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New focus targets underserved food distribution trade segments

Food distribution company, Everything Fresh Limited is reporting success in its COVID-19 restructuring exercise, which is now bearing fruit.

Chairman Gregory Pullen reports that the restructuring activities in 2020 are bearing fruit this year, with the company expecting a strong end-of-year performance with improved margins. According to Pullen, “the business is trending in the right direction and we will continue to carefully evaluate and pursue the best opportunities to grow sustainably.”

Everything Fresh started 2020 on a high with solid growth projections and a medium-term strategy to expand into retail sales. However, these projections were derailed by the global outbreak of COVID-19, which presented significant challenges to the business and severely impacted 2020 financial results.

The impact of the pandemic forced Everything Fresh, which was incorporated in August 2003 and commenced operations some five years later in October of 2008 to take swift and decisive action to restructure the business and accelerate plans already in the pipeline to deepen focus on core competencies of sales and distribution. In line with this strategic direction, the company scaled down its interest in manufacturing and eliminated non-performing product lines, while retaining revenue-generating products such as sausages, where Everything Fresh had a competitive advantage.

COVID-19 caused Everything Fresh to lose 98% of main revenue stream

Everything Fresh’s business model pre-COVID relied heavily on the hotel industry, which contributed over 85 per cent of total sales. With travel and hospitality being one of the first industries to be significantly impacted by the pandemic in 2020, the company lost 98 per cent of its main revenue stream within the first quarter of the year.

Taking swift action, the company shifted to restructure operations, targeting the following retail channels: in-house sales, restaurants, supermarket business, and wholesale.

Through driving this focus from March 2020 onwards, sales to the retail channel more than doubled and hotels accounted for 46 per cent of total sales by the end of the year.

As the hotel sector declined, Everything Fresh streamlined operations to further expand its sales and distribution capability into the retail trade: in-house sales, restaurants, supermarkets and wholesales. By catering to these underserved segments and expanding into additional channels, the company, which imports and manufactures high-demand food products, was able to sustain the business and generate steady revenue.

Containing expenses and restructuring debt

“We also increased our marketing effectiveness and profitability through investing in a new accounting system which delivered powerful, actionable insights. In addition, the company took steps to reduce expenses and to negotiate and restructure existing debt,” Pullen advised shareholders in his forward statement accompanied in the company’s just released 2020 annual report.

However, notwithstanding the efforts of the team, sales dropped to 50 per cent of pre-COVID levels, particularly with the decline of the hospitality sector. Overall, the magnitude of challenges posed by the pandemic precipitated a 52 per cent decline in gross profit to $142.8 million from $299.5 million a year earlier.

Based on Everything Fresh’s strategic direction and the changes implemented to focus on its core competencies, Pullen posits that, “Everything Fresh is poised to be ahead of the curve in 2021. We are introducing new product lines to meet consumer demand and will continue to increase sales from the non-hotel sector through improved merchandising and inventory management.”

There are strong indications that tourism will begin to normalise as the vaccine roll-out continues with focus on the hospitality industry. As such Everything Fresh is anticipating that the hotel sector will start to recover during summer with bookings increasing for the winter season.

This revival of the hotel industry, coupled with continued growth in the restaurant business, augurs well for Everything Fresh topline growth.

Everything Fresh transitioning

Having hit record revenue in the previous financial year, Everything Fresh had transitioned from being a medium-sized business into becoming a large one. Going forward, the strategic focus of Everything Fresh is to increase retail sales in restaurants, supermarkets and online shopping through improved merchandising and inventory management.

Since the start of 2021, the hotel sector accounted for 35 per cent of total sales, which Everything Fresh cites as a positive shift. Continued focus on the retail segment will eliminate reliance on the hotel industry and support sustainable growth.

In 2020, new product lines such as the Deep River brand of snacks and Provecho wraps performed very well in supermarkets. The company will continue to source and introduce new products to meet consumer demand with the expectation that improved margins from retail sales will offset promotion expenses.

The new accounting platform (Sage) will also enable improved stock rotation, logistics management and a further reduction in expenses.

Expansion to Bahamas with Everything Fresh Bahamas Limited

During the first half of 2021, the Company expects to consolidate the operations of Everything Fresh Bahamas Limited into the group. This follows July 2020 actions to acquire 60 per cent of the shares of Everything Fresh Bahamas Limited, a company registered in the Bahamas.

This was the culmination of a process that began in 2019 when Everything Fresh provided a loan to the Bahamian company to assist with startup costs and sourcing of inventory. The Bahamian law firm representing Everything Fresh Bahamas gave notice that the share certificate for 3,000 shares in the company was issued on July 1, 2020.

However, due to disruptions to commercial activities in the Bahamas caused by the pandemic, a statutory additional filing was left incomplete at the year-end. This meant that the company did not meet the requirements to prepare consolidated financial statements for the year ended 2020. The final steps are now underway to complete the formal process.

The current projections are for strong growth in the retail sector throughout 2021. There are also good indications that tourism will begin to normalize as the vaccine rollout continues, and Everything Fresh expects that the tourism industry will recover in time for the start of the winter season.