to localized supermarket saturation and the closure of smaller groceries. Also, there is a clear trend for consumers to buy high-margin fresh and chilled foods from modern supermarkets and lower-priced fast food from large QSRs, rather than traditional local food provider thereby displacing many SME distributors. The food distribution industry plays an important role in creating opportunities for employment and SME entrepreneurs to participate in the industry. Several countries have recognized the transformation and have implemented programmes to train and support SME food distributors to improve their service and product offerings, to differentiate themselves from the larger supermarkets. Such initiatives are often complemented by public sector investment in municipal markets to make them cleaner, and user-friendlier, and include elements of food service and entertainment to attract consumers back to the market. Such programmes can be closely linked to developing the tourist offering of member states. CARICOM member states need to revisit the role of the SME food distributors in the larger economy, and develop specific programmes to promote the development of specialty retailers and fresh markets as a viable alternative for some producers to supermarkets. This would involve revitalizing the fresh produce markets by increasing their accessibility, cleanliness, levels of supporting sanitation, and parking facilities. Such markets should be seen as an important contribution to the tourism product. Implement Regional Standards In the region food safety standards tend to be in need of modernization. Further, implementation by providers and enforcement by authorities often tend to be lacking. Adhering to highest international standards will facilitate exporting and enhance the ability of economic operators to cope with the private standards that are increasingly in vogue. Here, there is a clear need for additional development assistance as well as for stronger regional collaboration within CARICOM. The establishment of CROSQ is a significant step in this regard and its activities should be strongly supported by regional governments and private sector operators. Strengthen Agro-Food Distribution Backward Linkages The linkages between primary agriculture, secondary food manufacturing, and food distribution services were outlined briefly in the first part of this Chapter. Food distributors are gradually moving away from traditional methods of sourcing goods through markets, e.g., engaging the farmer directly. Policy makers need to recognize that, as has been shown (Reardon et al. 2002) in Latin America: (i) “supermarkets will be the major force in the agro-food economy” even over and above that of

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non-traditional export agriculture; (ii) they can be the engines of market development; (iii) to worry about their effects on the agri-food system in terms of exclusion of small firms and farmers; and (iv) to help the latter meet the challenges of supplying supermarkets where this is not possible, and encourage the development of retail alternatives for them where it is not. This also applies to the fast food chains.

To ensure that the local agricultural sector continues to draw more benefit from the activities of the distribution sector, specific programmes should be developed, similar to the efforts at Agro Tourism Programmes in some CARICOM States, to help small farmers meet the volume, quality, safety, and dependability levels demanded by the retail sector, particularly larger supermarkets and QSRs, faced with consumers demanding fresh and well-presented products. As these business relationships evolve, it will be necessary to ensure that farmers can negotiate acceptable contracts with wholesalers, supermarkets, and QSRs. Training should be provided in contract negotiations for farmers to enable them to protect their interests. At the same time, Governments should consider the possibility of facilitating the contract and payment process by developing laws to require prompt payment to farmers for delivered products. Argentina introduced such laws in 2002. Then assistance could be provided to farmers to ensure that the produce the required standards of quality, food handling, transportation, and delivery.

Governments can provide agricultural extension services to small- and medium-sized farmers and improve rural transportation infrastructures. Interventions to increase production in rural areas should be market-driven, and should involve understanding the needs of the private procurer in terms of supply issues to ensure those needs are met by producers of agricultural goods. In this regard, impediments in the supply chain should be identified and addressed through specific programmes to improve yields, and increase use of modern business practices and other support services such as certification and logistics. In addition, member states need to consider the potential role of the promotion of competition though effective competition policy. This is especially important as it has been shown that supermarket concentration can increase significantly in short spaces of time.

Improve Port Productivity

Port inefficiencies affect service delivery as much as goods production, although the latter tends to be stressed in most discussions. Wholesalers, retailers, and fast-food franchises also suffer the effects of inadequate infrastructures, antiquated equipment, poor management, corruption, and outdated procedures. Customs authorities tend still to focus on penalizing transgressions. While enforcement retains its validity, the focus should not be at the expense of efficiency. Further, customs authorities must take on a facilitative role in the current era of global competition. In many countries, these officials are both over-worked and underpaid, and undesirable, if predictable, results occur. It is recommended that specific future work be conducted to assess the effects of and provide solutions for logistics services.

Increase Use of Electronic Commerce The food distribution sector has not neglected the use of electronic commerce that is changing the face of business worldwide. Websites are increasing as part of the marketing mix of firms in the sector. Other instances of relevance are the growing use of Customer Loyalty cards, use of

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the website for promotions, and beginning of the use of the Internet to relay/receive fast food orders (Domino’s). An interesting phenomenon is occurring in Jamaica with Super Plus using electronic orders to gain immediate access to remittances from abroad. Orders are taken online from abroad for food purchases and delivery to relatives in Jamaica. Business-to-Business transactions are also growing. Some firms in the retail sector actively participate in procurement activities. Several others are putting in place software and hardware to engage in electronic data interchange along the supply chain. More of this activity should be encouraged. Governments have the responsibility to address inefficiencies in their telecommunications infrastructures that raise costs and deliver sub-optimal data transfer rates. Financial institutions should upgrade their services offering full e-commerce support at reasonable rates. Firms must ensure that they apply appropriate technological interventions to increase their competitiveness through improved service delivery. Reduce Crime Increased levels of crime, more so in some countries than others, impact negatively on consumer confidence and purchasing. Crime affects the distributor by minimizing options for delivery of service to the consumer and by extension, limiting the throughput, productivity, and profitability of the service production assets. Many food retailers across CARICOM have noted, for instance, that higher criminal activity in that country had led it to abandon plans for 24-hour operation as employees were hesitant to work in the dangerous early morning hours and consumers were also less likely to seek such services at odd hours in the current environment. Several QSRs have pointed out that, when comparing their operations to others across the world, they have significant profit-loss line items for security, which do not exist in many other parts of the world. Crime therefore affects the profitability of food distributors and any domestic policy for the sector must make provision for same. Promote Industry Organization and Effective Advocacy There are few instances of sector cooperation and organization although members of the retail sector, in particular, seem to recognize the benefits to be derived, including increasing influence on national and regional trade policy making. At the moment, the Trinidad and Tobago Supermarkets Association is the talisman in this area and is actively developing public sector/industry programmes to improve the manpower and skills in the industry.

Box 7.1: Supermarket Association of Trinidad and Tobago65 The Supermarket Association of Trinidad and Tobago was formed in 1968. During the early years of the Supermarket Association, there were only small groceries like the United Grocers, Ice House Grocery, and Allum’s Grocery in San Fernando. With the advent of the Neal and Massy Group of Companies, HI-LO became the biggest chain of retail outlets selling foodstuffs and they changed the concept of groceries into supermarkets with wide aisles in their supermarkets, massive car parking facilities, and specialist employees like packers, warehouse attendants, and cashiers.

In the late 1980’s, a number of young, educated, and forward-thinking individuals joined the supermarket industry eager to make their mark and made the supermarket business more competitive. They revolutionized the supermarket industry by introducing North American and European standards like radio and television advertisements and specialized commodity sales. Today, the membership of the 65 www.supermarkettt.org

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Association stands at over 200 members composed of large, medium, and small supermarkets with a stated mission of the Association of "Empowering our Stakeholders through genuine support and added value". Its objectives are: -

• To lobby as a strong economic group, to ensure that government provides the necessary laws and regulations for the effective operations of the supermarket industry.

• To provide training through workshops and seminars, so as to have members informed of the latest technologies and systems in a changing economy.

• To provide assistance and monetary support to individuals and organizations as may be deemed worthy

The Association is funded by membership fees and employs a staff of two people. Its work programme focuses on development of industry specific skill competency classification, training and certification, strengthening supply chain relationships, information dissemination, collaborative promotional programmes, and industry advocacy.

Table 7.3: Status of Industry Associations CARICOM State Association Status

Bahamas Supermarket Association Dormant Barbados Distributors Association Dormant Jamaica Jamaica Restaurant Association Dormant. Interest in resuscitation Suriname Chamber of Commerce & Industry Sub Committee Dormant. Interest in resuscitation T & T Trinidad and Tobago Supermarket Association Active. T & T Hotel Restaurant & Tourism Association Active. QSRs not involved.

Source: Field Interviews They are in regular dialogue with the national government, mainly about food prices, and maintain a website for information purposes. However, there have been industry organizations in the Bahamas, and one QSR operator in Jamaica was planning to revive a dormant association. Nonetheless, most distributors tend to be members of national Chambers of Commerce, most of which have not excelled in trade policy advocacy, an area in which national Manufacturers’ Associations have tended to be more active. The national chambers tend to espouse protectionist views related to the distribution sector, from which many of their members come. Nearly all food distribution service firms were very much aware of the WTO negotiations but only as it affected their business through the trade in goods. They were unaware that there was a services agreement that might impact on their business. They expressed interest in being better informed and most indicated a willingness to participate in follow up meetings. Similarly, there is no regional organization coordinating, researching, and providing advocacy for the sector. National organizations must first be established and specific institutional support for such activities should be provided, including accessing technical assistance from Europe, other developed markets, and from international organizations.

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An opportunity perhaps resides in the establishment of national Coalitions of Service Providers that could assist institutional development as well. Coalitions have been established in Barbados, Guyana, Trinidad and Tobago, and St Lucia. Future Work Further work is required to inform strategies to develop the sector and these will include some of the following areas. The following specific projects are worthy of consideration: • Regional Food Distribution Service Industry Workshop - A regional workshop

comprising representatives from both the industry and the public sector should be organized by the CRNM. One possibility might be to link it with a future meeting of the Technical Working Group on Services to consider the findings and recommendations of this report and to develop a programme of work for the sector.

• National Food Distribution Services Sector Profiles and Sector Policy Development –

Each CARICOM state should conduct an industry assessment and set policy objectives and a development strategy for the sector using both industry interviews and more complete national statistics. CARICOM states need to cooperate in pooling ideas to develop common regulatory responses and competitiveness improvement programmes to the challenges posed by distribution services bearing in mind the crucial role played by distribution services in market development and the yet unexplored potential for exporting distribution services. The national assessments should include greater attention to smaller retailers and sub sectors not addressed in this study: • Food Retail – Smaller retail formats, cafes & bars speciality food vendors, speciality

fresh food vendors and markets. • Food Service - Full service restaurants, street vendors and caterers. • Food Wholesale – Domestic wholesalers and commission agents. • Other Food Distribution Services subject to negotiations - logistic services and

maritime services.

• CARICOM Services Statistics Project – The existing CARICOM Services project should assess and take on board the recommendations of this study and develop a common framework and reporting format for capturing food distribution services information and reporting same to ministers at the national and regional level on a timely basis. This may necessitate an expansion of the current programme.

• Food Distribution Services Export Market Intelligence - The work of this study suggests

that the markets for Caribbean food services are experiencing significant growth in the North Atlantic countries, driven largely by formats developed by the larger Caribbean diaspora. CARICOM needs to stimulate and support the efforts for greater trade in food distribution services within the CSME and extra regionally by commissioning a series of studies on the export markets for agri-food distribution services. While such work is likely to be of marginal benefit to the largest firms in the region who can afford to do independent research, it would be of significant benefit to indigenous SME firms and to policy makers developing strategies for the growth of the sector.

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• Speciality Fresh Food Vendors & Markets – This study would involve the selection of a basket of member states to examine the likely impact of changes in the food distribution services industry on the traditional wholesale and retail marketing channels, with a view to proposing strategies to modernize markets in the face of continued market liberalization.

• Agri-Food Supply Chains Impact Assessment – This is outside the scope of this study, but

is crucial to the sustainable development of our economies and the resuscitation of the agriculture sector in our economies in the face of huge food import bills, declining agricultural productivity and rural poverty. The study could select a basket of representative agri-food supply chains and member states, and examine the likely impact of changes in food distribution services industry on chains with a view to developing programs to facilitate improvements in national and regional supply chain competitiveness. Products may include: • Fruit & Vegetables; • Chicken; • Fish; • Bread & Pastries; • Condiments; • Groceries: Packaged Foods & Beverages; • Packaging; • Logistics; and • Information Services.

Conclusion The benefits of an efficient distribution system include wider consumer choice and safety, reduced transaction cost and consumer prices, stimulation of small- and medium-sized enterprise development, strengthening of commodity and service supply chains, and export development. An example of the latter is the increasing use of local products in international food service franchises. The domestic policy environment in the region suffers from poor data collection and this must be improved to aid policy-making and market development. Nonetheless, competitiveness could be improved through a food distribution competitiveness enhancement facility, improved food market intelligence, human resource development programmes to improve the skill base available to the sector, and by supporting SMEs competitiveness. Work on improving logistics is urgently needed especially in the areas of intra regional transport and port inefficiencies, which affect efficiency in food distribution. Crime affects the profitability of distributors particularly in the retail sector by restricting options for service delivery and adding costs, e.g., for security and insurance. Electronic commerce and greater use of information technology can improve competitiveness. There is evidence that firms recognize these benefits and these efforts should be supported by improvements in national telecommunications infrastructures, legislative development, and additional affordable e-commerce service offerings by financial institutions. Industry organization is minimal but growing, and in need of institutional support. Of particular importance, will be the development of backward linkages to the agriculture sector, light manufacturing, and service sectors through special programmes to help SMEs, especially but not limited to farmers and agri-processors meet volume, quality, safety, and dependability

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levels demanded by larger supermarkets and QSRs. Other areas of training suggested include contract negotiation and agricultural extension services. An industry policy for food distribution services will contribute to realizing the potential contribution of the sector to the CARICOM economies. This study has revealed that the sector generates significant economic activity, plays an important role in the development of the informal entrepreneurs and SMEs, and has the potential for growth in exports of food distribution services and related agri-food products. However, growth prospects will be affected by lack of a coordinated policy framework, both nationally and across the CSME. The elements mentioned above are not intended to be comprehensive and other observers will no doubt identify gaps. However, these areas did arise in the consultations conducted during the course of this study as of some immediate concern to stakeholders in the sector. In some cases, the action must emanate from the sector players themselves. In all cases, a collaborative approach involving dialogue between the private and public sectors is indispensable and member states should seek to promote and foster food distribution industry organizations as part of the efforts to build their coalitions of service organizations. Resolving these issues will also equip the sector better to respond to the challenges of the negotiations on international trade in services in which the region is involved.

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8. RECOMMENDATIONS FOR CARICOM PARTICIPATION IN SERVICES TRADE

NEGOTIATIONS Introduction This Chapter considers global restrictions on distribution services trade and makes recommendations for CARICOM’s involvement in negotiations to liberalize trade in services, multilaterally, bi-regionally, regionally and bilaterally. Offensive and defensive interests are identified and specific recommendations made related to food distribution services. Global Trade Restrictions Overall, as seen in the previous Chapters, the CARICOM region’s regulatory structure with respect to food distribution services is underdeveloped especially in relation to that of other Members of the World Trade Organization. A review of GATS schedules of Member States with respect to the distribution sector has identified the following restrictions. Table 8.1: Examples of Distribution Services Restrictions

Product Exclusions

Geographical Limitations

Economic Needs tests (economic, public convenience, necessity)

Nationality or Residency Requirements for Establishment

Monopoly rights for distribution of certain products

Joint Venture Requirements

Foreign equity limitations Exclusion of Cooperative Stores from Foreign Equity Participation

Tax measures

Burdensome Administrative Procedures

Residency requirements for Managers

Source: UNCTAD • Economic Needs Tests – Economic Needs Tests are used by Governments to assess the

effect of new market entrants on an existing market. Frequently, these ENTs are conducted in a non-transparent manner with the prospective new entrant being unaware of the considerations that went into a negative decision to a request for market entry.

• Monopolies – Some Governments grant monopolies for the distribution of certain products

in their territory. These are often the result of long-standing practices that favour certain entrenched interests in a market. In these circumstances, the consumer is faced with restricted choice and higher prices (on both the good and the service) than would normally obtain in an environment in which service providers are competing for market share.

• Foreign Equity Limitations – These are limitations with respect to Mode 3 trade that

restrict foreign participation in an enterprise to a certain defined percentage. This can

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prevent the investor from establishing and operating in a manner in keeping with commercial considerations and can therefore hinder new investment in a market.

• Tax measures – In some cases, foreigners are required to pay higher taxes than local

competitors. This distorts competition in a market. • Residency requirements for Managers - Such measures call for Managers to be resident

in a market for a specified period of time before being able to participate in the direction of a firm. This restricts the options available to the ownership of a firm to select the best persons to manage their investment and can have an effect on profitability.

• Geographical Limitations – Foreign entrants may be allowed to participate in a market,

but may be limited to certain parts of a national territory or may be required to service a particular part of the national territory in addition to a more desired location.

• Nationality Requirements – Participation in an activity may be reserved for nationals of a

particular states or participation on the Board of an enterprise by a certain number of nationals may be prescribed to the investor.

• Joint Venture Requirements – A foreign investor may be able to establish an enterprise

but may be required to enter into a joint venture with a national of the receiving state. Such limitation on the form of an enterprise is perceived to promote local involvement, but may not be in keeping with the interest or the practice of the foreign investor.

• Exclusion of cooperative stores – Foreigners may not be able to invest in cooperatives.

This may also apply to stores run by trade unions as well. • Burdensome administrative provisions – These add to the cost of market entry and

participation in a market. In other parts of the world, Competition law is considered an effective means of regulating anti-competitive business practices of wholesalers and retailers.. Such laws are in place in Barbados, Jamaica, and Guyana, while a similar law was presented in the Senate in Trinidad and Tobago in May 2006. These laws have the same coverage and the same broad aims, but their development did not follow the same format and they could not be considered to be harmonized. Concurrently, CARICOM states have approved the establishment of a regional competition authority in Suriname. The intention is for the authority to begin its work in 2007 in accordance with the terms of the Revised Treaty of Chaguaramas. The food distribution sector in the region is relatively open to foreign investment although not much has actually occurred. Investors in this sector generally receive national treatment. The Bahamas, not part of CSME, has restricted the number of foreign supermarkets (although Winn-Dixie has had majority ownership of Bahamas Supermarkets Ltd until 2006) and included restrictions in their opening hours not applicable to national competitors. In addition, in the area of franchising, the Bahamas has an extensive licensing regime, favours joint ventures in franchising, and allows local individuals and operators to launch objections to prospective new market entrants. Other countries in the region as a general rule, apply such regulations as they have in a non-discriminatory manner, although, as indicated in previous Chapters a few instances

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of restrictions as related to distribution of food were identified by Member States in the CSME framework. CARICOM Participation in International Trade Negotiations Apart from current negotiations with the European Union on an Economic Partnership Agreement, CARICOM has only participated as a group in one international negotiation involving proposed commitments in trade in services, the FTAA. In that aborted negotiation, CARICOM Member States considered submitting a common offer such as the European Union was able to accomplish in the Uruguay Round of Multilateral Trade Negotiations. CARICOM was not able to reach this level of consensus and submitted a consolidated offer which consisted of Member States determining the content of their individual offer, which was then mechanically combined into a single CARICOM offer. In the FTAA negotiations, St Lucia was the only CARICOM Member willing to offer access to its market in this sector: - Commission Agents’ services, Franchising, Wholesale trade (Pharmaceuticals, Fuels, and related products). Two of the sector commitments above would have included the food sector. The actual offer was not as extensive in terms of market access and national treatment as it would not have provided new access in either Mode 3 or Mode 4. In the regional context, in its preparations for the EPA negotiations the CRNM has preliminarily included Distribution Services among those sectors considered to be Sensitive. This position is to be confirmed by consultations being undertaken by the CRNM to prepare for market access offers for the Economic Partnership Agreement negotiations. Requests made by some CARICOM countries at the WTO to developed Members could form the basis for a common CARIFORUM request to Europe in these negotiations. In summary, CARICOM seems to be hesitant to include Distribution Services as a sector for liberalization in international trade negotiations. In spite of the lack of international trade commitments, its countries have relatively open, non-discriminatory environments for distribution services trade in general, including for food distribution services. Export interests pursued to date have been minimal. Furthermore, the sector is characterized largely by an absence of regulations in comparison to other parts of the world. Specific recommendations for external services trade negotiations follow later in this Chapter.

