Closing the Alexander Era
Enterprise and Bureaucracy
Following the celebrations to mark Grace, Kennedy’s Sixtieth Anniversary in February 1982, a Gleaner editorial included the comment:
Through a blend of good business practice, efficient management, promotion in the market place and involvement with the Jamaican people, the company has earned for itself a sound reputation. There are other companies, which rank with GraceKennedy Limited and we hope the example, which they are setting in how to be good corporate citizens, will be followed by other younger and smaller enterprises.
Too often we tend to look at the negative aspects of private enterprise, tarring all of them with the same brush. Yet the reality is that there are good corporate enterprises doing a service and contributing to the development of the Jamaican economy; as well as the shady hustlers whose sole aim seems to be to make a million dollars in the quickest possible time, and to do so without reference to the national good.
It is the rip-off artists who are responsible for some of the more unacceptable practices in the private sector. And once the business community recognizes this, action should be taken to discourage the quick buck hucksters.
Companies operating at the level of Grace, Kennedy by their example can do a lot to foster the spirit of enterprise.
Carlton Alexander would have endorsed those comments to the full. In 1983 he would have reached his fiftieth year of service to the Company. With the passing of Dr. Grace, with whom he had not worked; and of James Moss-Solomon and Luis Fred Kennedy, his mentors and patrons, Carlton Alexander was now recognized throughout Jamaica as ‘Mr. GraceKennedy’, Chairman and Chief Executive Officer of the Company and the acknowledged spokesman for the private sector on matters of national importance. In their endeavour to achieve both the profitable expansion of the Company’s business and its acceptance by the general public as a worthy institution, Alexander and his Directors were constantly searching for a proper balance between raw enterprise and that measure of bureaucratic administrative control which would ensure the Company’s legality, longevity and popularity, without stifling the search for business.
The ultimate private enterpriser is the pirate whose primary concern is to find the greatest profit as quickly as possible. The pirate captain assembles his crew for each venture. Some may wish to work with him on every occasion because of his reputation for success. He, however, chooses his band to meet the anticipated exigencies of the immediate project; he is not concerned with their loyalty or their welfare beyond its conclusion. During the particular enterprise, his commands must be obeyed without challenge but there are previously agreed arrangements for the division of the expected spoils and for compensation of those who suffer death or injury during the action. All is strictly planned and controlled, but is totally ad hoc. There is no continuing organization,
there is no desire to increase the capital assets of the business beyond the ownership of equipment necessary for the particular engagement, and there is no concern to win the ‘goodwill’ of those with whom he will deal. Those are the marks of then ultimate profiteer.
At the other end of the scale is the private enterpriser who, seeking profit, seeks also to build a continuing, growing and publicly approved business. To be successful in this, he must find loyal support from his employees in order to avoid the disruptions of rapid staff turn-over; he must be ready, without seeming rapacious, to acquire additional assets and business when opportunity arises; as the enterprise grows, he must depute an increasing measure of managerial direction and responsibility to others; and he must so conduct his operations that those with whom he deals will wish to continue to do so. In short, his lust for profit is restrained by an unavoidable spread of executive and administrative controls of a bureaucratic sort and an increasing sensitivity to public opinion. From their early days, Grace, Kennedy & Co., Ltd. have always evinced these features of the private enterprise in search of profits and also of goodwill.
Aggressiveness and quick action are important means by which an enterprise beats its rivals in the business. Carlton Alexander had demonstrated this in 1951 after Hurricane Charlie. In another example, when it was announced in 1983 that the Jamaica Public Service Co., Ltd. would acquire a floating plant in Japan, GraceKennedy & Co. (Shipping) Ltd. moved quickly. They immediately advised Wijsmuller Transport B. V. in Holland, for whom they were the local agents, of the project and that company secured the contract to move the barge from Hiroshima to Kingston. Individual members of the GraceKennedy Board of Directors from time to time in the privacy of the Boardroom have described some other company as being ‘up for grabs’, or in similar ‘piratical’ language which they would carefully have avoided in public address. But there were always the restraints on action, and the most important of these were the understandings that Grace, Kennedy held no monopoly in aggressive business practice and the constantly emphasized policy of good corporate citizenship.
It was the Jamaica Chamber of Commerce which, in 1983, declared GraceKennedy & Co. Ltd. to be the company ‘which best demonstrates the Human Face of Business’ and, through Mrs. Avis Henriques, presented an award received on behalf of the Company by its Finance Director Rafael Diaz. And in the same year, in a meeting of the Board at which the Company’s policy in a highly competitive market was the main topic of discussion, Alexander was much concerned to protect the Company’s image as ‘the people’s friend’. With May 1983 marking his fiftieth year in the service of GraceKennedy & Co., Ltd. the first five years of the 1980s were the zenith of Carton Alexander’s outstanding career.
