Wallenford coffee goes to market in months

Avia Collinder, Business Writer

The assets of Wallenford Coffee Company (WCC), the largest and among the best known producers that make up the elite Blue Mountain coffee brand, are expected to finally hit the market this summer, as the Government has wrapped up more than a year of what it had termed "the preparatory phase" of the divestment of that state-owned enterprise. But even as the state readies the company for sale, Government officials refused to put to rest suggestions that Japanese interests have already gobbled up choice junks of the assets, even before a formal bid process takes place.

Ministry of Agriculture and Fisheries officials told the Financial Gleaner this week that an information memorandum is now being drafted as the basis for bids to be considered for the assets.

Donovan Stanberry, the permanent secretary in the agriculture ministry, indicated too that thought was being given to breaking up the company and selling it in pieces.

"All we know is that we want to get rid of the property," Stanberry said.

Buyers are being sought for assets which include factory and processing facilities, several farms in the Blue Mountain region, a pulpery, property located on Marcus Garvey Drive in Kingston and what Stanberry described as "the very valuable Wallenford brand itself".

"We are not in the business of processing coffee," the Government official declared.

Valuation of all assets, a process in train for a while now, is said to be still taking place.

Wallenford Coffee is a limited liability company created in 2004, when the Government sought to differentiate between its industry regulation functions, such as licensing, certification, advisory services, standards, pricing, shipments and sales.

Just weeks ago, Christopher Gentles, the Coffee Industry Board's director general had reiterated the Government's firm intention to rid itself of Wallenford, which the state-run Development Bank of Jamaica (DBJ) had been preparing for sale for some time now.

"The Ministry of Agriculture remains firm in its stance to divest itself of the coffee industry, so that the Government does not sustain competition with the private sector plants, and wants to ensure that the sector does not accrue deficits that the Government is expected to pay" he told the Financial Gleaner late last month.

PRIVATE SECTOR

Gentles sought to further explain the Government's desire to get rid of Wallenford.

"If the Government owns coffee-processing facilities these compete unfairly with the private-sector operators. If the Government bodies price the coffee too high and lose money, then (the state-owned commercial facilities) request financing from the Government (to covering deficits), which puts the private sector at a disadvantage."

If, on the other hand, he pointed out, a private company loses money, its shareholders and directors will either have to put in additional equity or put up additional collateral to borrow the money needed.

Neither of the government officials would comment on how much debt Wallenford was carrying, although a lengthy period of sorting out the financial state of the entity appeared finished or close to completion. Its financial results, including sales figures, have not yet been made public.

Total coffee sales for the local industry in 2009 amounted to US$37 million.

Meanwhile, neither Gentles nor Stanberry would confirm or deny information that commercial interests in Japan, Jamaica's largest market for Blue Mountain coffee, already owned a significant share of the Wallenford estate.

The estate is considered a money maker, which is expected to attract several bids.

Last year, the weighted average farm-gate price paid for Blue Mountain cherry coffee was $124,986.69 per tonne and non-Blue Mountain coffee fetched $73 560.15 per tonne.

The sale of Wallenford was approved by the Cabinet last year, but the agriculture ministry, its chief administrator said, had spent the time since then transferring some assets to Wallenford to consolidate all the state's commercial operations in the facility to be sold.

"There were critical assets not on the balance sheet, (but) the property now has a proper balance sheet which will form the basis of the information memorandum currently being prepared," permanent secretary Stanberry said.

The divestment is being handled by the DBJ and the information memorandum being prepared is to be made available to all interested parties in a process involving bid proposals invitations through public advertisements.

The coffee factory belonging to Wallenford, the largest in the island, is located at Tarrintun in Clarendon and the pulpery at Aenon Town in that parish, while the farms are in the Blue Mountains.

avia.collinder@gleanerjm.com