Sensitivity of the Sector When considering participation in international trade negotiations and in particular determining the structure of market access commitments, it is traditional to identify both offensive and defensive interests. Defensive interests are largely derived from an assessment and appreciation of the sensitivity of a particular sector. In goods, the decision-making is assisted by the availability of trade and economic data. In services trade, severe data limitations exist as a result of a number of factors including poor systems of information collection, lack of legislative requirements (including guarantees of confidentiality), non-compliance by providers with voluntary requests for statistics, and poor company record-keeping particularly in small enterprises, and misunderstanding of the nature of services trade. It is therefore extremely difficult to test and determine the sensitivity of a particular sector or sub-sector. In the case of distribution services, all of these inhibiting factors are present. Action by governments to

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improve statistical inputs to decision-making through increased resource allocation to statistical agencies is highly recommended. Nonetheless, it is necessary to seek to assess at some level the sensitivity of Food Distribution services in the Caribbean. It is clear though that among public officials in the region there exists a widespread perception that this sector is “sensitive”. In this context “sensitive” tends to mean that there is a concern that the economic performance or interests of domestic economic operators in the sector would be compromised by new market opening to foreign service providers. In a number of cases officials find it difficult to discern levels of sensitivity between the various segments of the Distribution sector declaring all to be of high sensitivity. Where the importance of efficient distribution systems to overall economic efficiency is understood and national deficiencies (in terms of the number of economic operations, market share, and consumer choice) identified or perceived, the small size of our economies is thought to militate against any effective result from market liberalization. Of course, this is not necessarily the case in practice nor, even if it is so, is the current status meant to endure permanently. In fact, one has seen the progression of the industry in several countries as a result of opportunities derived from increasing customer bases (including foreign tourists), increasing incomes leading to greater purchasing power, and increasing efficiencies in the area of logistics even if problems remain in this area. In some cases, among national officials, there is concern about the possible loss of identity (cultural) due to a proliferation of foreign food franchises. There is general concern that new market entrants with greater financial and other resources will lead to market displacement of smaller indigenous operators. In the wholesale and retail sector, these local operators consist both of “old” firms held by traditional economic elites as well as newer and lesser-resourced firms whose ownership extends to the middle and lower economic classes. No such clear determination is discernable among private sector operators. Here the responses differ by sub-sector, country, size of the enterprise, nature of the shareholding, and commitment to exporting orientations. Some elements of the franchising sub-sector consider that effective planning on their part, including acquisition of desirable sites, understanding of local management challenges and customer loyalty, make them capable of withstanding new market entrants. Others, with more local bases (service offerings including local foods and using local raw material and emerging local franchises), consider that they could benefit from more time to consolidate their positions and refine their business practices and implement strategic plans. In fact this is not new. In the past, Island Grill had outlets in the UK and the US. Further, in at least one case, expansion outside the Anglophone Caribbean is currently underway. Other service providers in franchising are actively pursing other such opportunities. Further, the inroads being made in the US by the Caribbean format suggest that additional business opportunities are possible. Commission agents’ services are generally considered to merit protection from trade officials. These tend to be nationals who are able to parlay their local knowledge and linkages to the benefit of the foreign food exporter. An outline of the sensitivity of the sector by Mode of Supply and sub-sector is suggested below. It is worth recalling that Mode 1 relates to Cross-border supply, Mode 2 to travel by the consumer, Mode 3 to investment to provide services and Mode 4 to movement by individual service providers. High sensitivity is suggested in circumstances where regulations are lacking or where there are a number of small or entrenched local operations which would be threatened by

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new foreign competition. Low sensitivity implies a higher national capability to withstand competition or extremely limited local capacity. Of course, these are broad positions that need to be tested and applied more specifically to particular sub-sectors of food distribution services. Table 8.2: Distribution Services Sub Sector Sensitivity

Sub Sector Mode Description Sensitivity

Commission Agents' Services Mode 1 Mode 2 Mode 3 Mode 4

Cross-border Supply Consumption Abroad Investment Movement of Persons

High Low High High

Wholesale Trade Services Mode 1 Mode 2 Mode 3 Mode 4


High Low Low Mid

Franchising Services Mode 1 Mode 2 Mode 3 Mode 4


High Low Mid Low

Retailing Services Mode 1 Mode 2 Mode 3 Mode 4


High Low Mid Low

Considerations in Making Commitments on Food Distribution Services The fact that WTO Members have generally been wary of binding liberalization in the sector is borne out by the limited nature of multilateral commitments in the Distribution Services sector. As is usually the case, developed countries appear to have been more encompassing in their scheduling. In addition, they tend to be more selective in their scheduling than developing countries. This may be the result of greater understanding of the liberalization process by developed countries, as well as a policy choice on the part of developing countries to address national market deficiencies. The overall situation of minimum commitments is scarcely set to improve based on the offers made in the current negotiating round. Less than one-third of the offers contain new market openings in the sector. Not surprisingly, most of the offers come from the developed world. Eighty percent of new developed market offers but only 22 percent of developing market offers would continue the liberalization process in the distribution sector. Despite improvements proposed a number of restrictions will still be in place such as: -

• The inclusion of additional services not listed in the Central Product Classification;

• Product exclusions;

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• Limitations on the allocation of distribution rights and imposition of mandatory export marketing strategies;

• Limitations on the number of licenses;

• Requirement to establish a juridical person;

• Export requirements for full equity participation; and

• Economic needs tests. Developing countries, in particular, continue to be confronted by limitations with respect to the entry of individual service providers through Mode 4. Developed country commitments in the distribution sector continue to refer to restrictive horizontal limitations on access and national treatment in this potentially lucrative mode of supply. In many developing and developed countries the degree of openness bound in the WTO is not representative of the actual degree of market opening on the ground. Developing countries, in particular are being called on to exceptionally open to foreign service providers, including in the Distribution sector. In considering future commitments in Distribution Services at all negotiating levels, CARICOM should be prepared to carefully consider the various sub-components of the sector. This statement can easily apply to all services sectors where top-level (4-digit CPC) commitments have been taken, in some cases apparently inadvertently. The result may have been unintended market opening. In converse, looking only at the broadest level can result in a lower level of commitment than is necessary, through the exclusion of categories of service provision which are in short supply, supplied inefficiently, or could benefit from additional competition. In the case of food distribution services, a commitment should be a deliberate act and not the unintended consequence of a high level commitment of the whole sector. If food distribution services are to be liberalized, the Member State can be even more specific by assessing further whether its commitments should relate to distribution of raw or processed products. In the case of the Caribbean, consideration of the linkage with regional production as well as the structure of regional imports of food, the liberalization of raw product distribution would seem to be less problematic at least in the wholesale sector. All elements of retail distribution are likely to continue to be deemed sensitive as these can impact on the smaller service supplier more directly. The high levels of activity in the Caribbean in franchising is supported by a number of factors including the strong tourism sector, which is the largest sector in the Caribbean and internationally competitive, changing tastes of nationals in the region, greater involvement of women in the formal work force, and the cultural influence of the US and the resulting demand for the fast food alternatives promoted in film and television. If commitments in food distribution services are to be considered, CARICOM should factor in use of the approach of phasing. Phasing in of commitments is a tool of specific relevance to developing countries in application of the principle of progressive liberalization, but has been used in practice by the Caribbean to some extent, with respect to telecommunications services. This might be especially relevant at negotiating levels below the multilateral where the direct trade-off benefits may be both more apparent and more negotiable either within services and investment or between services and investment and other negotiating subjects. With investment being the dominant form of provision of these services, this could involve a time-limited commitment for the introduction of competition in a market. Use of this approach calls for a

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more discriminating approach to scheduling commitments as well as an ability to identify benefits across negotiating subjects. Moreover, CARICOM should be mindful that member states are at different stages of development of the retail markets and industries, and that this would affect the attractiveness to inward trade in services, and the length of time required for phasing in of any commitments

Possible Offensive Interests of CARICOM An effective negotiation approach should start with an identification of both defensive and offensive negotiating interests. The former may be more effectively determined by trade officials who will assess on a broad basis, the effect of liberalization on trade policy and national development. Offensive interests, on the other hand, are most effectively determined by private sector operators and then relayed to trade negotiators for implementation. Instances have been legion of negotiated commitments having no reference to commercial realities, interests, and capabilities. Clear identification of offensive negotiating interest is facilitated by clear lines of communication between national negotiators and the private sector and by effective organization of sectoral interests on the part of the private sector. Based on our discussions with the private sector in the region, food distributors services in the region can be separated into several categories. The largest food regional retailers have been exploring equity investments in food retailing in other CARICOM states, but as yet none has traded in services outside of their home market. They report that in this regard there is ongoing probing for further opportunities. The largest QSR operators, led by the international brands but with pending action by the indigenous brands, who anticipate some slowing in market growth in their segments, are in the early stages of trading in QSR services in CARICOM and the greater Caribbean. Several of the latter have confirmed that speculative thought has been given to investments in Central America, whose economies may be similar to those of CARICOM and acquiring more of their own type of franchises in the southern USA. Beyond this, the wider international market is seen generally to be too complicated, competitive or costly to exploit. In addition, information on markets is lacking and perceived as difficult to obtain in a cost-effective manner. For the most part, many, especially the small to medium distributors in all states and the larger ones in less developed retail markets, are still focused on exploiting investment opportunities in their own markets. Importer/distributors, as opposed to manufacturer/distributors, have traditionally, and continue to operate out of several CARICOM states, but largely not for the purposes of trading within the CARICOM region, or deriving economies of scale in distribution or procurement, but rather to increase their share of the regional market. Some importer/distributors have expressed an interest in exporting more to the Single Market or even beyond, but have difficulty in sourcing local product to do so. Commission agents export by providing services for foreign firms in their home territory. Export interests tend to be confined first to the Single Market where market consolidation is a key strategy, then to the wider Caribbean, including overseas territories and regions, and then to the Americas. In the latter case, this applies as well to areas of the United States and Canada with Caribbean populations.

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E-commerce is only now beginning to emerge as a consideration in the region. Its development has been hampered chiefly by poor quality and costly telecommunications, inadequate levels of computer usage, a lack of supportive legislation, dearth of financial facilities for the service provider to some extent the result of a lack of demand, and initial hesitancy on the part of the Caribbean consumer to use these new facilities World Trade Organization Nonetheless, despite the above, two CARICOM countries appear to have determined offensive interests in the distribution services sector and have attempted to address these interests at the WTO. Dominica and Grenada have made requests of the US, Canada and the EU. Table 8.3 CARICOM requests on Distribution Services CARICOM Country

Sub-Sector of Interest WTO Member Requested

Summary of Content of Request

Dominica Wholesaling Retailing Franchising Commission Agents

United States Temporary entry for individual service providers in Mode 4

Dominica Wholesaling Retailing Franchising Commission Agents

European Union Removal of Residency and nationality requirements. Full liberalization of Modes 1, 3 and 4 Temporary entry for individual service providers in Mode 4

Grenada Franchising Commission Agents

Canada Temporary entry for individual service providers in Mode 4


United States Temporary entry for individual service providers in Mode 4


European Union Removal of Residency and nationality requirements. Bind cross-border supply Temporary entry for individual service providers in Mode 4

Source: CRNM These request indicate an export interest by the former country in all four areas of distribution services. In contrast, Grenada’s interest is confined to Franchising and Commission Agents. More will be said on these target markets later. The Americas In light of the private sector interests expressed above, particular interest could be paid to opening markets within the wider Caribbean and Central America. A particular focus is suggested with respect to franchising to support the exporting interests of a number of regional providers of such services. This might be particularly relevant to regional franchises. It is noted however, that international franchise holders may be restricted to certain markets on the basis of their commercial agreements. Consideration of the WTO commitments of possible trading partners allows for a determination of MFN access issues. Where possible, reviewing the offers made during the current negotiations at the WTO presents a picture of what the immediate future might look like upon conclusion of

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the Doha Development Round. Finally, some of the interested markets have concluded other trade agreements and these should be reviewed to appreciate current conditions of competition. Table 8.4 illustrates existing WTO commitments by non-CARICOM Latin American countries. Latin American countries have made few commitments in the sector within the GATS framework. Other than Panama, no Central American country has committed this sector to date. This reflects Panama’s position as a major transshipment point for goods in this part of the world. Other Central American countries clearly preferred other sectors for initial liberalization

Table 8.4 Distribution Services Commitments by Latin American Countries in GATS Country

Sectors Committed Mode Liberalized

Brazil Wholesale, Retail, Franchising, Mode 3

Ecuador Wholesale Modes 2 and 3 Mexico Wholesale (Food and Non-Food), Retail (Food,

non-Food, Motor Vehicles,, Other non-food) Modes 1 and 2 . Full investment in Mode 3 with exception of union and cooperative stores

Panama Commission Agents’, Wholesale, Franchising Modes 1-3 except for Franchising (Mode 3) where retail services must be provided by nationals

Peru Wholesale (extensive including specific Foods, Beverages), Retail (Foods, Beverages)

Mode 3

Source: WTO Services Schedules Of the commitments, there is a clear preference for encouraging investment through open Mode 3 commitments. The schedule of Brazil is the most expansive although short of meeting the expectations of developed countries as evidenced by the plurilateral requests made at the WTO (Attached as Appendix). It should especially be noted that Brazil has not committed to liberalizing Modes 1 or 2, thus not committing on the E-Commerce issue. Mexico’s and Peru’s schedules target wholesaling and retailing of food and beverages with Peru being more specific and concentrating on encouraging new investment. In Panama’s case, the inclusion of franchising is noted, but this is complicated by the Mode 3 limitation which could benefit from some clarification of the extent to which it complicate hiring practices by reaching into the mid-management levels. Any attempt to penetrate the Central American market must also take into consideration the new competitive environment created by the CAFTA-DR Agreement. This will be discussed below. The Dominican Republic As far as the Dominican Republic is concerned, there is an existing bilateral Free Trade Agreement with CARICOM which includes Chapters on Services and Investment but no services or investment liberalization commitments. The Chapter on Services in the Free Trade Agreement may need to be clarifited or amended before liberalization negotiations can begin. This involves essentially to cater for the use of the positive list in terms of liberalization modality. The negotiating strategy of CARICOM centres around a proposal for a phased opening starting from existing GATS commitments. With some revision, including some quicker sequencing of liberalization the approach could cater for those countries willing to proceed

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cautiously while still allowing for the negotiation of commercially relevant commitments. To date, at the WTO, the Dominican Republic has made commitments only with respect to Food Serving Services and Beverage Serving Services, areas linked to the Tourism sector. In these areas the Dominican Republic has not bound Mode 1 in terms of either Market Access or National Treatment. While Modes 2 and 3 are fully committed for Market Access, the Dominican Republic reserves the right to treat foreign service suppliers less favourably than its nationals. Mode 4 commitments are limited. Specifically the restrictions declared by the Dominican Republic above will have to be considered in CARICOM’s discussions with the Dominican Republic as well as the larger issue relating to Law 173. Law 173 provides extensive protection for distributors in the Dominican Republic, providing for heavy penalties in case of termination of contracts and including indemnification against future losses. Under the CAFTA, decisive steps were taken to address concerns relating to distributor or agent agreements involving U.S. providers of services or goods. The agreement, in the Chapter on Services, adopts a case-by-case approach that ensures that normal contract law applies. It also clarifies termination, encourages the use of binding arbitration for the settlement of disputes, and removes any automatic presumption of exclusivity. As a result of the CAFTA-DR, this sector has been fully opened for food distribution services, including franchising. The sole exception being the Dominican Republic which, in addition to its Side Letter on Law 173, has listed the following specific restrictions to cross-border services and investment:

• Only enterprises organized as stock companies (compañias por acciones) under Dominican law may operate as deposit warehouses for the care and conservation of imported goods.

• Coffee for export must be packed in locally manufactured sacks.

• Only the Instituto de Estabilización de Precios (INESPRE) may distribute domestically produced sugar in the Dominican Republic.

• Only the Consejo de Administración Salinera may distribute marine unrefined salt produced in the Dominican Republic.

In that Side Letter, the Dominican Republic agreed:

• To exclude new covered contracts from the provisions of Law 173 unless the contract explicitly states otherwise and sets out norms for covered contracts similar to those provided for the other CAFTA states

• To limit indemnification where Law 173 applies and where disputes arise encourage binding arbitration

• That goods or services exporters would not be required to pay indemnification where a contract was terminated for just cause or not renewed for just cause

• For exclusive distributorship rights to be provided the contract must explicitly provide for such rights.

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The CAFTA-DR commitments provide significant new market entry to United States service providers. Once fully implemented they will be clearly advantaged in the market vis-à-vis other regional and international competitors. With this agreement in place, new multilateral commitments from this region are unlikely. Similarly, providers from Central America and the Dominican Republic are also capable of benefiting. The capabilities and interests of franchising firms in Central America and the Dominican market would have to be investigated in order to assess the practical effect on this benefit on regional trading interests. Of the CAFTA-DR restrictions listed above, only the first seems relevant to CARICOM interests. CARICOM therefore should clarify the process required to become “stock companies” for the benefit of prospective wholesalers. The lack of restrictions relating to franchising is notable. As a positive list is now being used, it will be incumbent on CARICOM negotiations to ensure that Distribution Services are listed for liberalization at the outset. Regarding Law 173, this complicated matter is of direct relevance to this sector as well as of interest to CARICOM exporters of goods. The existing provisions of the CARICOM-DR Free Trade Agreement exempt contracts in instances where both the CARICOM and the DR exporter agree. There is disagreement whether this is adequate protection under the law in the Dominican Republic. Certainly CARICOM would have preferred something more definitive applicable in all cases, and sought a similar exclusion to that included Chapter on Services in the United States under the CAFTA-DR Agreement. CARICOM should settle for nothing less than the outcome achieved by the US described above in its market access negotiations with the Dominican Republic. Though the relationship with the US is based on extensive trading relationships, the new relationship with CARICOM is not as economically important but is no less “special”. Indeed, the Dominican Republic is negotiating the EPA negotiations as a partner with CARICOM. Further, the argument used in the CARICOM-DR negotiations that providing such protections as desired by CARICOM was constitutionally impossible has now been definitively contradicted. Central America CARICOM has not yet negotiated a free trade agreement with the countries of the Central American Common Market (CACM). An agreement between CARICOM and Costa Rica is in the early stages of implementation, but does not include substantive Chapters on Services and Investment. As mentioned above, the CACM countries have taken on no multilateral commitment in Distribution Services. It is therefore left only to review their CAFTA commitments in order to assess the market access conditions. Costa Rica, El Salvador and Guatemala still apply to CARICOM laws similar in application to the Dominican Republic’s Law I73. No other instances of restriction to Distribution Services have been found in the CAFTA Schedules. With respect to the US, though, these countries have agreed to a number of measures of application or non-application that will have the effect of improving the conditions for U.S. providers of Distribution Services or for the distribution of US products in these countries. These are summarized as follows: -

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• Costa Rica:

− Abrogates from the date of entry into force of the CAFTA Articles 2 and 9 of Law 6209 (and its regulations) and item b of Article 361 of the Commercial Code, Law 3284.

− Commits to enact new law that would preserve basic principles of contract law, ensure that exclusivity rights are provided only as a result of a explicitly stated contract, allow for termination of contracts on specific termination dates or by each party giving ten months advance notice.

− Agrees to binding arbitration in contracts (as long as both parties agree) where no express provision for settlement of disputes is laid out. Maintains any vested rights under Articles 2 and 9 of Law 6209 but encourages parties to renegotiate new contracts in line with the new legal regime when it is established.

• Guatemala:

− Already abrogated its dealer protection law (Decree 78-71) but agrees to encourage parties to renegotiate contracts still subject to that decree.

− Also agrees to promote use of binding arbitration especially in cases where the amount of indemnification is not provided for in the commercial contract and specifically determines what is meant by the termination date of a contract.

• Honduras:

− For contracts signed after the entry into force of the agreement, confirms that a national of Honduras need not be designated as agent or distributor in order for US goods or services to be sold in Honduras; agrees that contracts will not be renewed automatically.

− Agrees that other than in cases of a contract providing for an exclusive relationship goods and services can be sold in Honduras without reference to existing concessionaires.