From ‘Shartridge’ into ‘Scarcity’
During the last years of the PNP regime, the shelves in the stockrooms, in the supermarkets and in the smaller retail outlets had gone bare. Small suppliers went out of business, housewives searched for basic food and household items.
Tight restrictions on imports, lack of foreign exchange, an increasing North American mistrust of the
Jamaican Government’s policies and of the local business climate, the migration of entrepreneurial and managerial talent and of capital – all had subscribed to the dearth. Business slumped and so did good business practice. At the Gracefoods International Conference in Montreal in June 1981, Bruce Rickards summed it up:
During this period, the question of price and quality hardly mattered. The issue was who had the product, and when it would be available…. this was a totally different situation from that in, which the Company had developed. Our growth had been in an active market where dynamism, expertise, sources of supply, quality and price were the issue who got to the market first with the best product and the best price at the right time – but in that final six years those principles just went out the window. Anything you had could sell. We had many young people who grew up during this time unaware of what it meant to be in competition. We acted like God in the office – who should get what and how much, and so on. This did not develop our young people’s skills in selling and service.
Now, he continued, with the recently elected JLP, and following the embrace given to Prime Minister Edward Seaga by President Reagan, a great deal of interest was being shown in Jamaica,
…. from the U.S., notably the eastern seaboard, the mid-west, and also from Canada, England, France, South Korea, Japan, Taiwan, Venezuela and Mexico.
Carlton Alexander had been appointed Chairman of the Prime Minister’s Committee for Investment and Employment. The changes were noticeable:
…. not just in the new spirit of optimism, but in [the] consumer climate. People are anticipating that the times are once again opportune – that the consumer is again going to be king., making or breaking you according to whether you have the right price, the right quality and so on. Consumerism is taking over once more.
And so it did, but unfortunately it was not matched by increased production to pay for what we consumed. The zealous enterprise, which went into production of marijuana, for export to the United States in particular, was supportive of ‘consumerism’ and contributed little to the development of our capacity to produce for legal and accountable trading.
In the first week of January 1983, the Ministry of Finance Paper No. 1 dealing with the ‘Parallel Market’ was tabled in the House of Representatives. It was designed to encourage foreign exchange earnings by the manufacturing and agricultural sectors, especially in the European Economic Community and CARICOM markets, and it were particularly aimed at ‘non-traditional exporters’. If those in this category exported or planned to export at least 5 per cent of their total output within a twelve-month period, they would be eligible for access to the Export Development Fund.
This meant that such an exporter would receive, in advance. a foreign exchange allocation equivalent to 50 per cent of planned export earnings for the year (exporters to
CARICOM markets would receive 80 per cent). Moreover, an exporter ‘to third country markets’ (e.g. in Europe) would be allowed:
…. to retain 50 per cent of his export proceeds which he may use either to procure raw materials, spare parts and capital goods for his own use, or to sell these proceeds in the parallel market which is being formalized in the commercial banking system.
In addition to access to the EDF and the 50 per cent of hard currency earnings, which he retains, the non-traditional exporter will also have access to the formalized parallel market and the resources of the Jamaica Export Credit Insurance Corporation (JECIC).
The claim on 50 per cent of export proceeds, retained in the exporter’s bank in the appropriate foreign currency, could be sold by its holder within thirty days. Thereafter, only the holder could use it. Moreover, it might be sold to a producer for the local market as well as to another exporter.
The paper also introduced the Parallel Market mechanism. It acknowledged the existence of a thriving and increasing ‘informal market’ in foreign exchange, and, hinting at some of the problems, explained why the resources of this market could not be cornered for officially approved use.
- The multiple layers of intermediation operating in this market resulted in
large spreads between the buying and selling rates thereby leading to
artificially high selling rates.
- The funds generated in the market have been use largely for purchases of
consumer goods rather than imported inputs for the productive sector.
- Operators in the market have been unable to document their transactions for
the tax and audit purposes because of the informal nature of the market.
- The system has led to an increasing harassment of tourists, which is having a negative impact on the industry. Like other ‘traditional’ export industries – bauxite and alumina, sugar and banana tourism, though comparatively successful, was not thriving as it might.