− Removes the requirement for payment of indemnity for just cause terminations or on expiration of the term of a contract.

− Clarifies that determination of damages in the case of termination of a contract without just cause shall be based on contract law or the specific commercial contract.

− Agrees to use arbitration to determine the quantum of indemnification payments if this is not outlined in the commercial contract.

− Decree Law 549 will apply only if the agent, distributor or representative is registered with the Ministry of Industry and Commerce and the contract was entered into while the Law was in effect. Indemnity under this Law shall be calculated as of the date of entry into force of the CAFTA.

• El Salvador:

− Agrees that Articles 394–399B of the Commerce Code will not apply to any distribution contract that a U.S. person enters into after the entry into force of the CAFTA, once the contract so provides.

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− Agrees not to apply Art. 397 (indemnification) once a contract makes specific provision of indemnification

− Confirms that exclusivity must be specifically stated in the contact.

− Agrees to promote use of binding arbitration of disputes. This should serve as a model for any CARICOM agreement with these Central American countries. The general offensive thrust should be to seek identical treatment to that given to the US. In light of the failure of the Doha Development Round one possible avenue of approach has been closed, at least for the immediate future. Even with an active DDR, the extent to which CARICOM could have sought and reasonably expected to receive new Distribution commitments from Central America is uncertain. Indeed, offensive interests in this area might always have been more likely to succeed at a level below the multilateral one. If this reasoning is accepted, the question then emerges as to where an engagement with Central America might be pursued. The best response would be at the bi-regional level. If CARICOM is to seek to pursue offensive interests with Central America it should seek a new trade agreement, possibly building on the CARICOM – Costa Rica free trade agreement. It is notable however, that no timetable has been set by CARICOM for the services negotiations called for under the CARICOM – Costa Rica Free Trade Agreement. Further, 2007 is likely to be taken up with concluding the EPA negotiations and possibly new negotiations with the US and Canada. Canada and the United States Negotiations with Canada and the US are likely to be initiated during the course of 2007 to replace the existing unilateral preferential arrangements which relate only to trade in goods. Adding a services component to future agreements should be a priority. At the same time, it will be a challenge to negotiate suitable preferences for CARICOM. In light of the past experience of these countries both are likely to insist on use of the negative list. The significant results of the CAFTA-DR Agreement in respect of Distribution services have already been discussed. Canada, though, as evidenced by its agreement with Costa Rica, has been less aggressive than the US in seeking new market access for services providers. The use of the negative list poses some difficulty for some CARICOM Governments. Generally, this approach is thought to facilitate liberalization at too quick a pace and without sufficient control for the developing country. Discussion of the merits of this position is outside the scope of this study. However, given the position of CARICOM Member, the first likely offensive tactic could be to seek to get these countries to use a Positive List for CARICOM. Arguments to be used could include the underdeveloped regulatory environments, structural impediments to implementation of commitments, the challenges in the process of creating a Single Economy and its linkage with key services sectors such as financial services, the small size of the region’s economies and the example of negotiating an EPA with Europe using a positive list. Elements CARICOM should address from the point of view of offensive interests in future negotiations with Canada are:

• The exclusion of Commission agents’ services with respect to food and tobacco;

• The exception of agriculture and live animals, fisheries and alcoholic beverages from the offer on Wholesale services;

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• The exclusion of liquor, beer and wine from Retail services;

• Alberta’s restrictions in franchising; and

• Mode 4 opening in all sub-sectors. The US has fewer specific restrictions to address. Multilaterally, it is open for all Modes, except Mode 4, for all the sub-sectors of Distribution Services. Less expansive commitments are made with respect to wholesale and retail of alcoholic beverages. This sector should be addressed in any future negotiation as well as increased access in Mode 4. A further issue is the fact that the commitments undertaken at the federal level in US bilateral FTAs (such as the CAFTA) do not override any restrictions that may exist at the state level in the United States. Europe Assessing possible offensive interests for CARICOM in respect of food distribution services is best undertaken by reviewing the extensive revised offer made by the EU at the WTO. The EU is undertaking bi-regional negotiations with MERCOSUR and if such information could have been obtained it might have provided an indication of the willingness of the EU to address restrictions in this sector at more restricted level than the multilateral and with a negotiating partner of greater export capability a priori than CARICOM. This EU revised WTO offer reveals both additional benefits available multilaterally as well as some remaining issues for consideration in the EPA context. Improvements to the present EU schedule at the WTO include the following: -

• All restrictions on Mode 3 access for Commissions’ Agents have been removed

• In the same sector there appear to be some improved access for Business Visitors and Intra-corporate transferees;

• In wholesale services, in Mode 3 restrictions on national treatment have been removed and five countries have declared full market access; and

• In retail services, clarity is provided on the Economic Needs Tests in Belgium, Cypress, Denmark, France, Italy, MT, Portugal and Sweden and restrictions on National Treatment in Mode 3 are removed.

On the other hand, some important restrictions remain. France, for example, with respect to Commissions Agents maintains nationality restriction for traders’, commissioners and brokers working in 17 markets of national interest. In these same markets there is no Mode 1 access. In Wholesale services, wholesale services for beverages are excluded and limitations remain in all Modes including Mode 4. In retail services, economic needs tests are still in place in the above-mentioned countries, alcoholic beverages are not included in Ireland, and restrictions on individual service providers remain. In franchising, Mode 4 restrictions remain although the sub-sector is the most open for the other Modes with the exception of three Member States. From the above, it is clear that there is therefore scope for improvement in the Distribution services offers at the EPA negotiations. Requests to Europe should therefore include:

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• Improved Mode 4 access in all sub-sectors

• Removal of sub-sector exclusions

• Removal of all Economic Needs Tests;

• Improved access for cross-border supplies; and

• Clarification and then elimination of the French restrictions on Commission Agents. Possible Defensive Interests of CARICOM Because of the sensitivity of the sector discussed above, there is more interest in defensive reactions to trade negotiations in general and to consideration of the approach to be taken to the specific requests from negotiating partners. There is no stated interest in meeting these requests. In this scenario, the EU requests, reiterated in broad terms in the EPA negotiations, would have to best be considered in the regional arena rather than the multilateral one. As mentioned in an earlier Chapter, the EU has made requests for new access in Distribution Services (Wholesaling and Retailing) to the MDCs of the region, Barbados, Jamaica, and Trinidad and Tobago. In one sense this hesitancy on the part of CARICOM is understandable. The regulatory structure in the region is not well developed. Little focus is placed on the distribution sector in the development of new legislation. At the same time, modernizing existing laws and implementing new regulations for the distribution services sector would likely provide Governments with more impetus to liberalize. Further, the negative list requires listing of discriminatory measures in one Annex and Future Measures in another. The inclination of CARICOM is likely to be to seek to place the Distribution Sector in the Future Measures Annex. This suggestion would be given additional weight by the poor regulatory environment in CARICOM discussed above. This could be appropriate if no substantive improvement in access is provided to the EU in the EPA negotiations. In considering offers, apart from assessing the effect on the domestic market, countries also tend to consider their offensive interests in that particular sector. An interest in exporting would tend to encourage closer consideration of requests for market liberalization, thus opening a discussion of the balancing of potential interests. In food distribution services the lack of specific export requests supported by active lobbying by the sector facilitates the defensive or non-participatory instincts of officials in the region. In addition, there is less flexibility offered for pitting export access in one sector against market opening in another. This is exacerbated as CARICOM countries are not generally active in the cut and thrust of services negotiations at the multilateral level in particular and are thus less experienced in this regard. The role of safeguards also has to be considered seriously. CARICOM has argued that work on safeguards in services should be conducted because it will add to the trade defence arsenal of small states. This, it is suggested, would then provide more comfort in making new concessions. Bearing this is mind, it follows that CARICOM governments would be more willing to consider requests for access in distribution services, including food distribution, or any other sector for that matter, if an acceptable safeguard mechanism could be developed. The lack of progress at

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the multilateral forum of developing new disciplines to the GATS is notable, even as the difficulty of doing so is acknowledged, and mean that CARICOM is unlikely to venture into new areas of market opening in sectors considered to be sensitive. Inclusion of a safeguard mechanism in services agreements in regional and bilateral negotiations is more likely and possible and thus could be a corollary to new market opening. Recommendations for the World Trade Organization Negotiations At the World Trade Organization, the perceived sensitivity outlined earlier in this Chapter has been demonstrated by the fact that no CARICOM country prior to the Doha Development Round had made commitments in this sector. In the current round of initial services offers only Guyana has offered the Distribution Sector at the WTO. It is notable that the offer covers all wholesale services not only wholesale services related to the food sector. Table: 8.5: Guyana’s WTO Offer66

Wholesale Services

Market Access National Treatment

Mode 1 Unbound* Unbound* Mode 2 None Unbound Mode 3 None Unbound Mode 4 Unbound except as

in horizontal commitments Unbound except as in horizontal commitments

Source: Government of Guyana Barbados, Jamaica, Trinidad and Tobago, Guyana, St. Kitts and Suriname have received requests from WTO trading partners in Distribution Services. Requests have come from the EC, Japan and the United States. Interestingly, a few CARICOM states apparently identified offensive market interests and submitted request to other WTO Member States. Target markets were the United States, the European Union and Canada. Requests came from the OECS states of Grenada and Dominica. These requests are outlined in Table 7.3. It is noteworthy that franchising is considered an area of potential export interest by these countries. This tends to be substantiated by some of the findings of this report, although existing capabilities of these countries in this sub-sector have not been substantiated by our information. Any future commitments at the multilateral level by CARICOM must start with consideration of the offer already made by the Government of Guyana, should it be maintained. This is because as the Single Market is implemented and related elements of the Single economy come into place, there is greater desirability to moving toward a common CARICOM schedule. This is a medium term objective but one that should be actively pursued now. This therefore requires careful scheduling of national commitments at the WTO during the rest of the Doha Development Round. If the offer of Guyana is maintained, CARICOM states should, in keeping with the recommendation for more specificity above, first determine whether they are comfortable with

66 TN/S/O/GUY, Initial Conditional Offer of the Government of Guyana, Pg. 4.

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its broad coverage of all wholesale services, including wholesale food distribution. This may be appropriate for Guyana but others may consider it prudent to be less expansive. A multilateral commitment by more CARICOM countries including food distribution services would likely concentrate on Mode 3 access and thus would signal a willingness to receive new investment to the widest international community. On the other hand, it would take the sector out of play for other negotiations at which perhaps more directly relevant concessions could be extracted in return. It is for this particular reason that restraint is recommended at the multilateral level on food services commitments with the possible exception of franchising, using the terminology of the w.120 list. In franchising, as in other services, the Caribbean governments apply few restrictions to Mode 2 trade. Therefore this is the least sensitive of the sectors that are technically feasible. It is suggested that a sector should not be listed if the offering country is not willing to grant full national treatment. An unclear commitment with respect to national treatment, particularly in Mode 3 is unlikely to have a positive effect in encouraging new trade activity.

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Box 8.1: Distribution Services Plurilateral Request at the WTO67

THE COLLECTIVE REQUEST - In order to achieve a progressively higher level of liberalization of trade in distribution services, we request that [ ] make new and improved commitments adhering to the following objectives: (a) Sectoral Coverage: All sub-sectors (commission agents’ services, wholesale trade services, retailing

services and franchising). (i) Flexibility on an individual WTO Member basis would be discussed concerning the exclusion of a

limited number of sensitive products. Any such exclusion shall be clearly specified in the Schedule of Specific Commitments.

(b) Modes 1, 2 and 3: Provide market access and national treatment with no limitations, except that, on an

individual basis, flexibility would be discussed concerning: (i) A transition period for a maximum of [X] years. (ii) A limited number of non-discriminatory economic needs tests with clear, specific main criteria as regards mode 3. (iii) A limited number of other exceptions.

(c) Mode 4: Provide market access and national treatment with no limitations beyond those indicated in the

horizontal section, ensuring in particular access for Business Visitors and Intra-Corporate Transferees. (d) Scheduling of Commitments When scheduling commitments in this sector, Members’ attentions are drawn to the agreed objectives in

paragraph 1f(i) of Annex C to the Hong Kong Ministerial Declaration that Members should ensure, to the maximum extent possible, clarity, certainty, comparability and coherence in the scheduling and classification of commitments through adherence to, inter alia, the Scheduling Guidelines pursuant to the Decision of the Council for Trade in Services adopted on 23 March 2001.

Applicable CPC numbers by sub-sector:

• Commission agents’ services - CPC 621, 61111, 6113, 6121 • Wholesale trade services - CPC 622, 61111, 6113, 6121 • Retailing services - CPC 631, 632, 61112, 6113, 6121, 613 • Franchising - CPC 8929

For this element, the United States of America is not a requesting Member, but shall be deemed a recipient.

It is noteworthy though that QSRs continue to be confident that they can compete with inbound international QSRs if they employ slow penetration programs which would normally be associated with franchising. Rapid penetration of the market with high equity investment in stores as opposed to franchise investment – i.e. 10 stores a year for 4 years to shake out the market would pose more difficulty for local QSRs. Active competition policy instruments (nationally and regionally) could be a means of ensuring fair market activity. In addition, the region has to pay increasing attention to the discussion on Logistics and maritime services ongoing in the plurilateral request framework. This sector, critical to all economic activity, has an especially high impact on the distribution sector. The plurilateral request on Logistics made during the current WTO Services negotiation is worthy of consideration in all of CARICOM’s negotiations. 67 Source: http://www.tradeobservatory.org/library.cfm?refid=79991

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Of direct relevance is the collective request on Distribution Services in Box 8.1. Though not directed at CARICOM the request contains some elements which are worthy of note. First, there is recognition of the need to take a phased approach to liberalization, mirroring the recommendation of this paper. Second, there is a proposal for a limited number of product exclusions in regard to sectoral coverage. Our suggested approach is similar but there would likely be a resistance to determining the meaning of “limited number”. A more appropriate consideration would be the development priorities of the state. Finally, the Mode 4 request is limited in keeping with the perspective of the requesting states to themselves restrict additional opening in this Mode. CARICOM would seek a much deeper commitment. Recommendations for Regional Negotiations Generally, it is considered that it is at the regional level that specific new commitments in food distribution services should be seriously considered by CARICOM. Here there is the possibility for more direct and attributable benefits to be gained in the markets of greater export interest, actual and potential. In engaging developing markets, it will be noted that each negotiating partner will expect to receive similar treatment in terms of access to our markets. In any event, CARICOM stands to benefit little from discriminating against any of these markets if the objective is primarily to gain new investment. An important consideration with the developed markets will be the mode of liberalization where the US and Canada clearly prefer a negative list approach, whereas negotiations with the EU are being conducted using a positive list approach. This will require additional care in framing market access commitments. The Dominican Republic In the case of the Dominican Republicthe negotiating strategy of CARICOM has not yet been settled but a proposal has been made for a phased opening starting from existing GATS commitments. With some revision, including some quicker sequencing of liberalization, the approach could cater to the needs of those countries willing to proceed cautiously while still allowing for the negotiation of commercially relevant commitments. It is also important to remember that Carrefour, one of the top three global retailers already has a presence in the Dominican Republic. It could seek to use the DR presence as a platform to enter CARICOM. This consideration should not prevent CARICOM from making a substantive offer to the Dominican Republic. If the approach taken by the CARICOM Secretariat is approved (phased opening based on a consolidation of existing commitments) there will be no offer on Distribution Services. This is not tenable given the proposed Model Schedule for the EPA to follow later in this Chapter. The approach taken is as follows. The starting point is the offer of Guyana at the WTO although it is suggested that careful consideration be given to improving the offer with respect to National Treatment moving to full liberalization in the course of the negotiations. Member States with restrictions in these sectors would be able to list them here. With respect to Wholesaling there is scope for improving the National Treatment Provisions. All Member States would be able to include their own amendments with respect to the Limitations on Market Access and National Treatment in the four modes of supply. In addition, a wide commitment encompassing all Wholesale services is proposed in respect of the Dominican Republic encompassing Distribution

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of all types of material, including processed foods. The same approach is suggested for Commission Agents and Franchising. Table 8.6: Model CARICOM Schedule for Negotiations with the Dominican Republic (Food Distribution Services) Service Market Access National Treatment Wholesale Services Mode 1 Unbound* Unbound* Mode 2 None Unbound Mode 3 None Unbound Mode 4 Unbound except as in Unbound except as in

Horizontal commitments Horizontal commitments Commission Agents Mode 1 None None Mode 2 None None Mode 3 None None Mode 4 Unbound except as in Unbound, except as in Horizontal Commitments Horizontal Commitments Franchising Mode 1 None None Mode 2 None None Mode 3 None None Mode 4 Unbound except as in Unbound, except as in Horizontal Commitments Horizontal Commitments European Union The market access phase of the Economic Partnership Agreement negotiations is due to begin in September 2006 and CARIFORUM’s initial offer should be reviewed by Ministers and Heads of Government in July 2006. In addition, the EU has suggested to CARIFORUM that it would welcome receipt of a list of requests. There is also the matter of the requests made by the EU in the DDR. The EU revised offer at the WTO is the appropriate starting point for consideration of this particular matter. The EU’s requests to Barbados, Jamaica, and Trinidad and Tobago should be considered in the context of the process of developing a common CARICOM offer. Given the sensitivity of Distribution Services, a substantive common offer on Distribution Services is unlikely. In these circumstances the Model offer below is recommended for consideration. The Model schedule above would focus on the areas of less sensitivity and higher potential for influencing more efficiency regarding food distribution. It is emphasized that this relates only to Food Distribution Services. CARICOM countries would do well to consider inclusion of other distribution sectors that may have a positive effect on performance of other sectors of the economy as well. The Model allows Member States to determine the scope of their commitment and circumscribe it, if it is so desired. With respect to Wholesale Trade Services, consideration should be given to removing all limitations other than Mode 4 to maximize possible benefits to the economy. In

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contrast, the Franchising offer is the maximum realistically possible, reflects the status quo and would cause minimum disruption in most, if not all, Member States. Table 8.7: Model CARICOM EPA Schedule Code Sector Market Access

Limitations National Treatment Limitations

Rationale

6221 Wholesale trade services of agricultural raw materials and live animals 62211 Wholesale trade services of grain, oilseeds and oleaginous fruits, seeds and animal feed 62212 Wholesale trade services of flowers and plants 62213 Wholesale trade services of unmanufactured tobacco 62214 Wholesale trade services of live animals 62215 Wholesale trade services of hides and skins and of leather 62219 Wholesale trade services of agricultural raw materials n.e.c.

1) Unbound 2) Unbound 3) None 4) Unbound, except as in horizontal limitations

1) Unbound 2) Unbound 3) None 4) Unbound, except as in horizontal limitations

Raw material distribution is less sensitive than processed food distribution avoiding entrenched distribution firms in Member States. In addition, this can have a direct influence on improving supply-chain efficiency

89 Franchising (Restaurants)

1) None 2) None 3) None 4) Unbound, except as in horizontal limitations

1) None 2) None 3) None 4) None, except as in horizontal limitations

CARICOM firms have some exporting capability that needs to be promoted. In addition, there is already extensive franchising activity underway in all our markets. Note the refinement of the Sector Description

Canada and the United States It is recommended above that CARICOM consider providing some new opening to the European Union and realistically this level of opening will also have to be provided to the United States and Canada. If a negative list is used in these latter negotiations, as is likely, it will be difficult to transpose the positive list commitments that may be granted to the EU. An approach for consideration could involve: -

• Placing Retailing and perhaps Commission Agents in a Future Measures Annex;

• Liberalising Franchising with Mode 4 restrictions identified for the EU incorporated in an Annex on Movement of Persons; and

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• Using an approach of a Side Letter for committing only the Services related to wholesaling of certain agricultural raw materials and animals.

These markets are likely to grow in importance to service providers from the Caribbean in this sector as the progress of Caribbean quick service formats in the US detailed earlier in this paper, gains pace as it hopefully will, in the near future. Observers have repeatedly pointed to the market opportunity provided by the growing populations of Caribbean nationals in the United States and Canada. One interesting element, worthy of future study, is the inclusion of Puerto Rico under the scope of the future commitments by the US. Future Work Further work is required to inform strategies to develop the sector and these will include some of the following areas: - Logistics & Maritime Services – Supply-chain efficiencies are key to distribution efficiency, as clearly demonstrated by the Wal-Mart chain. At much smaller levels such as obtained in the Caribbean, incremental increases in efficiency can improve profit margins, stakeholder equity, and contribution to economic growth. These sectors need to be assessed at the regional level for the purposes of subsequent negotiations as several WTO members have indicated an interest in negotiating positions on these services.