The Parallel Market mechanism allowed the commercial banks to operate two currency markets, on at an ‘Official’ rate of J$1 = US$0.561349 set by the Bank of Jamaica; the other ‘Parallel’ rates to be set daily by each commercial bank on the basis of its supply and demand. Foreign Exchange required for all purposes except those listed in a Schedule would have to be purchased at the prevailing parallel rate. The inflows of funds to the Parallel Market were expected to come from the proceeds of the 50 per cent of export receipts by ‘non-traditional exporters, from certain lines of credit operated for the Bank of Jamaica by its subsidiary JECIC, and also from:
- Certain foreign exchange flows which are not amenable to effective
monitoring by the bank of Jamaica.
- Capital funds which might be attracted to Jamaica as a result of a more
orderly mechanism in the parallel market
- With regard to III and IV above, the banks will purchase foreign exchange on
a ‘no questions asked’ basis. Thus the whole range of enterprisers was to be accommodated.
Under the ‘Official’ rate, the Schedule sought to protect the interests of the ‘traditional’ export industries, the Government and its agencies, and the general public from the higher and daily fluctuating prices of foreign exchange in the Parallel Market. By the end of April 1985, the Government had removed most of the restrictions on imports but had increased stamp duties on raw materials by 10 per cent, capital goods by 20 per cent and consumer durables by 30 per cent. As far as Grace, Kennedy & Co., Ltd. was concerned, there were advantages to be gained.
At a Directors Meeting on January 27, Carlton Alexander announced that GraceKennedy & Co., Ltd. had been given approved status under the Export Development Fund and could now purchase, without quota, raw materials, spare parts and capital goods. At the same meeting, Rafael Diaz, Finance Director, observed:
The Parallel Market as governed by the Ministry Paper gives us opportunity to earn money and we should study the document carefully, understand it, and get out and earn that money.
Included in the official Schedule were basic foods such as the Company had always imported: rice, flour, chicken necks and backs, corned beef, pickled meats and fish, dairy products, agricultural materials and tools, and medical and pharmaceutical products. Importations of these would be limited only by the Quota System introduced in conjunction with the Parallel Market. By it, total import ceilings in foreign exchange were set for broad categories of commodities. Under these ceilings individual firms were allowed amounts for which they might apply.
Grace, Kennedy & Co., Ltd. had been allotted a quota of US$2 million of imports of foodstuffs. This was less than desirable and, as it would mean a scaling down of imports, the Company would have to appeal for an increase. Alexander commented:
It seems to be a delaying tactic as the Government does not have the foreign exchange in place and they do not want the Parallel Market to be pressured.
Nonetheless, as had been pointed out, there were now openings for business. Export Development Fund status was clearly an advantage, especially in view of the Company’s current efforts to increase its exports and so increase it own earnings of foreign exchange.
Moreover, as the Ministry Paper implied, there were other sources which might be tapped through the Parallel Market, now formalized in the commercial banking system, although still, as before, flourishing informally on the streets. As was noted in the Ministry Paper:
The introduction of the Export Incentive Scheme and formalized Parallel Market will lead to further leakages of foreign exchange from the official market and steps are being taken to strengthen existing measures and to introduce new ones in order to capture the maximum foreign exchange for the official market.
Despite such steps and subsequent policies, by which the Parallel Market system was ended, various procedures of ‘auctioning’ available foreign exchange adopted, and later moves to ‘free up’ the market introduced, the ‘leakages’ continued to an alarming extent.
By the end of the 1980s, the ending of the Parallel Market system with its official rate of exchange for scheduled transactions led to an upward movement of prices. At the same time, underground inflows of foreign exchange were weakened by the ‘ganja eradication programme’ carried out with the encouragement and assistance of the US government. Pressured by the International Monetary Fund, but also moved by the need to reduce Government’s current expenditures, the numbers of public sector employees were cut back, thus adding to the level of unemployment.
For a time, the foreign exchange supply had been bolstered by an inflow of investment capital. Some who had migrated in the 1970s returned home and reopened businesses. Lines of Credit were restored after the elections, and new ones offered. But little of this went into the acquisition of plant and equipment for production. Much went into the building of shopping malls and supermarkets to support the growing ‘consumerism’. In a situation of rising prices and declining real wages, the well-to-do reveled in a surging enjoyment of foreign luxuries, while a growing majority walked through the shelves of increasingly expensive basic commodities of food and clothing. There was no ‘Shartridge’. The goods were there; but there was scarcity in the households of the poorer paid. The black market became a major source of supply of foreign exchange.
As might be expected, fingers have been pointed in accusation at those suspected of raking in the foreign exchange on the streets. In an article entitled ‘Big food importers devour foreign exchange’ in the Sunday Gleaner of May 19, 1991, Max Lambie wrote:
The operators in the black market, also, estimate that now these firms represent the major resting-place for the underground funds.