Conclusion Services negotiations can play a role in improving the efficiency of food distribution sectors by facilitating new competition and investment in targeted strategic areas in the sector, while providing a cushion for the smaller more vulnerable industry sub-sectors. Participation by the region in international services negotiations has been minimal, influenced by determination of officials that the sector is sensitive and would be negatively affected by new foreign entrants. Businesses in the food distribution sector do not have a uniform opinion on this matter and there is interest in exporting services particularly in the food service (franchising and catering) sector. It is likely that as the food retail sector begins trading in services intra regionally and the capital markets in the CSME develop further that it will develop greater confidence in exporting services extra-regionally. This study’s focus has been on identifying measures which impact on market access and national treatment of foreign services suppliers. Bearing in mind this trade focus, it is possible to note that CARICOM countries tend to have a low incidence of such restrictive measures especially in comparison with other more developed WTO members. This lack of protection is a factor restraining new services commitments. CARICOM has no existing commitments in the sector in the now stalled negotiations at the WTO in Distribution Services and only Guyana made an offer in the sector. A similar low level of commitment was envisioned in the FTAA negotiations. In contrast to the lack of international binding, the countries of CARICOM operate relatively open, non-discriminatory environments for trade in food distribution services.

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With respect to future trade negotiations, care should be taken in scheduling under Distribution services to avoid broad commitments that would include the food distribution service sector. Using the approach of phasing allows countries to modulate their commitments in accordance with their interests and should be considered by CARICOM countries. With respect to the various services sub-sectors in food distribution, raw product distribution might be less sensitive than processed products distribution. CARICOM countries will find it difficult to make commitments in retailing. In franchising, there are some export interests and important penetration of the region by international franchises. The ongoing exposure of CARICOM QSRs to international marketing, operations and benchmarking systems may indeed be one reason why they view themselves as more competitive and less sensitive to competition. Policy makers should recognize that the QSR and food retail industries’ horizons and sensitivities are likely to change over time as they develop international experience and competitiveness. The QSR sector is the most poised to export in the region, although indigenous brands are less able to do so because of the absence of the support systems similar to that provided by the international brands. Food retailers tend to be focusing on the CARICOM market for the time being but as they gain experience in trade within the region are likely to develop extra regional trade interests. Importer/distributors are present in several CARICOM markets and a few have expressed interest in Latin American markets. Central America and the wider Caribbean tend to be of particular interest and should be the first focus of CARICOM’s offensive strategies in future negotiations. Multilaterally, Central America (with the exception of Panama) has not made commitments in the sector. Regionally, though, Central America and the Dominican Republic have made critical commitments to the US with respect to their laws governing distribution of goods. This changes significantly the competitive environment in Central America to the disadvantage of potential CARICOM exporters of goods and services, and might be addressed in a negotiation with Central America. Clearly, due to the sensitivity of the sector, defensive interests will be a priority and defensive impulses enhanced by a perceived lack of extensive export interests due to the minimal degree of interaction between private sector operators and public sector decision-makers in most countries in the region. Requests made by the EU in the WTO negotiations are more likely to be addressed in the EPA framework and must be accompanied by specific CARIFORUM requests related to, inter alia, improving Mode 4 access, removal of sector exclusions, removal of economic needs tests, and improved cross border supply commitments. While engaging in the Europe negotiations CARICOM must take into consideration future negotiations with Canada and the US. Of these latter two countries, the restrictions in distribution services are more extensive in the case of Canada. In all the negotiations CARICOM should be open to limited new access commitments in distribution services to its markets in exchange for removal of restrictions affecting its export interests. It is also recommended that a public sector/industry forum be held to flesh out domestic and trade policy issues raised by this project.

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BIBLIOGRAPHY & APPENDICIES

Bibliography

Appendix 1:

A. Terms of Reference

B. Interview Check List

C. List of Persons Consulted – Industry

D. List of Persons Consulted – Public Sector

E. List of Websites Reviewed

i. Food Retail

ii. Food Service

iii. Food Wholesale

iv. Policy & Trade

Appendix 2: CARICOM Agri - Food Consumer Profiles

Appendix 3: CARICOM Agri - Food Products Trade

Appendix 4: Key CARICOM Food Distribution Services Industry Members

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APPENDIX 1 - A TERMS OF REFERENCE

BACKGROUND Globalization of the Agri-Food Distribution Sector The global food supply chain has been going through substantial change driven by changes in

i. Consumer purchasing patterns – Rising disposable income, and changing demographics and consumer lifestyles have led to increased segmentation of the market and have allowed food distributors to compete on a greater set of dimensions. The modern consumer is getting older, households are getting smaller, more women are working, more people live in cities where they depend on food grown by others, and education levels are increasing.

ii. Technological changes – Improvements in communication, information and logistics allowing

consumers to learn about global brands and distributors to significantly improve service levels, costs and to do so on a global scale.

iii. Liberalization and structural adjustment - Trade agreements and structural adjustment programs

have liberalized trade in goods providing wider ranges of products and seasonal availability of foods often at lower prices. Moreover these agreements are also facilitating foreign direct investment by global and regional food retail and food service companies which are changing the competitive landscape of the local market place.

As a result of these factors, food manufacturing, transportation and distribution now represents a much greater share of share of consumer spending, compared to 1980 while the value of farm output has remained relatively constant over the last 20 years. More importantly, food distributors, which include food retailing, food service, catering and hospitality providers, have become the dominant players in the food supply chain. They are increasingly integrating backwards into the supply chain and investing in logistics, food manufacturing, and agro- food procurement programs. In addition food retailers now compete head-on with food service operators by offering wider ranges of convenience foods, home meal replacements and in store food services. The rate and form of the development of food distribution in any country or region is determined in part by the local regulatory environment including inter alia planning restrictions, food laws, price controls, environmental requirements, investment laws, and mergers and acquisitions codes. Transformation of Food Distribution in Developing Countries While the changes in the global food distribution system began in the developed countries, they have been overflowing into developing countries. Recent work by Reardon and Hagen demonstrate the transformation taking place in Latin America and Asia. Reardon reports that growth in Latin America food distribution sector over the last 10–15 years was characterized by rapid consolidation of the market to the current position where the top 5 stores account for over 50% of the retail food market. Moreover there was also rapid multi-nationalization, driven by mergers and acquisitions to take the multinational share of supermarket sales to over 50%. Such dominant market positions are possible because larger operations are better placed to cut cost, improve consistency and increase product quality and diversity. Cutting cost is achieved by improving all aspects of procurement, product cost and logistics cost including the use of distribution centers, logistics platforms, contracts with wholesalers and producers, private standards specifying quality, safety, volume, and packaging of products.

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THE AGRI-FOOD DISTRIBUTION INDUSTRY IN CARICOM The agri-food distribution industry makes a significant contribution to the regional economy. Preliminary industry estimates place the size of the CARICOM food market, at wholesale prices, at approximately US$4-5 billion. In CARICOM the food distribution industry is expanding and modernizing itself in most states, albeit at differing rates. Supermarket chains are introducing modern retail facilities and increasing in store size to increase product assortment, services and drive costs down. Larger floor space is being allocated to offer higher levels of choice, convenience and healthy products offered in fresh produce, pre-prepared chilled, frozen foods and in-store cooking facilities. Several operators are increasing penetration into the market by expanding store numbers as exemplified by Super-plus in Jamaica which is currently engaged in an expansion program which will take them from 15 stores in early 2000s to over 40 stores by mid 2005. At the same time firms such as Super Center in Barbados and Hi Lo Supermarkets in Trinidad and Tobago are developing multiple formats to service different market segments. Supermarkets have also been forging alliances with retail associations such as IGA from the United States, major manufacturing brands such as President’s Choice from Canada and supermarket brands such as Tesco from the United Kingdom to enhance their product offerings. These changes are being seen not only in the larger corporate chains but also in the independent small and medium sized supermarkets. The regional wholesale industry, many of which also hold equity in supermarkets, is being challenged by the expansion of the supermarkets into wholesaling and direct buying and the Florida based wholesalers. Until the late 1990s, most of the equity in the sector was local as in many of the islands the supermarkets belong to the major importers/wholesalers. More recently the advent of the membership club store has changed the dynamics of the food distribution sector.68 In addition, international petrol distributors have introduced retailing of foodstuff in their outlets which open 24 hours in many instances. Apart from the international operators, no locally owned food distributor has operations in more than one CARICOM state in spite of the efforts to create a CARICOM Single Market. Logistics systems have improved as back rooms have begun to give way to centralized warehousing and the increasing use of just in time, multi-temperature transport from the depots but also from dedicated wholesalers in Florida. The superior shipping infrastructure between Florida and CARICOM states versus the inadequate shipping between CARICOM states is also encouraging the procurement of North American products over and above those originating from CARICOM. This is cause for concern to governments and agri-industry stakeholders. More and more retailers are reporting that they are importing directly from US manufacturers or from Florida based wholesalers to improve their cost positions. This has significant implications for the indigenous food distribution system in CARICOM, as well as agri-food producers. Recent research indicates that intra-CARICOM agricultural exports have decreased over the past five years. This change which is occurring not only in the food retail sector but also in the fast food sector is best exemplified in Trinidad and Tobago. There are now more than 15 international fast-food operators in Trinidad and Tobago. Interestingly enough, several Caribbean fast food chains, led by Royal Castle (Trinidad and Tobago), Island Grill and Tastees (Jamaica) have also been developing and even opening franchises across the region and attempts have been made to export franchises to North America. But there has been limited success. Impact of Trade Agreements on CARICOM Food Distribution Sector The member states of CARICOM are currently engaged in several negotiations that have a services

68 Price Smart in Trinidad and Tobago, Barbados and Jamaica; Kmart began construction of a 40,000 square foot facility in Trinidad and Tobago before it went into receivership.

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component: the multilateral trade negotiations of the World Trade Organization (WTO) under the General Agreement in Trade in Services (GATS); the Free Trade Area of the Americas (FTAA); the negotiations with the EU regarding an Economic Partnership Agreement (EPA); and CARICOM-Canada negotiations are expected to commence in 2005. All apart from the EU negotiations are set to conclude before 2007. Meanwhile the deadline for the establishment of the regional services market under the CARICOM Single Market and Economy (CSME) is December 2005. To date, CARICOM states have yet to develop a negotiating position on food distribution services in services trade negotiations. None have made commitments under “distribution services” under the GATS. But this may change as CARICOM states have received GATS negotiating requests to commit this sector from trading partners such as the EU and US. The food distribution services that are the focus of this study fall under two categories under the GATS. Supermarkets, food wholesalers and franchising are classified under “distribution services” whereas catering companies and fast-food outlets69 would fall under “tourism and travel-related services”. The main mode of supply for the trade in food distribution services is Mode 3 commercial presence (e.g. supermarkets, caterers). Some trade also takes place under Mode 1, cross-border supply (e.g. franchising for fast-food outlets). The study will review and assess developments in the food distribution sector in CARICOM and consider the implications of external trade negotiations for supermarkets, fast-food outlets, catering companies and food wholesalers in CARICOM states. It will also consider how the implementation of the CSME may affect the provision of these food distribution services in CARICOM states. OBJECTIVES The overall aim of the study is to obtain an overview and assess the competitiveness of the food distribution sector in CARICOM and to make recommendations for industry development strategies and trade and domestic policies to enhance the sector’s competitiveness. The output of the study will be of benefit to CRNM negotiators, regional and national policy makers, and stakeholders in the food distribution sector and the agri-food industry in CARICOM. SCOPE OF WORK The Consultants are expected to undertake the necessary research and prepare a report which covers the following tasks:

1) Briefly review the structure, trends and performance of the global food distribution sector, with special emphasis on North America and Europe, to establish industry benchmarks and identify major trends, and competitiveness improvement strategies being pursued. Provide an inventory of local and foreign distribution firms (supermarkets, etc) and food retailers in each CARICOM state. To the extent possible, provide an indication of the employment in this sector and the economic value of this industry.

2) Examine the Caribbean agri-food markets, consumer trends and the CARICOM agri-food

distribution industry. Assess the economic structures affecting distribution in CARICOM states and the extent to which there is competition in the sector.

3) Provide an inventory of local and foreign distribution firms (supermarkets, etc) and food retailers

69 According to the WTO secretariat (1998, S/C/W/37), “McDonalds and Kentucky Fried Chicken provide restaurant services [classified under tourism and travel-related services] but their sales of food not consumed on the spot constitute distribution services”.

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in each CARICOM state. To the extent possible, provide an indication of the employment in this sector and the economic value of this industry.

4) Identify any domestic policy measures that impede the development of the CARICOM food

distribution sector. Explore any competition issues facing the CARICOM food distribution sector such as selective distribution, exclusive dealing and retail price maintenance, and recommend policy responses.

5) Provide a brief overview of the linkages between the distribution sector and the key

manufacturing, agricultural and service industries in CARICOM and explore the implications of developments in the food distribution sector on these upstream industries.

6) Assess the extent to which national agri-food distributors have made inroads in other CARICOM

states compared to foreign firms. Examine any barriers (monopolistic conditions, government restrictions, etc.) to the distribution of agri-food products in individual CARICOM states. Provide time series data on production, trade and sale of agri-food products in CARICOM states.

7) Consider opportunities and challenges posed by the CSME for the export of food distribution

services by regional supermarkets, wholesalers, caterers and fast-food restaurants (including through franchises).

8) Assess the extent to which foreign firms in CARICOM source and sell local or regional agri-food

products. Also explore how CARICOM agri-food products are distributed in the United Kingdom and North America.

9) Recommend strategies for improving the competitiveness of the regional food distribution

industry and domestic policy measures to promote the development of the sector.

10) Explore whether CARICOM food distribution firms are interested in investing in overseas markets and any barriers to market entry faced by these firms. Recommend negotiating requests that CARICOM states should make to other trading partners in services trade negotiations to increase the export of food distribution services by regional supermarkets, wholesalers, caterers and fast-food restaurants (including through franchises).

11) Review and assess any negotiating requests made to CARICOM states in services trade

negotiations that will impact on the food distribution sector, and provide recommendations regarding how CARICOM states should respond.

12) Explore how trade negotiations in goods sectors (e.g. agricultural products) and other services

sectors (e.g. advertising, transportation services) will impact on the development of the CARICOM food distribution sector.

13) Recommend how CARICOM governments could best promote the development of the food

distribution sector through external trade negotiations.

14) Identify any relevant areas for further analysis or study.

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METHODOLOGY The study should be conducted through both primary research (interviews) and secondary sources. The Consultants must collaborate with CRNM regarding persons to be interviewed. A list of all persons interviewed and their coordinates must be documented.

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APPENDIX 1 - B CARICOM FOOD DISTRIBUTION SERVICES STUDY

Interview Check List

Industry Issues 1. Interviewee

a. Names, Position, Firm, Address b. Exchange Business Card, CRNM Letter

2. Description of Firm

a. Date Established, Founder, Owner, Legal Form b. Markets, Store Numbers, Employees, Sales if Willing c. Store Location, Format/ Fascias Mix, Sales Area d. Product/ Brand Assortment/ Menu, Service Mix e. Technology – Store Equipment, Information, Logistics, Human Resources f. History, Changes over Last Years, Future Strategy

3. Description of Industry

a. Sales - Total Sector, Channel/ Sub Sector, Largest Firms, Typical Firm in Channel, Specialty Food Retailers Share of Category

b. Stores - Largest Firms, Typical Firm in Channel/ Sub Sector c. Employment - Largest Firms, Typical Firm in Channel/ Sub Sector d. Trends – Stores Location & No, Formats, Fascias, Product & Service Mix,

Technology e. Changes – Impact of Competition/ Changes on retailer/ food service providers,

especially SME, structural adjustment, market liberalisation 4. Consumer Trends

a. Income, Geo Demographics, Household Appliances b. Purchasing Habits c. Changes – Impact of Competition/ Changes on Consumers Product Service Choices /

Prices 5. Agri - Food Supply Chains

a. Product Source – Local, CSME, Extra Regional Share b. Procurement Mix – Direct Import, Affiliate, Importer – Distributor Share c. Changes – Impact of Competition/ Changes on Agri Food Suppliers, especially

Perishable Suppliers 6. Competitiveness

a. Concentration - Consolidation, Vertical & Horizontal Integration, b. International Benchmarks – Sales, Productivity, Customer Service c. Profitability – Firm; Industry - Local, Regional and International d. Future – Concerns & Strategies

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7. Trade In Food Distribution Services a. Service Exports – Firms Interest, Markets, Time Frame, Challenges b. Service Exports Experience & Knowledge - Regional and Extra Regional c. Service Imports – Description of Inbound Competition, Concerns d. Agri Food Exports – Examples of Trade in Goods Resulting From Trade in Services e. CSME- Role in Trade in Services

8. Agri Food Distribution Services Industry Domestic Policy Environment

a. Regulatory Framework Impacting on Industry b. Restrictions to Trade in Services c. Recommendations for Improvement

9. Industry Organisation

a. Association Status b. Relationship With Government on Trade in Services c. Interest in Association Establishment & Meeting on Study

10. Close

a. Double Check Trade & Policy Issues Check List b. Request documents/ Websites/ Email c. Offer to Send Relevant Sections For Review and Feedback

Trade and Policy Issues 1. Services Trade Activity

a. What is the overall services trade balance? b. What is the contribution of the distribution sector? c. Has this been disaggregated between food distribution and other distribution

activities? d. What is the main source of imports? e. How much activity goes on under Mode 3? f. What foreign involvement is present? g. Can any trends be determined with respect to commercial presence? h. What is the extent of CARICOM presence? Which territory has the largest share?

2. Contribution to GDP

a. What is the extent of CARICOM presence? Which territory has the largest share? b. What is the sector’s contribution to GDP? c. What is the employment? Can any trends be determined. d. In which sector is the main employment?

3. Policies to build capacity

a. Is there a concern about the state of the distribution sector? b. Are any efforts underway to increase capacity or local involvement? c. What are they? d. Can any successes be pointed to?

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e. In any evaluation that may have taken place, what areas have shown a disappointing performance? Why?

f. What are the key factors in success? g. What are the major constraints? h. Which Ministry or agency has the responsibility in this area? i. Who are the persons directly responsible? j. Are any interventions being considered?

4. Market Inefficiencies and their Effects

a. What, if any, market inefficiencies have been identified? b. What causes have been identified? c. Is there any attempt to quantify the effects of market inefficiencies? d. Is this a concern at all of the Government?

5. Export initiatives and Challenges

a. Is there an interest in improving export performance? b. What are the possibilities? c. Which markets are of particular interest? d. Who are the main players? e. What challenges have been identified? f. What has been the recent export performance? g. Are any trade missions planned?

6. Perspectives of ongoing Negotiations

a. To what extent have you been able to follow ongoing negotiations? b. Which would you characterize as the most important? Why? c. Which are you most wary of? Why? d. What distribution services issues, concerns have you identified? e. How are policies and positions arrived at? f. Which is the responsible agency/Ministry? g. Who is the responsible official? h. What consultative mechanisms are in place? How well do they work? i. What views have been expressed by civil society? Business Sector? Distribution

Sector? j. What requests have been received for new market opening in this sector? k. Have you begun to consider the requests? l. What has been your response? m. Is there an interest is disaggregating the sector for the purposes of making a

commitment? n. Is there any interest in making a joint CARICOM commitment? o. What would be the content of that commitment, if any? p. Have you considered any requests in this sector? If so, to which Member?

7. Internal Regulations

a. What regulations are in place for the distribution services sector? b. What specific regulations might affect food distribution? c. Do these regulations have any discriminatory elements? National treatment? MFN? d. If regulations are minimal or non-existent, is there any self-regulatory mechanism at

work?

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e. If regulations are minimal or non-existent, is there any intention to or process underway for regulatory reform?

f. What is the lead agency? g. What are the principles of the reform? h. What is the content of the proposed reform? i. When is the reform likely to be completed? j. Has the process involved a period of public consultation? k. What guidelines have been developed? l. What models have been considered?

8. National Competitiveness Challenges

a. How competitive is the national distribution sector in general? b. Which elements would be best able to withstand foreign competition? c. Have the main impediments to competitiveness been identified? d. If so, what are they and is there a plan to address them? e. What is the degree of foreign involvement? f. Is this recent or of longer duration? g. How would you rate the degree of competition in the sector on a scale of 1-10? h. What anti-competitive practices have been identified? Foreign or local firms? i. Is legislation in place to address these practices? j. Is any action contemplated?

9. Sensitivities across Distribution Categories

a. Rate the sensitivity of the four sub-sectors of Distribution services (Low – Medium – High).

b. Rate the sensitivity of the four (4) Modes of Supply (Low – Medium – High). 10. Subsidy Practices

a. Are any subsidies provided to the distribution sector? b. Are any subsidies provided to food production? c. Were subsidies previously provided? d. If discontinued, provide the reason for the change in policy? e. Quantum of the subsidy? Application?

11. Opportunities for Investment

a. Succinctly describe the investment promotion strategy. b. What sectors have been identified as a priority? c. Which sectors are reserved for the state? d. Which sectors would not be included in future liberalization? e. How does this policy impact on distribution services investment? f. Have you received any recent requests for investment in this sector? Source?

12. Organizational Initiatives

a. Is there a Food Distributors Association? b. Do Food Distributors engage in advocacy in an organized or in an ad hoc manner? c. How effective has been the intervention? d. What are the stated priorities? e. Is there a Coalition of Service Providers or similar oganization? f. What are the stated priorities?

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g. How does it lobby? h. Do other bodies or companies accept its role?

13. Impact of the CSME

a. What is the extent of CARICOM involvement in the local market? b. Is this expected to grow as a result of the CSME? c. What benefits do you see from increased CARICOM involvement? d. What concerns do you have? e. To what extent do firms collaborate with other CARICOM firms?

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APPENDIX 1 - C LIST OF PERSONS CONSULTED – PRIVATE SECTOR

Name Position Store Brand Company Country

Stephen A. Joseph Managing Director Bargain Centre Supermarket Bargain Enterprise Antigua & BarbudaGregory Shillingford Chief Operating Officer KFC Casa Antigua Ltd. Antigua & Barbuda Christine Mallalieu Financial Controller Epicurean Fine Foods Epicurean Supermarket Antigua & Barbuda Terry C Brown CEO Island Provision Island Provision Group Antigua & Barbuda Anthony Richardson CEO Papi's Chicken Grill Papi's Chicken Grill Antigua & Barbuda Sonia Gonzales General Manager Subway Sandwich & Salads Subway (Ant.) Ltd. Antigua & Barbuda Garfield Joseph Franchisee Business KFC Yum! Restaurants International Antigua & Barbuda Peter Goudie Human Resources Manager Bahamas Supermarkets Ltd. Bahamas Supermarkets Ltd. Bahamas Godfrey Eneas Representative to the FAO FAO Food & Agriculture Organization Bahamas Sydney Chea General Manager John Chea & Sons John Chea & Sons Ltd. Bahamas Gabriel Sastre Vice President KFC/ Restaurants Bahamas Ltd KFC Bahamas Ltd. Bahamas Robert K. d'Albenas Managing Director Food & Allied Products The D'albenas Agency Ltd Bahamas Minas Vardaoulis CEO, President Grand Bahama Foo Grand Bahama Food Co. Ltd. Bahamas Franklyn A. Butler President Milo B Butler & Sons Milo B Butler & Sons Ltd Bahamas Arnold A. Dorsett Assistant General Manager Agriculture Bahamas Agricultural & Ind Corporation Bahamas Dane Pritchard Marketing Supervisor Bahamas Food Services Bahamas Food Services Bahamas Steve Stanhope Warehouse Director Asa H Pritchard Asa H Pritchard Ltd Bahamas Rupert W. Roberts Jr. President Super Value Food Stores Super Value Food Stores Ltd. Bahamas James Paul CEO Barbados Agricultural Society Barbados Agricultural Society Barbados Ben Woods Senior Vice President PriceSmart PriceSmart Inc. Barbados David Neilands Managing Director Super Centre Super Centre Ltd. Barbados Tony Wilson CEO Trimart Trimart Incorporated Barbados Bruce Tudor Ass. Managing Director SBI Distribution Inc. Barbados Supply & Trade Ltd. Barbados Dr Astworth Thomas Director Human Resources Goddard’s Enterprises Limited Barbados Ian Alleyne Director Import Distribution & Retail Goddard’s Enterprises Limited Barbados John Naime CEO Big Johns Big Johns Barbados Grey Broomes CEO Pizza Man Doc Pizza Man Doc Barbados Philemore Davis CEO KFC KFC Barbados Scott Gribble CEO Café Blue Café Blue Barbados Ester Price Managing Director Price Premier Products Price Premier Products Ltd. Belize

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Alma G. Martin Assistant Manager Save U Supermarket Santiago Domingo Ltd. BelizeHowell Longsworth CEO HL Burger HL Burger Ltd Belize Victor Nwabudike Restaurant Manager Subway Subway (Belize) Ltd. Belize Sherman A. Sawers Manager SuperFoods James Brodie & Company Ltd. Belize Brian Sylvester Marketing Manager C.K.'s Super Valu Food Depot Independent Agencies Limited Grenada Christopher David Director Foodland Supermarkets Geo. F. Huggins & Co. G'da Ltd. Grenada Nicholas Harris Director Food Fair Supermarkets Jonas Browne & Hubbard (G'da) Ltd. Grenada Charles F. Roberts General Manager Real Value Supermarket Real Value Supermarket Grenada Gina Jerome Director Royal Castle Chesterfield Corporation Ltd. Grenada Candy Pysadee General Manager Subway Subway (G'da) Ltd. Grenada Vishnu Singh Manager Disinco DeSinco Trading Ltd. Guyana Joyce Ying Manager Bonny's Supermarket Bonny's Marketing Complex Guyana Patrick de Groot CEO Bounty Meat Centres Bounty Farms Ltd./ John Fernandes Group Guyana Avinish Dhagisandin Group Managing Director Fogarty's Supermarket Laparkan Holdings Ltd. Guyana Joseph Johnson Managing Director Nigel's Supermarket Nigel's Supermarket Guyana Nizam Hassan General Manager Guyana Marketing Corporation Guyana Marketing Corporation Guyana Anthony V. Chang Managing Director Geddes Grant Geddes Grant Guyana Ltd. Guyana Barry Mattai Managing Director Mattai’s Supermarket NS Mattai & Co. Guyana Andrew King Master Franchisor Chester Fried Chicken Toucan Industries Ltd. Guyana Robert Badal CEO Popeye’s Chicken & Seafood Guyana Stock Feeds Guyana Neil B Fernandes General Manager Qik Serv Demico / DIHL Guyana Brian James Director Royal Castle ASCO Guyana Thelma Nicholas CEO Salt & Pepper Restaurant Salt & Pepper Group Guyana Paul Ho CEO Juici Beef Franchisee Supreme Ventures Jamaica Dianna Blake-Bennett Marketing Manager Burger King Restaurants Associates Ltd. Jamaica James Moss Solomon Director Corporate Affairs Grace, Kennedy & Co. Ltd. Jamaica Freddy Chin Operations Manager Domino's Pizza Partners Foods Jamaica John P. Mahford Chief Operating Officer HiLo (Jamaica) Ltd. Grace, Kennedy & Co. Ltd. Jamaica Thalia Lyn Managing Director, CEO Island Grill Island Grill Jamaica Lisa Bell Executive Director JAMPRO JAMPRO Jamaica Norman W. Grant President Jamaica Agricultural Society Jamaica Agricultural Society Jamaica Mark Meyers CEO KFC/Pizza Hut Restaurants of Jamaica Jamaica Geoffrey Gordan Manager Megamart Wholesale Club Megamart Ltd./ Basco Ltd. Jamaica Diana Blake Bennet Marketing Manager Popeye’s Chicken & Seafood Restaurants Associates Ltd Jamaica

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Donovan C. Walker Director Subway (Jamaica) Ltd. Subway (Jamaica) Ltd. JamaicaWayne Chen CEO Super Plus Food Stores Super Plus Food Stores Ltd. Jamaica Leslie R. Clarke Managing Director Domino's Pizza Domino's Pizza St. Lucia Sean Griffith Purchasing Manager Burger King Restaurants Associates Ltd St. Lucia Frank C. Keller Managing Director KFC KFC (St. Lucia) Ltd. St. Lucia Angela Alphonse Manager Brydens Bryden & Partners Ltd St. Lucia Andrew Rigobert Chairman St. Lucia Marketing Board St. Lucia Marketing Board St. Lucia Troy Valcin Director Super J Supermarkets Consolidated Foods Limited St. Lucia Luke Boyea Managing Director Aunt Jobe's Market Aunt Jobe's Market St. Vincent Nigel A. Greaves Director C.K. Greaves Supermarket C.K. Greaves & Co. Ltd. St. Vincent Liley Cato Sales & Marketing Manager Corea's Food Stores Corea's Trading Ltd. St. Vincent Roxanne Morris General Manager Gourmet Foods Gourmet Foods Ltd. St. Vincent Alec Crichton Manager Corea’s Hazells Corea’s Hazells Inc St. Vincent Rick James CEO Rick’s Pizza Rick’s Pizza St. Vincent Joost Libbers CEO Wolly’s Burgers Wollys NV Suriname Richard Wongsokarij Restaurant Manager Sarunah Indisch Restaurant Sarunah Indisch Restaurant Suriname Arun K Hindori Managing Director KFC, P/Hut, United Distributors Cirkel Group of Companies Suriname Jules Fernandez Owner Operator McDonalds NV Jules Fernandes Suriname Liew Luis Manager Best Mart Supermarket Best Mart Suriname Ramdath T Ramsoedit Manager Combe Markt Combe Markt Suriname R Bisumbar CEO Tappie’s Golden Wings Tappie’s Golden Wings Suriname Ms De Freitas CEO Bos Burgers Bos Burgers Ltd. Trinidad & Tobago Allen Chu Fook Executive Director N/A Caribbean Breweries Association Trinidad & Tobago Wilbur Balgobin President N/A Caribbean Dairy Federation Trinidad & Tobago David Affonso Chief Executive Officer Marketing & Distribution Trading & Distribution Ltd. Trinidad & Tobago John Sabga CEO Trotters/ Prime Restaurants Trent Restaurants Ltd Trinidad & Tobago Roy L. Allum Poon Director J.T.A. Supermarkets Ltd. J.T.A. Supermarkets Ltd. Trinidad & Tobago Charles Wizen-Abboud CEO Joe's Pizza Steaks & Hoagies Joes Pizza Italian Restaurant Trinidad & Tobago Ejaz Ali CEO Low Cost Supermarket Low Cost Supermarket Trinidad & Tobago Richard Harford CEO Mario’s Pizzeria & Blimpie’s Subs Mario’s Pizzeria Ltd. Trinidad & Tobago Joseph E. Teixeira Chairman Hi Lo Food Stores Ltd Neal & Massy Holdings Ltd. Trinidad & Tobago Declan Littrean Operations Manager Papa John’s Pizza Elysians Ltd Trinidad & Tobago Lloyd Warner CEO Pennysaver's Supermarket Penny Savers Ltd Trinidad & Tobago Dane Darbasie CEO KFC/ Pizza Hut/ TGI/ TCBY Prestige Holdings Trinidad & Tobago

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Derek Luk Pat General Manager Burger King/ Popeye’s Restaurant Associates Trinidad & TobagoSandy Roopchand Corporate Manager Royal Castle International Castle Ltd. Trinidad & Tobago Saleem Boochoom General Manager Subway Mainstream Foods Trinidad & Tobago Govind Maharaj Chief Executive Officer Tru Valu Supermarkets CL Financial Trinidad & Tobago Ewan Gordon Regional Procurement Mgr McDonalds Restaurants McDonalds Regional Office, San Juan Puerto Rico Anthony Ho Sang CEO JerkQuizine Royal Caribbean Bakery USA Ms Hawthorne Franchise Manager Golden Krust Caribbean Grille Golden Krust Caribbean Bakery USA Richard Simpson Chairman Caribbean Cuisine Consortium c/o Cummin Up Restaurants United Kingdom

APPENDIX 1 – D LIST OF PERSONS CONSULTED – PUBLIC SECTOR

Name Position Department Organisation Country

William A Schouen Commissioner Inland Revenue Ministry of Finance Antigua & Barbuda N/a Statistician Statistical Office Antigua & Barbuda Phillip Simon General Manager N/A Bahamas Chamber of Commerce Bahamas Wendy Graigg Governor N/A Central Bank Bahamas Charles Stuart Director N/A Central Statistical Office Bahamas Hugh Chase Deputy Director N/A Ministry of Foreign Affairs & Public Bahamas Franklyn Kemp Chief Valuation Officer Business License Office Ministry of Foreign Affairs & Public Bahamas Vivienne Davis Secretary to the Licensing Authority Business Licensing Office Ministry of Foreign Affairs & Public Bahamas Hilary Deveaux Director N/A Securities and Exchange Commission Bahamas Ruall Harris General Manager N/A Barbados Chamber of Commerce Barbados Wendell Callender Executive Director N/A Barbados Manufacturers' Assoc. Barbados Carlos Wharton Trade Consultant N/A Barbados Private Sector Trade Team Barbados Russel King Consultant, Trade in Services N/A Ministry of Foreign Affairs and Foreign Barbados Carlos Wharton Trade Consultant, Services & N/A Private Sector Trade Team Barbados Richard Reid Trade Officer Ministry of Foreign Affairs Ministry of Foreign Affairs & Trade Belize Shawn Adasha Richards Trade Economist Trade Ministry of Foreign Affairs & Trade Belize

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Name Position Department Organisation Country

Ricardo James Director Ministry of Trade, Labour, Foreign DominicaMargaret France Statitstian Central Statistics Office Administrative Complex Grenada Ronald Theodore Investment Promotions Manager N/A Grenada Industrial Development Grenada Fitzroy James General Manager N/A Grenada Marketing and National Grenada Sally Ann Bhagwan Senior Trade Officer Economic Affairs Ministry of Finance Grenada Margaret Frame Statistician Statistics Ministry of Finance Grenada Derrick Romain Price & Consumer Affairs Officer Statistics Ministry of Finance Grenada Terrence Niles Supplies Control Officer Statistics Ministry of Finance Grenada Oliver Joseph Permanent Secretary, Ag. (was Director N/A Ministry of Foreign Affairs & Int. Trade Grenada Alain Bain Trade Officer N/A Ministry of Foreign Affairs & Int. Trade Grenada Avalon Jagnandan Executive Director N/A Chamber of Commerce and Industry Guyana Mark Harris Secretary N/A Chamber of Commerce and Industry Guyana Ramesh Dookhoo Chairman, National Competitiveness N/A Guyana Manufacturers & Services Guyana Neville B. Totaram Trade Vice-Minister Ministry of Foreign Trade Ministry of For. Trade & Int Corporation Guyana Bal Parsaud Executive Director N/A Private Sector Commission (PSC) Guyana Kevin Harriot Competition Bureau Chief N/A Fair Trading Commission Jamaica Lisa Bell Executive Director JAMPRO JAMPRO Jamaica Esmond Reid Foreign Service Officer N/A Ministry of Foreign Affairs & Foreign Jamaica Marcia Thomas Senior Director, Foreign Trade N/A Ministry of Foreign Affairs & Foreign Jamaica Calixte Leon St Lucia Nathaniel Williams St Vincent & Grenadines Nancy Hardanan Officer Public Relations Bureau of Statistics Suriname Joan Van Ommerman Industrial Relations Specialist N/A Chamber of Commerce & Industry Suriname Dr Remy Grauwde Chief Officer Plant Quarantine Ministry of Agriculture Suriname N/a Trade Officer Services Trade Team Ministry of Trade and Industry Suriname Trudy Lewis Economist I Services Trade Department Ministry of Trade & Industry Trinidad & Tobago Norris Herbert Assistant Director to the Minister N/A Ministry of Trade and Industry Trinidad & Tobago Ramesh Sarabjit Senior Economist N/A Ministry of Trade and Industry Trinidad & Tobago Camille Sears-Carter Manager, Business and Sector Services N/A T&T Chamber of Industry Commerce Trinidad & Tobago

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APPENDIX 1 - E FOOD DISTRIBUTION SERVICES INDUSTRY WEBSITES REVIEWED

1. Food Retail Websites GLOBAL Food Retail Website CARICOM Food Retail Website Wal-Mart www.walmart.com James Brodie’s - SuperFoods www.brodiesbelize.com Carrefour www.carrefour.com Sav-U Supermarkets – Royal Ahold www.ahold.com Bahamas Supermarkets - City Markets www.winn-dixie.com Tesco www.tesco.com Abaco Markets - Solomon’s & Costright www.abacomarkets.com Casino www.groupe-casino.fr Super Value Supermarkets www.supervalu.com Soriana www.soriana.com.mx Super Plus Food Stores www.superplusfoods.com Distribucion & Servicio www.dys.cl Grace Kennedy - Hi Lo Food Stores www.gracekennedy.com K Mart www.kmart.com Progressive Grocers of Jamaica - Shoppers Fair – PriceSmart www.pricesmart.com Epicurean Fine Foods – Winn Dixie www.winndixie.com Gourmet Foods – Waitrose Supermarkets www.waitrose.com Rams Supermarket – Independent Grocers Association www.iga.com Whitchurch Supermarket – Loblaw’s - Presidents Choice www.loblaws.ca Consolidated Foods/ Super J Supermarkets www.consolidatedfoodsinc.com FMA www.fmanet.org Glace Supermarkets Institute of Grocery Distribution www.igd.net CK Greaves Supermarket – Food Marketing Institute www.fmi.org Aunt Jobe’s Market – Rabobank www.rabobank.com Food Land Supermarket hugginsgrenada.com/supermarkets USDA - ERS www.ers.usda.gov/Briefing/ Food Fair Supermarket – GlobalFoodMarkets/Industry BS&T - Super Centres www.supercentre.com USDA - ERS http://www.ers.usda.gov/ Jordan’s Supermarkets www.jordans.co.uk Briefing/FoodMarketStructures Trimart Incorporated www.trimart.ca Neal & Massy - Hi Lo Food Stores www.hilofoodstores.com CL Financial - Tru Valu Supermarket www.clfinancial.com Fong’s Supermarket – John Fernandes - Bounty Farms Meat Centers www.jf-ltd.com Laparkan’s - Fogarty’s Supermarket Supermarket Association of Trinidad and Tobago www.supermarkettt.org

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2. Food Service Websites

GLOBAL Food Service Website CARICOM Food Service Website 1. Chicken 1. Chicken a. KFC/ Yum www.yum.com a. Island Grill b. Churches Chicken www.churchs.com c. Chefettes' www.chefette.com c. Popeye’s Chicken www.popeyes.com d. Royal Castle – d. Chester’s Fried Chicken www.chestersinternational.com e. Bamboo Shack – 2. Burger 2. Pizza/ Pasta a. McDonalds www.mcdonalds.com a. Mario's Pizza www.mymariopizza.com b. Burger King www.bk.com b. Pepper's Pizza c. Wendy’s www.wendys.com c. VIP Pizza – 3. Sandwich d. Pizzaman Doc a. Subway www.subway.com 3. Sandwich/ Burgers b. Blimpie’s www.blimpie.com a. Super Subs www.brodiesbelize.com c. Quizno’s www.quiznos.com b. Café Blue d. Francianes www.francianes.com b. Wolly’s Burgers www.wollys.com 4. Pizza/ Pasta 4. Caribbean a. Pizza Hut/ Yum www.pizzahut.com a. Tastee’s – b. Domino’s Pizza www.dominos.com b. Juici www.juicipatties.com c. Papa Johns Pizza www.papajohns.com b. Mother’s – d. Sbarro’s www.sbarro.com e. Hosein’s Roti – 5. Seafood f. Roopram’s Roti a. Captain D's www.captainds.com 5. Caribbean - a. Long John Silvers/ Yum www.ljsilvers.com a. New Thriving Restaurant 6. Casual Dining 6. Casual Dining – a. Ruby Tuesday’s www.rubytuesday.com a. Anthony’s b. Tony Roma’s www.tonyromas.com b. Trotters www.trentrestaurants.com c. TGI Friday www.tgifriday.com c. Mambo Inn 7. Caribbean 9. Snacks & Beverages a. Golden Krust www.goldenkrustbakery.com/ a. Rituals www.pizzaboy.com b. JerkQzine www.jerkqzine.com/ b. Coffee Mill – c. Cummin Up www.blacknet.co.uk/cummin-up/ 11. Multi-brand Restaurant Companies d. Bahamas Breeze www.bahamabreeze.com a. Prestige Holdings www.phl.com 8. Snacks & Beverages e. Restaurants Bahamas Ltd - a. Dairy Queen www.dairyqueen.com f. Demico/ Banks DIL www.banksdih.com b. Starbucks www.starbucks.com b. Pizza Boys www.pizzaboy.com