Rafael Diaz rose to the defense of Grace, Kennedy & Co., Ltd. The Gleaner of June 12 reported his statement:
He pointed out that for a considerable number of years the Company has been getting the feedback that they had authorized agents buying foreign exchange on their behalf. Mr. Diaz said the accusation that Grace, Kennedy and Company had undercover agents,
purposing to be employees of the Company, on the streets soliciting foreign exchange on the Company’s behalf was a fraudulent one. He denied any such involvement.
About a week later it was announced that the bank of Jamaica would now officially enter the black market. In the Financial Gleaner of June 21:
Commercial Banks have been given the green light by the Bank of Jamaica to begin appointing agents to purchase foreign exchange on their behalf.
The two largest banks, National Commercial bank and bank of Nova Scotia, said to control nearly 70 per cent of the foreign exchange market, proclaimed no interest. Others proposed to appoint agents almost immediately. Questions concerning the reliability and integrity of such agents, and the means by which their street transactions might be monitored remained to be answered. At the same time, the ‘unauthorized’ dealer would lie open to prosecution under the law. This arrangement did not, apparently, come into operation. In September 1991, the Minister of Finance announced that Government had decided to ‘liberalize’ the foreign exchange market. Henceforward, dealings in foreign exchange, whether by firms or by individuals, would be entirely unrestricted. Thus, the Jamaican dollar would find its true rate of exchange and the black market in foreign currencies would be forced out of existence. The policy, generally hailed as ‘a bold step’, was welcomed by the business community in general; but as the value of the Jamaican dollar rapidly sank to unprecedently low levels the prices of goods in the shops sharply increased. This, together with the removal of subsidies on basic items of food, led to further general decline in the standard of living especially among the lower income earners. The confident claim that the new policy would eliminate black market trading in foreign currencies was apparently soon abandoned. The Sunday Gleaner of October 6 carried an item:
Minister of Finance, Development and Planning, P.J. Patterson was reported last week as saying that a special unit comprising people from the Bank of Jamaica (BOJ), Revenue Board and the Police is to be established to stamp out the black market.
Nonetheless, the bank of Jamaica itself supplied agents with large quantities of Jamaican Dollars with which they went into the highways and byways in search of foreign currency. It would seem that, as in the past, there would be distinctions between ‘pirates’ and others called ‘privateers’ who operated under a king’s commission. The hard fact is that until we curtail conspicuous consumption of imported goods and at the same time greatly increase our earnings by exports, foreign exchange will remain a very scarce commodity and will continue to be offered to the highest bidders and most dependable large buyers, not necessarily authorized dealers.
Grace, Kennedy in the Local Marketplace
Introduction of the Parallel Market system would clearly affect the prices of foodstuffs and other commodities not on the Scheduled List. The Grace, Kennedy Directors set out their strategy to meet their competitors. The Company would hold prices, wherever possible, ‘until the competition moves up to or above us’. No Company was yet selling food items at prices, which reflected the Parallel Market costs on imports and packaging, and GraceKennedy & Co., Ltd., could hold prices longer than others could. This was because they carried heavier inventories priced before the Parallel Market, and they might even be able, on some locally prepared items, to increase the Grace, Kennedy factory output and lower prices so as to ‘force back’ the competition. The support of consumers could be won by new trade deals facilitating the islandwide advertisement of ‘Specials’ and Price-Offs’ printed on labels, thus ensuring that savings were passed on to the consumer and taken by the retailer. The Company was also ‘lobbying hard’ to get import permits for unscheduled items in demand.
In April 1985, on the absence of Carlton Alexander due to ill health, Rafael Diaz chaired a meeting of the Directors. He emphasized that the strength of the GraceKennedy Group as a whole lay in their sales, marketing, and customer service, and that those must always
remain as ‘key factors in our business’. However, in days of tight money and high interest rates, the Company could no longer be generous in its credit policy. Above all, GraceKennedy must maintain service in the marketplace. The Directors recorded, ‘Marketing will be crucial as competitors, both existing and to come, will try to “eat away” our market share.”
The market became increasingly competitive. In July 1987, Douglas Orane, who had been appointed a Director in May 1985, remarked.
We are being very aggressive with our pricing and promotional allowances in the market place in order to ensure that none of our competitors makes inroads into our market share. This is an investment for the future in [import] quotas are reintroduced.
Meantime, meetings of the Board of Directors had become little more than occasions for the routine presentation of monthly reports on the performance of the various GraceKennedy Group enterprises. A visiting consultant, Mr. Bieler of the International Executive Services Corps (ISEC), had commented on the creeping bureaucracy, which was hampering business:
Personnel in the Group spend a lot of time preparing reports, to the detriment of their duties, and he recommended that we report only quarterly in detail on operations such as the factories.