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9. Other c. Restaurant Associates - a. Carib. Food Emporium www.caribbeanfoodemporium d. Restaurants of Jamaica - b. Eat Jamaica www.eatjamaica.com c. Franchise Times www.franchisetimes.com d. QSR Magazine www.qsrmagazine.com e. Nat. Restaurant Assoc. www.restaurant.org f. Int. Franchise Org. www.franchise.org

3. Food Wholesale/ Distribution Websites

GLOBAL Food Distribution Website CARICOM Food Distributors Website International Grocers Association James Brodies www.brodiesbelize.com Super Valu http://www.supervalu.com Santiago Castillio www.santiagocastillo.com Southeast Wholesale Foods - Hytop www.seff.com Grace Kennedy Ltd. www.gracekennedy.com Flemming International http://www.fleming.com Consolidated Foods www.consolidatedfoodsinc.com Associated Grocers of Florida http://www.agfla.com BS&T – SBI Distribution www.bsandtco.com Walton Post http://www.waltonpost.com Goddard’s Enterprises www.goddardenterprisesltd.com Goe F Huggins (Gda) Ltd. http://hugginsgrenada.com Neal & Massy – Marketing & Distribution www.neal-and-massy.com Ansa Mc AL – Alston’s Marketing www.ansamcal.com Ansa Mc AL – Brydens Ltd www.brydenstt.com John Fernandes Ltd. www.jf-ltd.com Laparkan Group www.accessbarbados.com Cirkel Group www.cirkelgroup.com

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4. Trade Policy Websites

GLOBAL Website CARICOM Website Brazil Link www.brazilink.org/foreignpol. Government of the Bahamas www.bahamas.gov.bs CEDOPEX- CEI-RD www.cei-rd.do International Business, Barbados www.barbadosbusiness.gov.bb European Communities www.europa.eu Government of Barbados www.barbados.gov.bb Food and Agriculture Organization www.fao.org CARIOOM Law www.caricomlaw.org Foreign Affairs, Canada www.dfait-maeci.gc.ca Fair Trade Commission, Barbados www.ftc.gov.bb Foreign Trade Costa Rica www.comex.go.cr CARICOM Secretariat www.caricom.org Global Trade Negotiations www.cid.harvard.edu Government of Grenada www.gov.gd Global Policy Forum www.globalpolicy.org IDC, Grenada www.grenadaworld.com ICTSD www.ictsd.org Office of the President, Guyana www.op.gov.gy International Affairs www.internationalaffairs.com International Cooperation, Guyana www.mintic.gov.gy International Monetary Fund www.imf.org Government Information, Guyana www.gina.gov.gy ITC www.intracen.org Jamaica Fair Trading Commission www.jftc.com Mercosur www.mercosur.org.uy TT Ministry of Trade www.minti.gov.tt Mexico Trade Information www.mexico-trade.com Ministry of External Relations, DR www.serex.gov.do Ministry of Economy, Mexico www.economia-snci.gob.mx Ministry of Foreign Affairs, Brazil www.mre.gov.br/ Ministry of Foreign Affairs, Australia www.dfat.gov.au OAS Trade Information System www.sice.oas.org Our World is Not for Sale www.ourworldisnotforsale.org Third World Network www.twnside.org.sg UNCTAD www.unctad.org United States Trade Representatives www.ustr.gov. World Trade Organization www.wto.org World Bank www.worldbank.org WTO www.wto.org

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APPENDIX 2 CARICOM FOOD CONSUMER PROFILES

Appendix 2.2 Table A2 : CARICOM Population Ranked by Size 1985-2002 [000] Country 1985 1990 2000 2001 2002

Haiti 6,134 6,942 8,357 8,511 8,668 Jamaica 2,297 2,369 2,576 2,598 2,621 Trinidad & Tobago 1,178 1,215 1,294 1,300 1,306 Guyana 754 731 761 763 765 Suriname 384 402 417 419 421 Bahamas 234 255 304 308 312 Barbados 253 257 267 268 269 Belize 163 186 226 231 236 Saint Lucia 121 131 148 149 151 Saint Vincent & Grenadines 102 106 113 114 115 Grenada 90 91 94 94 94 Dominica 72 71 71 71 70 Antigua & Barbuda 62 63 65 65 65 Saint Kitts & Nevis 44 42 38 38 38 Total CARICOM 11,888 12,861 14,731 14,929 15,131

Source: Statistical Yearbook for Latin America and The Caribbean - 2002. Appendix 2.2 Table A3: CARICOM Population Projections , 2000-2015 (‘000)

Country 2000 2005 2010 2015 2015-2005 % Change

Jamaica 2,576 2,693 2,821 2,957 9.8%Trinidad & Tobago 1,294 1,324 1,358 1,392 5.1% Guyana 761 768 763 749 –2.5% Suriname 417 426 433 437 2.6% Bahamas 304 324 341 359 10.8% Belize 226 249 268 300 20.5% Barbados 267 272 277 281 3.3% St. Lucia 148 156 163 169 8.3% St. Vincent / Grenadines 118 118 118 118 0.0% Antigua / Barbuda 72 76 88 100 31.6% Grenada 94 95 96 97 2.1% Dominica 71 70 70 70 0.0% St. Kitts / Nevis 42 42 42 42 0.0% Montserrat 4 4 4 4 0.0% Total CARICOM 6,394 6,617 6,842 7,075 6.9% Source: UN Population Division / ECLAC

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Appendix 2.2 Table A3: Tourists and Cruise Passengers Arrivals by Country 1995 and 2002, Ranked by Size (‘000)

1995 2002 Difference Difference

CARICOM Tourist Arrivals

Cruise Passenger Arrivals

Tourist Arrivals


Tourist Arrivals


Bahamas 1 1,598 1,544 1,513 2,802 –5.3% 81.5%Jamaica 1,147 605 1,266 865 10.4% 43.0% Barbados 442 485 498 523 12.6% 7.9% Trinidad and Tobago 260 49 384 60 47.8% 22.4% Belize 321 8 200 320 –37.9% 3895.0% Haiti 145 225 142 354 –1.9% 57.3% Guyana 106 0 104 0 –1.6% 0 Suriname 4 43 0 58 – 35.3% 0 St Lucia 232 176 253 387 9.2% 119.9% Antigua and Barbuda 220 227 227 310 3.1% 36.4% Grenada 108 250 132 135 22.6% –46.0% St Vincent/Grenadines 60 85 78 70 29.3% –17.3% Dominica 61 135 69 137 13.3% 1.3% St Kitts/ Nevis 79 121 68 167 –14.6% 37.7% Montserrat 18 9 10 0 –46.7% –100.0% Total CARICOM 4,840 3,919 5,002 6,130 3.4% 56.4% Source: CTO member countries and CTO estimates Appendix 2.2 Table 4: Estimated Expenditures by Tourists 1995-2001, Ranked by Size, (US$ million)

CARICOM Country 1995 1996 2000 2001 % Diff

Bahamas 1,346 1,450 1,814 1,665 23.7% Jamaica 1,069 1,092 1,333 1,232 15.2% Barbados 612 633 711 687 12.2% Antigua & Barbuda 1 247 258 291 272 10.2% Saint Lucia 268 269 277 258 -3.9% Trinidad & Tobago 1 73 110 213 214 193.6% Belize 77 89 120 121 56.5% Guyana 3 78 70 87 87 11.0% Saint Vincent & Grenadines 1 41 64 75 80 95.6% Grenada 58 60 70 63 8.4% Saint Kitts & Nevis 65 67 58 62 -4.8% Haiti 3 56 58 56 54 -3.6% Suriname 31 38 44 50 61.3% Dominica 1 34 37 48 45 33.5% Montserrat 3 20 10 9 9 -57.0% Total CARICOM 4,075 4,305 5,205 4,898 20.2%

NB: Table ranked by size using 2001

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Appendix 2.2 Table 5: Percentage of Urban Population for CARICOM for Selected Years Countries Urban Population % Change 1985 1990 2005 (f) 2005-1985Bahamas 79.7 83.6 90.0 12.9% Suriname 60.3 65.4 77.2 28.0%Trinidad and Tobago 66.2 69.1 76.1 15.0% Dominica 66.0 67.7 72.7 10.2% St Vincent/ Grenadines 33.6 40.6 60.4 79.8% Jamaica 49.2 51.5 58.5 18.9% Barbados 42.5 44.8 52.8 24.2% Belize 48.7 48.1 48.0 48.6 Grenada 33.3 34.2 40.6 21.9% St Lucia 37.3 37.2 39.1 4.8% Haiti 26.3 29.5 38.9 47.9% Antigua and Barbuda 35.0 35.4 38.4 9.7% Guyana 31.8 33.2 38.5 21.1% St Kitts/ Nevis 35.2 34.6 35.0 –0.6% Source: Statistical Yearbook for Latin America and The Caribbean - 2002, Page 14 Table 9.NB: Table ranked by size using 2002 data Appendix 2.2 Table 6: Labour Force participation rate for women aged 15 years and over

1980 / 1981 1990 / 1991 Latest Year Member State Note

Women Women Women Bahamas 57 84 68 St. Lucia 44 50 63 d Barbados 63 a 46 62 a Dominica 38 39 60 Antigua & Barbuda 60 See 1991 Jamaica b, c 64 a 62 a 57 St. Kitts & Nevis 46 57 See 1991 Grenada 41 39 55 Montserrat 48 50 See 1991 St. Vincent & Grenadines 38 45 See 1991 Trinidad & Tobago 31 34 46 Guyana 24 25 40 a Belize 22 25 37 Suriname 21 a 44 a 34 Haiti Source: Compiled by the CARICOM secretariat from (i) 1980-1981 Population and Housing Census of the Commonwealth Caribbean- National Reports; (ii) 1990-1991 Population and Housing Census of the Commonwealth Caribbean- Volume of Basic Tables for Sixteen CARICOM countries, Regional Census Office, Trinidad and Tobago; (iii) National Labour force survey reports; (iv) data submitted to CARICOM by member States; and (v) Key Indicators of the Labour Market 2001-2002, KILM 1, International Labour Office, Geneva 2002.Notes: a. Compiled from KILM for Men (1980/1981 and latest year), b. Refers to age 14 years and over

c. Data for 1984, d. Compiled from http://www.stats.gov.lc/laba24.htm

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Appendix 2.2 Table 7: Radio & TV Use in CARICOM ( Units per 1000 Inhabitants)

Country 1980

1985

1990

1995

1997

Radio TV Radio TV Radio TV Radio TV Radio TV

Antigua & Barbuda 281 264 338 306 407 360 441 426 542 463

Grenada 394 501 590 331 597 347 615 353

Trinidad & Tobago 277 194 424 272 494 318 515 329 533 333

Barbados 542 209 791 237 875 272 889 280 888 285

St Kitts & Nevis 462 91 477 114 645 203 685 238 701 264

Mont serrat 475 533 575 148 604 186 626 234

Bahamas 485 148 518 220 537 225 731 228 739 230

St. Lucia 701 80 733 134 746 186 754 208 746 213

Belize 487 530 582 165 586 178 591 183

Jamaica 375 80 401 94 426 131 437 162 483 183

St. Vincent Grenadines 429 53 540 59 662 142 682 161 690 163

Suriname 532 113 599 117 660 137 709 147 728 153

Dominica 421 524 588 70 635 76 647 78

Guyana 408 448 487 35 494 48 498 55

Haiti 19 2.9 23 3.4 42 4.3 50 4.6 53 4.8

Source: Year 1998: 2000 World Development Indicators; Year 2001: 2003 World Development Indicators; Others Years: 1999 Statistical Yearbook UNESCO

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Appendix 2.2 Table 7: Passenger Cars & Commercial Vehicles in Use in CARICOM ( per 1000

inhabitants) Country

1985 1990 1995 2001 Antigua & Barbuda 210.0 350.0 297.0 372.5 Bahamas 268.0 325.0 285.5 342.0 St Kitts & Nevis 93.0 126.0 170.5 299.3 Barbados 149.0 187.5 206.8 268.2(99) Grenada -- -- 134.9 246.9 Trinidad & Tobago 277.0 203.5 165.7 219.8 Suriname 118.0 125.9 162.8 203.5 St. Lucia 73.0 108 89.3 172.1 Dominica 28.0 112 18.1 171.1 St. Vincent & Grenadines 68.0 76.4 78.9 117.8 Belize -- -- 89.7 112.2 Jamaica 30.0 40.8 61.9 74.8 Haiti 6.0 5.1 10.4 19.3 Guyana 52.0 41.5 16.7 10.1 Montserrat -- -- -- -- Source: World Statistics Pocketbooks. NB: Passenger cars and commercial vehicles in use according to census on registration figures for years census or annual registration took place. Latest year for Barbados is 1997.

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APPENDIX 3 The data below provides an indication of the level of regional and extra-regional exports and imports of perishable products; Appendix 3 - Table 1: Total Imports by Volume Fresh & Frozen Goods (Tonnes)

Year 2000 2001 2002 2003 2004 Average % of AVG

Trinidad & Tobago 135,521 81,129 74,733 118,614 83,432 98,686 30.62% Jamaica 100,572 94,933 90,860 84,714 93,779 92,971 28.84% Barbados 37,160 37,120 37,196 38,181 38,840 37,699 11.70% Guyana 32,292 28,416 24,677 19,224 64,880 33,898 10.52% St Lucia 16,837 16,618 17,620 18,895 26,186 19,231 5.97% St Vincent & Grenadines 12,952 9,733 9,815 9,758 10,952 10,642 3.30% St Kitts & Nevis 8,388 6,952 6,564 7,346 15,214 8,893 2.76% Grenada 7,654 7,871 7,699 8,182 … 7,851 2.44% Belize 5,946 7,113 6,116 12,077 5,130 7,276 2.26% Dominica 5,296 6,225 4,772 4,700 4,946 5,188 1.61% Montserrat … … … … … 0 0.00% TOTAL 362,617 296,109 280,051 321,690 343,357 322,335 100.00% Source: CARICOM Secretariat / Vassel Stewart Appendix 3 - Table 2: Total Exports by Volume Fresh & Frozen Goods (Tonnes)

Year 2000 2001 2002 2003 2004 Average % of AVG

Belize 84,968 69,259 67,534 256,443 127,915 121,224 35.93% Jamaica 67,527 71,952 63,355 66,049 49,687 63,714 18.88% St Vincent & Grenadines 52,727 40,352 45,556 34,063 36,385 41,817 12.39% St Lucia 51,009 26,329 49,425 35,270 45,133 41,433 12.28% Guyana 23,202 31,083 32,215 32,455 35,206 30,832 9.14% Dominica 36,593 23,695 22,883 16,172 18,969 23,663 7.01% Trinidad & Tobago 13,906 13,823 12,616 10,857 11,411 12,523 3.71% Grenada 2,680 1,456 1,289 1,258 … 1,671 0.50% Barbados 471 553 396 312 347 416 0.12% St Kitts & Nevis 86 61 43 149 170 102 0.03% Montserrat … … … … … 0 0.00% TOTAL 333,169 278,563 295,312 453,026 325,224 337,393 100.00% Source: CARICOM Secretariat / Vassel Stewart

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Appendix 3 - Table 2: US Exports of Agri-Food Products (HS Chapter 1-24) to CARICOM, 1000 US$, 1996 - 2005

HS Chapter Heading HS Code 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Growth

96 - 05Growth 01 - 05

CEREALS 10 265,522 214,772 198,459 206,631 201,043 190,583 211,487 246,908 269,960 272,369 2.6% 42.9% MEAT, EDIBLE OFFAL 2 93,672 104,819 122,614 110,896 84,522 93,334 80,124 88,537 88,574 117,963 25.9% 26.4% MISC EDIBLE PREPS 21 79,143 62,557 51,289 63,525 76,987 68,768 60,832 50,174 54,198 68,103 -13.9% -1.0% RESIDUES, WASTES 23 52,565 69,561 61,354 54,146 53,294 61,443 60,399 66,591 64,378 57,546 9.5% -6.3% BEVERAGES, VINEGAR 22 25,111 31,070 32,922 32,433 32,500 33,652 32,703 39,352 43,028 53,718 113.9% 59.6% CEREAL,FLOUR,STARCH 19 36,004 33,365 34,581 31,097 30,228 47,954 38,764 36,525 44,878 50,808 41.1% 6.0% DAIRY PRODUCTS 4 21,222 27,521 27,761 25,028 24,836 31,859 30,221 32,519 60,926 47,246 122.6% 48.3% VEGIE, FRUIT, PREPS 20 35,772 36,986 38,722 38,998 40,958 42,857 46,281 45,694 42,825 43,905 22.7% 2.4% FATS, ANIMAL, VEGIE 15 57,548 68,901 72,829 79,686 56,716 51,831 46,724 49,444 43,574 38,756 -32.7% -25.2% EDIBLE VEGETABLES 7 21,960 23,594 28,592 23,882 31,299 29,482 25,136 30,634 32,233 31,629 44.0% 7.3% OIL SEED 12 40,550 28,895 17,998 20,045 29,160 30,966 29,615 25,213 42,856 31,242 -23.0% 0.9% MEAT, FISH, PREPS 16 6,554 9,598 10,062 7,101 11,177 18,948 19,546 17,199 20,132 20,360 210.6% 7.5% MILLING PRODUCTS 11 56,119 47,833 49,387 31,770 22,847 18,008 13,592 13,657 23,408 19,061 -66.0% 5.8% EDIBLE FRUIT, NUTS 8 5,662 7,150 7,447 6,825 7,752 13,228 11,480 12,741 16,206 18,975 235.1% 43.4% SUGARS 17 39,859 32,639 27,649 27,808 23,598 24,248 21,296 12,493 13,798 16,998 -57.4% -29.9% FISH, CRUSTACEANS 3 4,272 4,118 5,775 6,408 4,186 5,114 4,460 5,977 6,785 8,548 100.1% 67.1% COCOA AND COCOA PREP 18 3,667 3,937 3,750 4,196 4,957 5,650 6,554 6,088 7,603 8,547 133.1% 51.3% LIVE TREES, PLANTS 6 1,552 1,840 5,791 7,175 5,681 7,248 2,489 3,216 4,117 4,661 200.3% -35.7% LIVE ANIMALS 1 2,033 986 1,609 964 5,145 2,282 2,758 3,249 3,318 3,646 79.3% 59.8% COFFEE, TEA, SPICES 9 1,321 1,786 2,592 2,491 2,263 2,259 1,674 3,100 2,491 3,076 132.9% 36.2% LAC, GUMS, RESINS 13 4,930 2,455 2,494 2,217 1,721 3,102 3,071 1,052 1,598 1,794 -63.6% -42.2% ANIMAL PRODUCTS NES 5 235 216 336 390 1,346 914 824 1,694 2,538 1,595 578.7% 74.5% TOBACCO 24 9,295 12,694 8,184 6,733 4,448 2,999 3,378 3,648 1,312 1,322 -85.8% -55.9% VEGETABLE PLAITING 14 218 134 3,496 5,368 4,831 3,611 3,025 1,694 2,356 686 214.7% -81.0% TOTAL 864,786 827,426 815,693 795,815 761,497 790,340 756,435 797,399 893,093 922,553 6.7% 16.7% Data Source: Department of Commerce, U.S. Census Bureau, Foreign Trade Statistics

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APPENDIX X - TABLE: US EXPORT GROWTH FOR SELECTED AGRI-FOOD PRODUCTS (HS CPT 1-24) TO CARICOM, FROM 1996 TO 2005 AND 2001 TO 2005, 1000 US$ HS DESCRIPTION HS Chp 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Growth

96 -> 05Growth 01->

05 CHAPTER 2 - MEATS MEAT, POULTRY 207 72,488 79,345 92,051 83,062 61,601 61,639 52,305 59,990 57,323 72,121 -1% 17% MEAT BOVINE FROZEN 202 5,370 4,384 5,634 7,776 8,351 10,386 12,055 14,214 14,328 16,691 211% 61% MEAT OF SWINE 203 2,720 3,481 3,293 2,453 2,800 4,133 3,577 3,975 5,229 9,310 242% 125% MEAT BOVINE FR/CH 201 792 1,075 1,718 2,534 1,486 4,204 3,685 2,122 3,460 6,788 757% 61% EDIBLE OFFAL 206 4,085 8,689 10,155 5,295 3,946 3,789 2,918 2,529 2,719 5,673 39% 50% MEAT SALT/DRY/SMOKE 210 2,733 3,674 3,299 2,947 2,556 4,223 2,384 3,374 3,802 4,736 73% 12% MEAT OF SHEEP/GOATS 204 686 517 399 764 122 473 778 1,191 1,079 1,610 135% 240% MEAT, OFFAL, OTHER 208 2,924 3,316 5,980 6,016 3,063 4,386 2,406 1,095 553 828 -72% -81% PIG/POULTRY FAT 209 1,875 324 86 42 593 101 15 47 57 196 -90% 94% TOTAL 93,672 104,819 122,614 110,896 84,522 93,334 80,124 88,537 88,574 117,963 26% 26% CHAPTER 3 - SEAFOOD FISH, FROZEN, WHOLE 303 1,934 1,668 2,405 2,012 528 1,156 620 1,302 1,982 2,386 23% 106% FISH FILLETS, MEAT 304 702 584 1,097 1,388 778 1,064 1,290 1,320 1,672 2,154 207% 102% CRUSTACEANS 306 506 623 920 1,929 1,924 1,912 1,357 1,685 1,655 1,942 284% 2% MOLLUSCS 307 624 764 452 526 368 344 431 522 482 1,096 76% 219% FISH, WHOLE FR/CH 302 344 383 500 423 434 392 140 825 742 673 96% 72% FISH, CURED, SMOKED 305 153 91 397 115 127 173 334 257 249 282 84% 63% TOTAL 4,272 4,118 5,775 6,408 4,186 5,114 4,460 5,977 6,785 8,548 100% 67% CHAPTER 16 - MEAT, FISH PREPERATIONS SAUSAGES 1601 2,010 2,630 2,648 2,661 2,907 8,241 7,500 7,304 7,683 9,113 353% 11% PREPARED MEAT 1602 1,707 3,293 3,523 1,784 4,992 7,136 8,321 6,917 8,616 6,669 291% -7% FISH, PREPARED 1604 2,118 3,051 3,253 2,201 2,412 2,032 2,509 2,183 2,248 2,646 25% 30% CRUSTACEANS, PREP 1605 602 597 520 427 818 1,534 1,198 731 1,393 1,833 204% 19% JUICES, MEAT, FISH 1603 117 26 117 27 48 6 18 63 192 99 -15% 1550% TOTAL 6,554 9,598 10,062 7,101 11,177 18,948 19,546 17,199 20,132 20,360 211% 7% CHAPTER 4 - MILK BASED PRODUCTS ONLY CHEESE AND CURD 406 2,283 4,042 4,412 5,555 4,731 6,148 5,881 7,382 9,522 10,494 360% 71% MILK CONCENTRATED 402 4,198 7,487 6,407 3,441 4,003 5,184 3,160 2,917 23,295 5,433 29% 5% BUTTERMILK 403 489 334 653 531 229 309 186 417 1,252 2,250 360% 628% MILK NOT CONCENTRATE 401 475 116 478 322 451 112 176 300 873 799 68% 613% WHEY, NATURAL MILK 404 397 289 366 357 277 522 541 321 302 570 44% 9% BUTTER, FATS, MILK 405 792 451 447 341 433 463 176 277 494 432 -45% -7% TOTAL 8,634 12,717 12,763 10,547 10,123 12,739 10,120 11,613 35,739 19,978 131% 57%

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HS DESCRIPTION HS Chap 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 96 -> 05 01 -> 05

CHAPTER 7 - EDDIBLE VEGETABLES VEG, DRIED LEGUME 713 8,896 10,054 15,630 13,752 11,417 15,393 14,216 18,235 17,693 13,648 53% -11% VEGETABLES NES, FR 709 7,861 6,779 5,836 5,823 11,265 5,508 4,875 4,893 5,966 8,553 9% 55% VEGETABLES FROZEN 710 810 555 541 382 544 809 801 1,463 1,690 1,902 135% 135% TOMATOES, FRESH 702 152 372 525 578 536 657 1,199 1,426 1,742 1,647 984% 151% CARROTS, TURNIPS, FR 706 932 954 638 439 2,490 3,935 1,252 1,345 1,727 1,500 61% -62% LETTUCE AND CHICORY 705 19 288 282 150 683 424 760 968 974 1,271 6589% 200% CABBAGE, CAULIFLOWER 704 35 193 84 81 145 329 303 446 546 992 2734% 202% POTATOES, FRESH 701 901 1,045 1,357 833 418 919 733 629 687 864 -4% -6% ONIONS, SHALLOTS 703 850 1,056 1,807 659 523 335 523 650 700 584 -31% 74% VEGETABLES, DRIED 712 753 850 839 704 1,971 353 331 390 320 462 -39% 31% LEGUMINOUS VEGETABLE 708 589 1,210 458 256 1,163 713 78 62 94 139 -76% -81% VEGETABLES PRESERVED 711 163 237 558 224 145 50 29 77 78 32 -80% -36% CUCUMBERS, GHERKINS 707 0 0 0 0 0 0 0 0 0 18 -- -- TOTAL 21,960 23,594 28,592 23,882 31,299 29,482 25,136 30,634 32,233 31,629 44% 7% CHAPTER 8 - EDDIBLE FRUIT GRAPES 806 1,399 1,742 1,926 1,989 2,023 3,189 3,408 3,553 4,577 5,159 269% 62% APPLES, PEARS 808 1,656 2,414 2,601 2,302 2,202 4,070 3,766 4,005 4,271 4,094 147% 1% FRUITS NES, FRESH 810 418 480 674 866 2,016 2,572 1,675 2,295 3,468 3,724 791% 45% CITRUS FRUIT, FRESH 805 317 225 236 138 174 417 637 658 1,099 2,346 640% 463% NUTS EXCEPT COCONUT, 802 987 1,213 719 503 489 379 664 1,228 628 1,189 20% 214% FRUIT, DRIED, NES, 813 464 440 410 327 254 1,347 444 338 1,350 834 80% -38% MELONS, WATERMELONS 807 46 211 350 100 33 301 222 268 323 529 1050% 76% COCONUTS, BRAZIL NUT 801 160 198 221 147 69 114 133 111 128 422 164% 270% STONE FRUIT, FRESH 809 32 79 58 162 66 126 207 89 119 248 675% 97% FRUITS AND NUTS, FRZ 811 74 46 40 67 369 652 132 83 87 229 209% -65% FRUITS, NUTS PRESER 812 67 72 49 87 8 15 5 0 9 128 91% 753% DATES FIGS PINEAPPLE 804 41 31 146 137 49 45 189 114 145 74 80% 64% TOTAL 5,662 7,150 7,447 6,825 7,752 13,228 11,480 12,741 16,206 18,975 235% 43% CHAPTER 20 - VEGETABLE & FRUIT PREPERATIONS FRUIT, VEGIE, JUICES 2009 12,918 17,306 17,311 17,714 18,464 17,374 18,666 17,749 20,303 20,752 61% 19% VEGETABLES NES, PREP 2005 8,048 8,252 7,920 7,952 12,436 12,963 16,984 17,946 7,867 7,974 -1% -38% FRUIT, NUT, PREP 2008 3,871 4,731 6,244 6,317 5,345 7,521 4,273 4,469 5,792 6,482 67% -14% TOMATOES PREPARED 2002 4,698 3,927 3,929 2,719 1,620 2,232 3,345 3,002 6,571 5,875 25% 163% VEGETABLES NES, PREP 2004 5,054 1,749 2,262 3,425 2,122 1,598 1,566 1,331 1,686 1,941 -62% 21%

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JAMS, JELLIES 2007 1,079 969 980 780 797 519 524 498 376 710 -34% 37% VEGIE, FRUIT, VINGAR 2001 95 48 28 36 107 450 436 378 154 77 -19% -83% FRUITS, NUTS, SUGAR 2006 9 3 33 55 46 192 460 291 45 56 522% -71% MUSHROOM, PREP 2003 0 3 16 0 21 8 28 30 30 38 -- 375% TOTAL 35,772 36,988 38,723 38,998 40,958 42,857 46,282 45,694 42,824 43,905 23% 2% HS DESCRIPTION HS Chap 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 96 -> 05 01 -> 05

CHAPTER 9 – SPICES ONLY OTHER SPICES 910 613 977 1,812 1,528 1,335 1,097 933 2,109 1,022 1,497 144% 36% PEPPER (PIPER) 904 99 86 101 125 172 397 160 290 214 274 177% -31% NUTMEG, MACE 908 4 0 26 7 23 57 33 8 78 131 3175% 130% CLOVES 907 3 0 0 0 7 3 3 3 109 52 1633% 1633% VANILLA BEANS 905 0 0 20 0 3 0 0 15 54 12 -- -- SEED SPICES 909 0 0 9 22 39 0 23 13 0 6 -- -- CINNAMON 906 0 8 0 22 27 44 50 4 0 0 -- -100% TOTAL 720 1,071 1,968 1,704 1,607 1,598 1,202 2,441 1,478 1,971 174% 23% CHAPTER 17 – SUGARS & SUGAR CONFECTIONARY SUGAR CONFECTIONERY 1704 3,838 4,522 3,748 5,359 6,145 6,356 7,545 5,722 7,393 7,169 87% 13% SOLID CANE OR BEET 1701 30,694 22,480 19,546 18,313 13,988 14,176 10,087 3,604 2,351 5,661 -82% -60% SUGARS NES, LACTOSE 1702 5,324 5,615 4,351 4,124 3,463 3,709 3,647 2,937 3,344 4,152 -22% 12% MOLASSES 1703 3 22 4 12 3 8 16 229 710 15 400% 88% TOTAL 39,859 32,639 27,649 27,808 23,598 24,248 21,296 12,493 13,798 16,998 -57% -30% CHAPTER 18 – COCOA & CHOCOLATE CONFECTIOBNARY CHOCOLATE 1806 3,440 3,751 3,348 3,902 4,885 5,351 6,002 5,751 7,398 8,126 136% 52% COCOA POWDER, NT SWT 1805 59 139 220 128 48 106 498 311 194 405 586% 282% COCOA BUTTER, FAT 1804 142 18 106 132 24 46 53 26 12 16 -89% -65% COCOA PASTE 1803 26 29 76 34 0 146 0 0 0 0 -100% -100% TOTAL 3,667 3,937 3,750 4,196 4,957 5,650 6,554 6,088 7,603 8,547 133% 51% CHAPTER 19 – BAKERY, PASTERY AND PASTA BAKED BREAD, PASTRY 1905 11,980 8,773 9,405 11,330 10,323 14,100 14,810 12,364 14,659 19,252 61% 37% MALT EXTRACT, FLOUR 1901 12,793 14,553 11,623 10,587 11,619 13,572 12,180 10,952 15,370 17,561 37% 29% CEREAL FOOD 1904 9,005 7,687 8,952 6,796 5,784 16,401 7,294 7,837 7,782 7,132 -21% -57% PASTA, COUSCOUS, ETC 1902 2,227 2,348 4,563 2,383 2,502 3,881 4,474 5,372 7,066 6,863 208% 77% TAPIOCA 1903 0 4 39 0 0 0 7 0 0 0 -- -- TOTAL 36,004 33,365 34,581 31,097 30,228 47,954 38,764 36,525 44,878 50,808 41% 6%

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HS DESCRIPTION HS Chap 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 96 -> 05 01 -> 05

CHAPTER 20 - MISCELLANEOUS EDIBLE PREPARATIONS FOOD PREPS, NESOI 2106 69,229 50,544 38,558 50,146 60,516 51,247 41,958 29,458 29,205 39,755 -43% -22% SAUCE, MUSTARD, ETC 2103 5,562 6,413 7,597 7,676 8,555 9,292 9,256 10,762 11,528 12,868 131% 38% SOUPS, BROTHS 2104 1,195 1,310 1,313 1,663 3,396 3,526 5,104 5,983 7,910 8,933 648% 153% ICE CREAM 2105 1,655 2,199 2,336 2,642 3,257 3,066 3,047 2,676 3,426 4,212 155% 37% COFFEE, TEA, EXTRACT 2101 981 1,522 1,061 954 945 805 733 659 1,242 1,406 43% 75% YEAST, BAKING POWDER 2102 520 569 426 445 319 831 735 636 888 929 79% 12% TOTAL 79,143 62,557 51,289 63,525 76,987 68,768 60,832 50,174 54,198 68,103 -14% -1% CHAPTER 22 - BEVERAGES WATERS, NON-ALCOHOL 2202 8,528 13,393 11,758 9,599 13,022 13,794 14,074 19,890 25,909 31,030 264% 125% GRAPE WINES 2204 4,731 5,518 6,171 6,931 6,737 5,876 5,324 7,316 5,128 8,295 75% 41% LIQUEUR, SPIRITS 2208 4,011 6,481 8,081 8,014 4,249 5,232 5,059 5,253 4,974 6,354 58% 21% BEER MADE FROM MALT 2203 4,251 3,605 3,932 5,124 5,322 4,957 5,386 4,295 3,625 4,359 3% -12% WATERS, UNSWEETENED 2201 388 283 746 866 884 1,420 1,317 991 1,541 1,520 292% 7% ETHYL ALCOHOL 2207 2,515 1,132 1,696 1,082 1,259 1,774 1,155 1,133 1,156 1,410 -44% -21% FERMENTED BEVERAGES 2206 601 508 339 524 499 468 303 358 576 423 -30% -10% VINEGAR 2209 31 101 102 218 269 98 59 72 112 227 632% 132% VERMOUTH 2205 55 50 98 75 259 34 26 44 8 101 84% 197% TOTAL 25,111 31,070 32,922 32,433 32,500 33,652 32,703 39,352 43,028 53,718 114% 60% Data Source: Department of Commerce, U.S. Census Bureau, Foreign Trade Statistics

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Appendices 2/21/2007

APPENDIX 4 KEY CARICOM FOOD DISTRIBUTION SERVICES INDUSTRY MEMBERS

Store Brand Company Address Town Country FOOD RETAILERS Bargain Centre Supermarket Bargain Centre P.O. Box 1273 Perry Bay Antigua & Barbuda The Epicurean Fine Foods Epicurean Fine Foods Woods Centre, Friar's Hill Road St. Johns Antigua & Barbuda O'Beez Food Store & Wholesale O'Beez Food Store & Wholesale Factory Road St. Johns Antigua & Barbuda Christos Supermarket Caribbean Distribution Old Parham Road St Johns Antigua & Barbuda Gourmet Basket Island Provision Group Airport Road St. Johns Antigua & Barbuda City Markets/ Winn Dixie Bahamas Supermarkets Ltd. East-West Highway, P.O. Box N-3738 Nassau Bahamas Budget Food Stores Budget Food Stores Store 1 Bernhard Road Nassau Bahamas John Chea & Sons John Chea & Sons Ltd. P.O. Box N 6211 Nassau Bahamas Solomon's / Cost Rite Abaco Markets March Harbor P.O. Box General Delivery Abaco Bahamas Super Value Food Stores Super Value Food Stores Ltd. P.O. Box N-3039 Nassau Bahamas Buy Rite Discount Mart Buy Rite Ltd. Trident House, Bridgetown Bridgetown Barbados Carlton & Emerald Supermarket Carlton A1 Supermarket Carlton Centre Black Rock Barbados Jordan's Supermarket Jordan's Supermarket Ltd. Fitts Village St. James Barbados Less Frills Less Frills Ltd. Rock Dundo St. Michael Barbados PriceSmart Wholesale Club PriceSmart Inc. Cnr. Lodge Hill Road & Green Hill St. Michael Barbados Popular Discounts Popular Discounts Spry St Bridgetown Barbados Super Centre Super Centre Ltd. J.B's SuperCentre, Sergeants Village Christchurch Barbados Trimart Inc. Trimart Incorporated Mall International Haggart Hall St. Michael Barbados Sav-U Supermarket Santiago Castillo Ltd. SanCas Plaza, Belcan Bridge, P.O. Box 365 Belize City Belize SuperFoods Supermarket James Brodie & Company Ltd. 16 Regent Street, P.O. Box 365 Belize City Belize Brizee’s Supermarket Brizee’s Supermarket Canefield Roseau Dominica Whitchurch Supermarket Whitchurch IGA Supercentre Old Street Roseau Dominica Arendelles Arrendelles Carenage St Georges Grenada C.K.'s Super Valu Food Depot Independence Agencies Limited P.O. Box 1298, Grand Anse St. Georges Grenada

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Food Fair Supermarket Jonas Browne & Hubbard (G'da) P.O. Box 25 St. Georges Grenada Food Land Supermarket Geo. F. Huggins & Co. G'da Ltd. P.O. Box 46 St. Georges Grenada Real Value Supermarket Real Value Supermarket Spiceland Mall, Int'l, Mourne Rouge St. Georges Grenada Bonny's Supermarket Bonny's Marketing Complex 302 Church Street Georgetown Guyana Bounty Meat Centres John Fernandes Group 24 Water Street Georgetown Guyana C & F Supermarket C & F Supermarket 144 Regent St., Lacytown Georgetown Guyana Fogarty's Supermarket Laparkan Holdings Ltd. 34-37 Water St. Georgetown Guyana Mattai’s Supermarket NS Mattai & Co. 4A Water & Hope Streets, C/Burg Georgetown Guyana Nigel's Supermarket Nigel's Supermarket 44-45 Robb & Light Streets, Bourda Georgetown Guyana Survival Supermarket Survival Supermarket 16 Duncan St. & Vlissengen Rd. Georgetown Guyana Empire Supermarkets Chrisryon Limited Retirement Rd., Kingston St Andrew Jamaica HiLo (Jamaica) Ltd. Grace, Kennedy & Co. Ltd. 73 Harbor street, P.O Box 86 St. Andrew Jamaica Lees Food Fair Lees Food Fair 86 B Red Hills Road Kingston 10 St. Andrew Jamaica Megamart Wholesale Club Megamart Ltd./ Basco Ltd. 21 Orange St. St. Andrew Jamaica Shoppers’ Fair Progressive Group of Jamaica 56 Mannings Hill Road, Kingston 8 St. Andrew Jamaica Super Plus Food Stores Super Plus Food Stores Ltd. 2 Beverly Vale Close St. Andrew Jamaica Horseford's Valu Mart Horseford's Valu Mart Wellington Rd Basseterre St Kitts & Nevis National Supply Minimarts National Supply Minimarts CAP Southwell Industrial Park Basseterre St Kitts & Nevis Ram’s Supermarkets. Ram’s Supermarkets. Bird Rock Basseterre St Kitts & Nevis Ultra Mart Ultra Mart Inc Marchand Castries St Lucia Glace Supermarket Glace Motors Marisule Castries St Lucia Super J Supermarkets Consolidated Foods Limited Choc Estate, P.O. Box GM580, G/woods Mall St. Lucia Aunt Jobe's Supermarket Aunt Jobe's Market P.O. Box 1436 Stoney Ground Kingstown St. Vin. & Grenadines C.K. Greave’s Supermarket C.K. Greave’s & Co. Ltd. Upper Bay St. Kingstown St. Vin. & Grenadines Corea's Food Stores Corea's Trading Ltd. P.O. Box 1+F11122 Kingstown St. Vin. & Grenadines Randy’s Supermarkets Randy’s Supermarket Lower Bay Street Kingstown St. Vin. & Grenadines Veira Supermarket PH Veira & Co Ltd Bay Street Kingstown St. Vin. & Grenadines Best Mart Best Mart Josef Israelstraat 3, Ma Retraite 4 - 5 Paramaribo Suriname Chois Supermarket Chois Supermarket Mungrastraat Joh Paramaribo Suriname