The comment would not have surprised either Carlton Alexander who, some time before, had upbraided managerial staff for telling him what they had done rather than what they thought ought to be done. Nor would it have come as a new revelation to Board members
who had Peter Moss-Solomon and Orville Garrick say much the same thing at a meeting in June 1981.
In October 1987, the competition was said to be still increasing. GraceKennedy & Co. Ltd. had lowered prices, and by so doing had protected their share of the market at the cost of lower profits. Thanks to the efforts of Bruce Rickards – appointed a Director in July 1975, – inventories, which had been about $25 million higher than they should have been, were now much reduced; and the Company was ‘continuing to aggressively advertise and to trade deal’. But 1987 was to be a disappointing year in which nearly all the GraceKennedy & Co., Ltd. businesses, except Grace, Kennedy (Shipping) and Dairy Industries, performed below budgeted figures; accounts receivable increased as the list of delinquent customers grew longer; and inventories, though much reduced, remained too high at over $71 million. Forecasts for 1988 cautioned against even stiffer competition ‘as more new people will enter business’. Becoming more and more important among the body of the ‘competition’ were the Informal Commercial Importers, the ICIs.
Heavily burdened as Jamaica is with problems arising from rapid population growth and increasing under- and unemployment, the Government, of whatever political party, has long tended to turn a blind eye to practices which, though understandably motivated and full of potential advantage to the national society, can turn sour if left undirected and uncontrolled.
There have always been higglers on the streets of out towns. They used to be itinerant: the fish-seller, the broom-seller, the ‘in season’ booby-egg seller, the live fowl-seller, the ‘provisions’ seller, the snow-ball man with his push-cart labeled ‘Stop Me and Buy One’, the lady on King Street with assorted cosmetic and other articles on her tray with the label ‘Buy Me and Stop One’. They bought and sold locally.
As the hard times of the 1960s and 1970s began to be felt, and as the value of the Jamaican dollar declined against is American counterpart, the ‘higgler trade’ began to move overseas. The acquisition of enough United States currency for a plane-fare to Haiti or Cayman or Miami (and even further afield), and the purchase there of small consumer items for sale on return home, allowed the individual enterpriser a satisfactory profit. The hard currency for the project was found in the black market. The number of such higglers increased, and so did the volume of their business. They were recognized and given corporate standing as the Jamaica Association of Higglers (JAH, with its cultural and religious connotations). They were no longer itinerants. They established their stalls on the pavements of the towns and cities in the ‘Bend-down Plazas’ where they spread their wares, impeding pedestrian traffic and raising the antagonism of the operators of the shops and stores in front of which they offered competitive goods brought through the Customs as personal effects.
Their ability to import without paying duty or by paying officially reduced duty, opened opportunities for some of the less scrupulous importing firms to avoid customs duties by employing higglers as purchasing agents. The ‘higglers’ had become the Informal Commercial Importers, formal recognized in the Parallel Market system:
Informal commercial importers (higglers) will be granted import quotas on the basis of their import performance during the last twelve month period, based on returns made to the Revenue Board.
They could now purchase foreign exchange from the banks. It was predictable that conflicts would arise. As the Government became more and more concerned to reap revenues, the lower rates of customs duties allowed to the ICIs would come under challenge. Importing firms which did not traffic with them would eventually protest
against unfair competition from the ICIs, some of whom had become large dealers in their own right, and from importers who used the services of the ICIs as a means of avoiding the full incidence of customs duties.
In the Sunday Gleaner of May 19, 1991, the Minister of Finance was reported as saying:
A substantial amount of the goods being sold by the distributive trade is, in fact, imported into Jamaica by informal commercial importers. These persons import goods not only for themselves but supply outlets in the formal sector ranging from supermarkets to uptown apparel stores.
When this method of importation first became popular, the persons involved were perceived to be of humble means…. therefore a very lenient approach was taken towards the valuation being placed on the goods they imported. This was effected through the use of a list of nominal values, which were kept at deliberately suppressed levels.
The consequences of this special allowance included the fact that:
…. distributors not using the ICIs to import goods are placed at a disadvantage since they are required to pay duties based on current market values, which impacts negatively on their ability to compete.
Therefore, as the aim of the Government was to raise revenues, the Minister proposed not that formal importers should pay less but that the ICIs should pay the same duties as everyone else. It was easier said than done. After two companies had been fined large amounts for defrauding the Government of duties on imported merchandise, Bruce Rickards, Marketing Director for the Grace Brand and President of the Importers and Distributors Association, thundered in the same newspaper:
For many years several private sector organizations have continually pointed out to successive governments that illegal imports and nonpayments of duties had assumed epidemic proportions….
Well, this problem has now become both a full-blown disease and big business, making it impossible for many companies that are paying legitimate duties, company profit tax, education tax and all the other statutory payments to remain in business.
What had begun as a worthy demonstration of individual enterprise in the face of adversity had, through lack of thoughtful nurturing and guidance, became a ‘disadvantage’ of ‘epidemic proportions’. It might have developed differently if on appearance of the first ‘Bend-down Plazas’ representatives of the Government, the Chamber of Commerce, and the higglers had sat down together to try to find a way beneficial to all.
GraceKennedy & Co., Ltd Overseas
Following the death of Luis Fred Kennedy, Rafael Diaz had been appointed to a directorship on the Board of Terfloth & Company in Montreal. Other Board members were Carlton Alexander, Boerries Terfloth, Peter Cummyn and Frank Yule. GraceKennedy & Co., Ltd., it must be remembered, had continued trading with the Terflothowned overseas companies and Boerries Terfloth held the rights to the Grace Brand everywhere except in Jamaica. At a Board meeting at the end of July 1983, proposals previously agreed in Montreal were approved and confirmed in Kingston. These were:
- Grace Foods Ltd., a Bermuda Corporation formed by B. Terfloth & Co., Ltd., would be the ‘owner’ of all ‘Grace’ trademarks registered in countries other than Jamaica.
- This Company would be owned 50:50 by Grace, Kennedy & Co., Ltd. and B. Terfloth & Co. Ltd.
- Grace, Kennedy & Co., Ltd. would now transfer all existing ‘Grace’
trademarks registered in Jamaica to Grace Foods Ltd.
- All users of the trademark would be required to pay a royalty to Grace Foods Ltd. The users in the first instance would be GraceKennedy & Co., Ltd and B. Terfloth & Co. Ltd. Others might later use the trademark if so agreed by the two shareholders above. Both companies, it was agreed, would work to expand the market for the Grace Brand.
Boerries Terfloth would act as Brand Manager and Ivanhoe Yee and Wayne Stewart would be Grace, Kennedy’s Export and local Brand Managers respectively. The reunion of GraceKennedy & Co., Ltd. and B. Terfloth & co. Ltd. had begun.
GraceKennedy & Co., Ltd. now began in earnest to expand their exports beyond supplying ‘ethnic markets’ abroad into much wider ‘volume markets’. One Canadian supermarket chain, Nob Hill Farms, began marketing Grace products in 1983, but the first big breakthrough came in 1984 when the huge Loblaws chain undertook to market twenty-four Grace Brand products.
By the end of August 1984, Carlton Alexander was able to announce that he and Rafael Diaz had met Boerries Terfloth and Peter Cummyn in London:
- …. in connection with the merger of Grace, Kennedy (U.K.) Ltd. and B. Terfloth (U.K.) Ltd. to take effect 1st November, 1984, to trade as Terfloth & Kennedy (U.K.) Ltd.
- The next step had been taken. Then in April 1989, a bit further on the way,
- Mr. Diaz tabled a paper on the B. Terfloth Group and advised that Mr.
Terfloth had asked us to consider purchasing 50 per cent of the Group.
Carlton Alexander was now ill. Rafael Diaz and Douglas Orane were instructed to meet with Christopher Bovell to consider the proposal and recommend what action the Board should take.
The negotiations were soon completed, and on November 1 of that year Terfloth and Kennedy (Bermuda) acquired 100 per cent shareholding in the Terfloth Group of Companies operating in North America, Britain, and Europe. Since the Bermuda Company was equally owned by B. Terfloth & Co. Ltd. and GraceKennedy & Co., Ltd., the latter was now fully restored to the 50 per cent ownership of the original Terfloth & Kennedy Companies of the early 1970s. Other outlets fully owned by GraceKennedy & Co., Ltd., or by them in partnership with other Caribbean-based companies, by the end of 1989 included Grace, Kennedy (Belize) Ltd., United Foods in Toronto, Atlantic and Pacific Trading Co., Ltd. in Miami (both now fully owned by GraceKennedy & Co., Ltd.), and Grace, Kennedy (Trinidad) Ltd., fully acquired in mid-1989.
In March 1985, the ranking of Grace, Kennedy export sales had been given as:
- England – where sales were expected to benefit by the agreement of the Tesco chain to market six Grace Products;
- Canada – where the Loblaw chain was involved;
- Belize; 5. Antigua; and
- Bahamas. In Trinidad there was some opposition from local businessmen, and George Phillip and Ivanhoe Yee were requested to go there and try ‘to mend the fences’.