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Combe Markt Combe Markt Grote Combeweg 1009 - 125 Paramaribo Suriname Zinnia Supermarket Zinnia Supermarket Zinniastraat 44 Paramaribo Suriname Dollar Valu Supermarkets CL Financial 76 Tragarite Road, Woodbrook Port-of Spain Trinidad & Tobago Fong's Supermarket Fong’s Supermarket Ltd. 31 - 33 Cipero Street San Fernando Trinidad & Tobago HiLo Food Stores Ltd Neal & Massy Holdings Ltd. P.O. Box 544, 63 Park St. Port-of-Spain Trinidad & Tobago J.T.A. Supermarkets Ltd. J.T.A. Supermarkets Ltd. Carlton Centre San Fernando Trinidad & Tobago Payless Supermarket Payless Supermarket Ltd. 99 - 101 Charlotte Street Port-of-Spain Trinidad & Tobago Pennysavers Supermarket Pennysavers Supermarkets Ltd. Milford Road Canaan Trinidad & Tobago Persad's Superstore Ltd. Persad's Food Stores Ltd. 585 Naparima Mayaro Road Naparima Trinidad & Tobago Low Cost Supermarket Low Cost Supermarket Southern Main Rd Cunupia Trinidad & Tobago Naipaul's & Xtra Foods Naipaul's Group of Companies Grand Bazaar, Uriah Butler Highway Valsayn Trinidad & Tobago PriceSmart PriceSmart Trinidad Ltd. Endeavor & Nabsaloo Roads Chaguanas Trinidad & Tobago Tru Valu Supermarkets Eastern Lands/ CL Financial Level 5, Long Circular Mall St. James Trinidad & Tobago QUICK SERVICE RESTAURANTS KFC Yum! Restaurants International PO Box 1755 St Johns Antigua & Barbuda KFC Casa Antigua Ltd. Anchorage Road St. Johns Antigua & Barbuda New Thriving Restaurant New Thriving Restaurant Airport Road, Woods Centre St. Johns Antigua & Barbuda Big Banana Big Banana Redcliff Quay St Johns Antigua & Barbuda Papi's Chicken Grill Papi's Chicken Grill Fow Road St. Johns Antigua & Barbuda Subway Sandwich & Salads Subway (Ant.) Ltd. Radcliff Street St. Johns Antigua & Barbuda Tastee Patties Stephen Gomez St. Johns Antigua & Barbuda Mc Donald’s Mc Donald’s Restaurants Nassau New Providence Bahamas Sbarro’s Sbarro’s Nassau New Providence Bahamas Bamboo Shack Bamboo Shack Nassau Street New Providence Bahamas Carib Quick Service Restaurants Carib. Quick Service Res. Harbor Bay Shipping Centre Nassau New Providence Bahamas Checker’s Café & Restaurant Checkers Café Mackey Street South P.O. Box SS-5365 Nassau New Providence Bahamas Domino’s Pizza Domino’s Pizza Blue Hill Road New Providence Bahamas Wendy’s Restaurants Wendy’s Restaurants Harrold Road New Providence Bahamas Church's Chicken Church’s Chicken Harbor Bay Shipping Centre Nassau New Providence Bahamas

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KFC/ Pizza Hut Restaurants Bahamas Ltd Bradley Street Nassau New Providence Bahamas Lexus Juicy Chicken Restaurant Lexus Chicken Restaurant E. Sunrise Shipping Centre Freeport Grand Bahama Bahamas Papa John’s Pizza Papa Johns International Inc. Round Plaza East Mall Drive Grand Bahama Bahamas Burger King Burger King 12 Bradley Street New Providence Bahamas Adriana's Roasters Adriana's Roasters Queen St., Speightstown St. Peter Barbados Chefette Restaurants Chefette Restaurants Ltd. Head Office Harbor Rd, Bridgetown St. Michael Barbados Big Johns Big Johns Restaurants Harbor Street Bridgetown Barbados Café Blue Café Blue Harbor Street Bridgetown Barbados Chicken Barn Chicken Barn Aquatic Gap St. Michael Barbados KFC KFC (Barbados) Ltd. Hadley House, Hincks Street St. Michael Barbados New Thriving Restaurant New Thriving Restaurant Weymouth Corporate Center ICB Building St Michael Barbados Pizza Man Doc Pizza-Man Doc. Passage & Baxter Road, Bridgetown St. Michael Barbados Pizzaz Restaurants Brosville Restaurants Ltd. Hole Town, St. James St. Michael Barbados Blue Water Grill Blue Water Grill Beachfront at Sunbreeze Hotel San Pedro Belize HL Burger Howell Longsworth Burger Ltd Northern Hiway Belize City Belize Pepper’s Pizza Peppers Pizza 4 St Thomas St Belize City Belize Subway Subway (Belize) Ltd. 162 Freetown Road Belize City Belize Super Subs James Brodie & Co Ltd. 16 Regent Street, P.O. Box 365 Belize City Belize KFC Trois Piton Foods 21 Great George Street Roseau Dominica Royal Castle Chesterfield Corporation 12 Halifax Street St. Georges Grenada Subway Sandwiches Subway (G'da) Ltd. Airport Rd St. Georges Grenada Chester Fried Chicken Toucan Industries Ltd. 10 Water Street, Kingston Georgetown Guyana KFC/ Pizza Hut KFC Guyana/DIDCO 23 Water & Coral St., Stabroek Georgetown Guyana New Thriving Restaurant New Thriving Restaurant Camp & Brikdam Streets Georgetown Guyana NP Creole /Chicken NP’s Group 155 Charlotte & King Sts., Laceytown Georgetown Guyana Popeye's Chicken & Seafood Guyana Stock Feeds 1E Vlessengen Road & Duncan Street Georgetown Guyana Qik Serv Demico /Banks DIHL Demico House, Brickdam, Stabroek Georgetown Guyana Royal Castle Royal Castle 30 Hadfield St., W/rust Georgetown Guyana Salt & Pepper Restaurant Salt & Pepper Group 14 - 15 Croal & Longden St. Georgetown Guyana

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VIP Pizza VIP Pizza 164 Barr Street, Kitty Georgetown Guyana KFC/Pizza Hut Restaurants of Jamaica 4 Northside Drive Kingston 6 St. Andrew Jamaica Island Grill Island Grill 2 Valentine Drive, Kingston 19 St. Andrew Jamaica Domino's Pizza Partners Foods 33B Hope Rd., Kingston 10 St. Andrew Jamaica TGI Friday TGI Friday/ Prestige Holdings Hope Rd., Kingston 10 St. Andrew Jamaica Subway Subway (Jamaica) Ltd. 48 Duke Street St. Andrew Jamaica Burger King Restaurants Associates 18 Hope Road, Kingston 10 St. Andrew Jamaica Popeye's Chicken & Seafood Restaurants Associates 18 Hope Rd., Kingston 10 St. Andrew Jamaica Juici Beef Patties Juici Beef Ltd Lot 1 Clarendon Park, Clarendon Clarendon Jamaica Tastee's Patties Tastee Ltd. 25A H W T Rd. Kingston 5 St. Andrew Jamaica Mother's Mother's Restaurants 14 Retirement Rd. Kingston 5 St. Andrew Jamaica Captain’s Patties Captain’s Bakery Kingston St. Andrew Jamaica Tony’s Original Pizza Tony’s Original Pizza Grenville St Kingstown St. Vin. & Grenadines Rick’s Pizza Rick's Pizza Arnos Vale Kingstown St. Vin. & Grenadines KFC Aunt Jobe’s Market Melville & Grenville Sts Kingstown St. Vin. & Grenadines Burger King Restaurants Associates 4 Glace House, Rodney Bay Gros Islet St. Lucia Domino's Pizza Domino's Pizza Reduit Beach Drive, Rodney Bay Gros Islet St. Lucia KFC KFC (St. Lucia) Ltd. 17 Bridge Street Castries St. Lucia Chez Moms Restaurant Chez Moms Restaurant Grande Riviere Gross Islet St Lucia Suriname Pizza Suriname Pizza Coppenamestraat 9 Paramaribo Suriname Joosje Roti Shop Joosje Roti Shop Zwartenhovenbrugstraat 9 Paramaribo Suriname KFC/ Pizza Hut/ Mambo Grill Cirkel Group Domineestraat 22 Paramaribo Suriname McDonalds Jules Fernandes NV Klipstenenstraat #1 Paramaribo Suriname Naskip Naskip Verl Gemenelandsweg 2 Paramaribo Suriname Popeye's Chicken & Seafood Popeye's Chicken Dominestraat 39 Paramaribo Suriname Roopram Roti Roopram Roti Zwartenhovenbrugstraat 9 Paramaribo Suriname Sarinah Indisch Restaurant Sarinah Indisch Restaurant Ver Gemenlansweg Paramaribo Suriname Tapies Golden Wings Tappis Chicks Houtuinweg 5 Lelydrop Suriname Wolly’s Burgers Woolly’s Restaurants Tuberoostraat Paramaribo Suriname

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Blimpie’s Subs & Salads Mario's Pizzeria Ltd. LP 80 El Socorro Ext. Road (BOX 1731 POS) El Socorro Trinidad & Tobago Bos Burgers Bos Burgers Ltd. 65 Eastern Main Road Barataria Trinidad & Tobago Burger King/ Popeye's Chicken Restaurant Holdings Ltd. Unit 5 Lot 2 C Chootoo Road, El Socorro San Juan Trinidad & Tobago Church’s Chicken Pizza Boys Group 80 Boundry Road San Juan Trinidad & Tobago Pizza/Burger Boys Pizza Boys Group 80 Boundry Road San Juan Trinidad & Tobago Rituals/ Donut Boys/ Gelatos Pizza Boys Group 80 Boundry Road San Juan Trinidad & Tobago Wok & Roll Pizza Boys Group 80 Boundry Road San Juan Trinidad & Tobago Joe's Pizza Steaks & Hoagies Joes Pizza Italian Restaurant Coral Cove, Marina & Hotel Chaguaramas Trinidad & Tobago Papa John’s Pizza Elisians Limited Corner Riverside Road & Eastern Main Road Curepe Trinidad & Tobago Hagen Dasz Café Hadco Ltd JRJ Warehousing Compound, Bhagoutie Trace San Juan Trinidad & Tobago Hosein's Roti Hosein's Roti Western Main Rd., St. James Port-of-Spain Trinidad & Tobago KFC/ Pizza Hut/ LJS Prestige Holdings Ltd. 47 - 49 Sackville St. Port-of-Spain Trinidad & Tobago TGI Friday's /TCBY Prestige Holdings Ltd. 47 - 49 Sackville St. Port-of-Spain Trinidad & Tobago Mario's Pizza Mario's Pizzeria Ltd. LP 80 El Socorro Ext. Road El Socorro Trinidad & Tobago Royal Castle International Castle Ltd 206 Montrose Main Road, Longdonville Chaguanas Trinidad & Tobago Subway Sandwiches Mainstream Foods Ltd. Frederick Settlement, Industrial Estate Caroni Trinidad & Tobago Trotters/ Prime Restaurants Trent Restaurants Ltd Corner Maraval & Sweet Briar Road, St. Clair Port-of Spain Trinidad & Tobago Willies Ice Cream Willies Ice Cream Arena Freeport Road Freeport Trinidad & Tobago JerkQuizine Caribbean Grille Royal Caribbean Bakery 117 Route 303, Suite A, Tappan New York USA GoldenKrust Carib Bakery &Grill Golden Krust Caribbean Bakery 3958 Park Avenue, Bronx, New York 10457 New York USA Sallys West Indian Restaurant Sallys West Indian Restaurant 1574 Ralph Avenue New York USA Bahamas Breeze Darden Restaurants 593330 Orlando 32859-3330 Florida USA Mr Jerk Mr Jerk Brixton London United Kingdom Bamboula Restaurant Island Grill (Jam) Ltd. Brixton London United Kingdom Hot & Spicy Hot & Spicy Brixton London United Kingdom Take Two Take Two Brixton SW2 5UL London United Kingdom Cummin ‘Up Restaurants Richard Simpson 283 Sydenham Rd. London United Kingdom IMPORTER DISTRIBUTORS A S Bryden & Sons A S Bryden & Sons Cnr Fort & Anchorage Roads St Johns Antigua & Barbuda

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Anjo Wholesale Anjo Wholesale American Road St Johns Antigua & Barbuda Dew's Wholesale Dept Dew's Wholesale Dept Industrial Estate Airport Rd Coolidge St Johns Antigua & Barbuda Food Brokerage Services Food Brokerage Services Upper Newgate Street St. Johns Antigua & Barbuda Island Provision Island Provision Group PO Box 898, Airport Rd St Johns Antigua & Barbuda Asa H Pritchard Ltd Asa H Pritchard Ltd P.O. Box SS-6218 Nassau Bahamas Associated Grocers Bahamas Bahamas Assoc Grocers East West Highway PO Box SS-1909 Nassau New Providence Bahamas Bahamas Food Services Bahamas Food Services P.O. Box N-4401 Nassau Bahamas Food & Allied Products The D'albenas Agency P.O. Box N-8180 Nassau Bahamas Grand Bahamas Foods Grand Bahamas Food Co. P.O. Box F-42450, Freeport, Grand Bahama Bahamas Milo B Butler & Sons Milo B Butler & Sons Ltd Peach St. Off Montrose Ave., P.O.Box N-712 Nassau Bahamas Prime Bahamas Ltd. Prime Bahamas Ltd. East West Highway PO Box SS-1909 Nassau New Providence Bahamas Bryden & Sons Bryden & Sons Barbaree's Hill Bridgetown Barbados Goddard's Enterprises Ltd Goddard's Enterprises Ltd Mutual Building, Lower Board St, Bridgetown Barbados Hanchell Inniss Hanchell Inniss N/a Bridgetown Barbados SDI Distribution Inc. Barbados Shipping & Trading PO Box 1435, Bridgetown Bridgetown Barbados Stokes & Bynoe Ltd ANSA Mc Al Meadow Road, Wildey Industrial Estate St Michael Barbados Tempro AR Ltd Tempro AR Ltd Barbarees Hill, St Michael Barbados James Brodie & Company Ltd James Brodie & Company Regent Street Belize City Belize Price Premier Products Price Premier Products 27 Regent Street Belize City Belize Santiago Castillo Santiago Castillo Ltd. San Cas Plaza Belize City Belize Brisbane O D & Sons Brisbane O D & Sons Canefield Roseau Dominica J Astaphans J Astaphans N/a Roseau Dominica Shillingford T D Shillingford T D Self Service King George V Street Roseau Dominica Whitchurch H H V & Co Ltd Whitchurch H H V & Co Old St Roseau Dominica Byrden & Minors Ltd. Byrden & Minors Ltd. Lagoon Rd Box 14 St Georges Grenada George F Huggins George F Huggins (Gda) Ltd N/a St Georges Grenada Jonas Browne & Hubbard (G'da) Goddard's Enterprises Ltd. Careenage St Georges Grenada Walker R E & Co Ltd Walker R E & Co Ltd Victoria & Albert Sts Grenville St Andrew Grenada Ansa McAl Trading Ltd ANSA McAL 91 Middle Street, Georgetown Georgetown Guyana

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M Beepat & Sons M Beepat & Sons 101 Regent Street, Lucytown Georgetown Guyana Bryden & Fernandes Inc Bryden & Fernandes Inc 53 - 55 Water Street Georgetown Guyana Cirkel Distributors Inc Cirkel Distributors Inc 1 - 2 Lamaha & Vlissengen Road Georgetown Guyana Desinco Trading Ltd Desinco Trading Ltd 48 Sherrif Street Georgetown Guyana DIDCO Trading Co. Ltd. DIDCO Trading Co. Ltd. 118 Cowan Street Kingstown Guyana Geddes Grant Ltd Geddes Grant Guyana Ltd. 109 Marcus Garvey Drive, P.O. Box 417 Georgetown Guyana Guyana Marketing Corporation Guyana Marketing Cor 87 Robb & Alexander Sts. Georgetown Guyana N S Mattai & Co N S Mattai & Co 4A Water Street & Hope Street Georgetown Guyana Patsan Trading services Patsan Trading services 282 Sherrif Street Georgetown Guyana Caribbean Producers Caribbean Producers Oxford Road, Kingston St Andrew Jamaica Facey Commodity Co. Ltd. Facey Commodity Co. 61 Newport Blvd N P W St Andrew Jamaica Grace, Kennedy & Co. Ltd. Grace, Kennedy & Co. 73 Harbor Street, P.O Box 86, Kingston St Andrew Jamaica Hand Arnold (Ja.) Ltd Hand Arnold (Ja.) Ltd St Andrew Jamaica Lacalles Merchandise Ltd Lacalles Merchandise Ltd White Marl St Catherine Jamaica Musson's Jamaica Ltd Musson's Jamaica Ltd Kingston St Andrew Jamaica T Geddes Grant Ltd T Geddes Grant (Dist) Ltd 10o Marcus Garvey Dr Kingston 11 St Andrew Jamaica Wysinco Trading Wysinco Trading N/a St Andrew Jamaica Brisbane O D & Sons Brisbane O D & Sons C A P Southwell Industrial Park Basseterre St Kitts & Nevis David Coury & Co Ltd David Coury & Co Ltd College Street Basseterre St Kitts & Nevis Kawaja Food Centre Ltd Kawaja Food Centre Ltd Buckley's Basseterre St Kitts & Nevis Bryden & Sprott Ltd Bryden & Sprott Ltd Calliaqua Box 82 Kingstown St. Vin. & Grenadines CK Greaves & Co Ltd CK Greaves & Co Ltd Upper Bay St Kingstown St. Vin. & Grenadines Frank B Armstrong Frank B Armstrong Vigie Hiway Fountain Box Kingstown St. Vin. & Grenadines Bryden & Partners Ltd Bryden & Partners Ltd Bois D'Orange Box 853 Castries St. Lucia Island Foods Ltd Island Foods Ltd Massade Industrial Estate Castries St. Lucia Peter & Co Goddards Enterprises Cul de Sac Box 84 - 85 Castries St. Lucia Renwick & Co Renwick & Co Vide Bouteille Box 90 Castries St. Lucia St. Lucia Marketing Board St. Lucia Marketing Board P.O. Box 441 Castries St. Lucia Trans Caribbean Agencies Ltd Trans Caribbean Agencies Vieux Fort Industrial Estate Vieux Fort St. Lucia

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United Distributors Cirkel Group BV 22 Domineestraat Boven Suriname Firgos Suriname NV Firgos Suriname NV 16 Industrieweg Zuid Paramaribo Suriname J L Jong A Kiem NV J L Jong A Kiem NV PO Box 272, Wilhelminstraat Paramaribo Suriname Pacific Handle NV Pacific Handle NV PO Box 1009 Paramaribo Suriname Subisco International Subisco International PO Box 9299 Paramaribo Suriname United Distributors Cirkel Group Domineestraat 22 Paramaribo Suriname Agostini Ltd Agostini Ltd 4 Nelson Street Post of Spain Trinidad & Tobago Alston's Marketing ANSA McAL Uriah Butler Hiway Chaguanas Trinidad & Tobago AS Bryden ANSA McAL Ibis Avenue San Juan Trinidad & Tobago Hadco Ltd Hadco Ltd Bhagoutie Trace San Juan Trinidad & Tobago Marketing & Distribution Neal & Massy Holdings Ltd. Macoya Rd & Churchill Roosevelt Hiway Trincity Trinidad & Tobago T Geddes Grant Ltd. T Geddes Grant Ltd. 9 Chacon Street Port-of-Spain Trinidad & Tobago Vemco Ltd. Multifoods Corp. 7 Diamond Vale Industrial Estate Diego Martin Trinidad & Tobago

crnm assessment of caricom agri-food distribution services€¦ · uwi university of the west...

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