A year later, the performances were less pleasing. None of the Grace, Kennedy outlets, now including the one in Miami, had shown a profit. Robert McDonald, reporting in place of Ivanhoe Yee who had left Grace, Kennedy & Co., Ltd. in May 1986, explained in a memo to Carlton Alexander that competition had forced sales prices down below costs. Carlton Alexander himself later admitted, ‘We tried to corner the ackee market and it had cost us a lot of money.’
As implied, the attempt had been unsuccessful. Robert McDonald had put it less bluntly. He had said that due to ‘abnormal competitive pressures’ Grace, Kennedy & Co., Ltd. had been forced to sell large stocks of ackees at a loss. Later in the year, Cecil Ho was employed as a consultant to help reorganize the Export Department; and E.G. Muschett was temporarily in Toronto to complete the reorganization of United Foods to which Arnold Chin would be seconded for at least a year to work in Sales and Marketing.
The drive to increase exports, and so earn foreign exchange, clearly had its large misfortunes. Nonetheless, by the end of 1989, Grace, Kennedy & Co., Ltd. was earning nearly one-third of its foreign exchange requirements. That commendable achievement owed much to the labours of the staff of the Export Department and a great deal also to the aid and advice of Boerries Terfloth.
The Grace Group
The year 1984 opened with another involvement of GraceKennedy & Co., Ltd. in an attempt to improve the quality of life in Jamaica. On January 5, the Jamaica Agricultural Development Foundation (JADF) was incorporated. A ‘not-for-profit’ private sector
venture capital institution, JADF is a partnership between GraceKennedy & Co., Ltd., USAID, and Land O’ Lakes Inc. of Minnesota, USA, a food and agricultural cooperative owned by 500,000 farmers in the United States. Assistance in setting up JADF was received from the Rockefeller Fund. The overall objective was:
…. to promote and develop sustainable agriculture and agri-business to assist in improving the economic and social well being of the people of Jamaica….by providing loans, venture capital, guarantees, technical assistance, grants, and lease financing.
At the end of March 1984, the Grace, Kennedy Board of Directors received a very favourable report. Group Profits of just under $11 million for that first quarter were well over budget and an improvement on performance in the same period of 1983. GraceKennedy & Co., Ltd. had itself done exceedingly well with profits 52 per cent over budget ‘due to improved pricing policy and control of expenses’. There had also been considerable saving of overhead costs by a merging of Grace Food Processors (Canning) and DaCosta Ltd. Except for Halse Hall, there were no large problems looming. George & Branday Ltd. had been relieved of Insurance and was now a Finance Company with Peter Moss-Solomon as Managing Director, Calvin Moo-Young as General Manager, and
R.C. Humphries, formerly a senior partner in Price, Waterhouse, as Chairman of the Board. In the Shipping Division, though Wharves and Cold Storage suffered from decreasing tonnages coming in, the Agencies and Port Services reaped compensatory benefits from devaluations of the Jamaican dollar. The Board optimistically considered what new ventures might be undertaken. Something in spices, perhaps, or electronics, or beef cattle with American partnership. In August, Carlton Alexander asked Douglas Orane, Adrian Wallace and Peter Chin to prepare a proposal for the purchase of the Hi-Lo Food Stores from Neal & Massey Ltd. who had given GraceKennedy & Co., Ltd.
until September 1 to decide whether or not to buy. If not, Neal & Massey would ‘accept another offer that had been made by someone else’. The decision was to buy. E.G. Muschett and Oliver Clarke, external Director, were authorized to conclude the negotiations, and on September 1, 1984, GraceKennedy & Co., Ltd began to operate the Hi-Lo Supermarkets. The purchase was a clear reflection of response to ‘consumerism’. In January 1985, GraceKennedy & Co., Ltd. acquired 51 percent of the shareholding of Schwartz (Jamaica) ltd. and went into the spice business.
In mid-1985, the earlier confidence began to turn. For the first time since 1972, the half-yearly returns showed that Grace, Kennedy & Co., Ltd. had traded at a loss. Nevertheless, the trend appeared reversible. One reason for the decline was an unsatisfactory mix of goods sold by which some items were oversupplied and others under-supplied. This could be remedied by better planning and proper ‘streaming’ from production through inventory to sales. Another reason, which it was hoped would be avoided in the future, was that GraceKennedy & Co., Ltd. had purchased large quantities of goods from Seprod Ltd. and Seprod had subsequently lowered their prices. Grace, Kennedy stood to loose a considerable sum.
What could not be, avoided were rapidly climbing rates of interest. At the end of the year, GraceKennedy & Co., Ltd. and its associated factories had done less well than expected, and in the Merchandise Division, though sales had increased 32 per cent over 1984 (for which Arnold Chin and Adrian Wallace were commended), profit had turned out below budget. The factories and the Merchandise Division were then reorganized into three divisions:
- Grace, General & Bulk – Arnold Chin, Philip Alexander, Ted Wells.
- Cosmetics, Paper, Cards, Drugs – Jimmy Moss-Solomon.
- Meat and Cold Storage – Erwin Burton.
On Thursday, April 2, 1986, there was an important meeting of the Board of Directors. It was well attended. Present were: Carlton Alexander, Chairman, Rafael Diaz, Michael Belcher, Mable Tenn, Ivan Yee, Cyril Tame, Robert McConnell, Bruce Rickards, Peter Moss-Solomon, E.A. Girod, E.G. Muschett, Anthony Barnes, L. B. Lukong, Douglas Orane, Joe Lee, Christopher Bovell, E.D. Anderson (Secretary), and, by invitation, Gladstone Ford, Arnold Chin, George Phillip, Raymond Thompson and Bryan Davidson. Apologies by Directors unable to attend were received from John Issa, Gordon Sharp,
F.X. Kennedy, Paul Bitter and Oliver Clarke. After reviewing performance for the first quarter of the year and comparing it with the same period in 1985, Carlton Alexander proceeded to announcements of particular importance. It was intended to have GraceKennedy & Co., Ltd. listed on the Stock Exchange. In going public, the Board of Directors would have to ‘identify succession’. Very soon he would reach the age of seventy, and he intended to give up the post of Chief Executive Officer, though remaining as Chairman a little longer. A planning committee of himself and ‘several members of staff’ to be invited would meet to discuss the naming of his successor.
Near the conclusion of a long agenda, Carlton Alexander, as he so frequently did, recognized a special effort voluntarily given in the service of the Company. The computerization of the Company’s payrolls, personnel records, stocks, ledgers, sales statistics, and billing had begun a decade later. There were on going difficulties with the new technology. He recorded that:
The Order Department girls worked up to 8-9 p.m. at nights in trying to keep the billing up to date to overcome the computer problems and they should be congratulated.
Later, in November 1988, recuperating at home from a recurrence of the illness first suffered on a business tour in the Far East earlier that year, he sent word through Rafael Diaz, Acting Chairman at a Board Meeting, that he had noticed the outstanding service of many staff members who had kept the Company going before and after Hurricane Gilbert. He wished them to be recognized at an awards function.
In May 1986, Douglas Orane was appointed a Co-Managing Director with E.G. Muschett. At the same meeting, the Board gave its seal of approval to the proposed listing on the Stock Exchange. The necessary Resolution was passed on June 27; on September 5 the decision was made public; and on September 11, 1986, the listing was made. Other events marked the year. In September, WTG Systems Ltd., a computer sales and servicing business one-third owned by the Terrelonge Group and in which GraceKennedy & Co., Ltd. also held shares, was in need of capital. None of the shareholders was willing to invest further. Within a few months the Board agreed with Rafael Diaz that a decision was necessary. As the other shareholders either could not or would not provide more capital, GraceKennedy & Co., Ltd. must either liquidate or take over. The latter course was adopted.
Grace Food Processors Ltd. was again in trouble as the wheel of the ‘pig cycle’ turned. For Christmas 1986, hams would again be in short supply and the Grace, Kennedy staff would have to be assigned one each. A way had to be found to counter the fluctuations in
We will have to find strategies to insulate ourselves against the difference between shortage being 115,000 pigs and glut being 130,000 pigs.
Grace Food Processors Ltd. would begin to make binding contracts with selected farmers stipulating price, weight range and the number of pigs to be regularly supplied for processing. The Company would also offer an advisory extension service to pig farmers.
In the same year, Grace, Kennedy & Co., Ltd. had begun distributing the JF Mills Brand products of Jamaica Flour Mills and also purchased stock in that company. Within the Group, Metal Fencing Ltd. had become Armour Metal Fencing and Construction Ltd.; and Errol Wilson was given the management of a specialty established Sales Division to supply the hotel trade.
For Carlton Alexander this was a year, which brought two important honours. He was the recipient of the Martin Luther King Jnr. Humanitarian Award for 1986 for his service to the national community.
And on November 15, Selwyn Carlton Alexander was called up by his full name to be awarded the Degree of Doctor of Laws, Honoris Causa, by the University of the West Indies at its Mona Campus. On receiving the congratulations of his Board of Directors twelve days later he replied, ‘Grace made me – otherwise I wouldn’t be noticed.’
In 1987, as the competition hardened, Board members became concerned about the probable performance in 1988 when even more competition was expected. The 1987 profits were largely tied up in inventory and in receivables. This would have to be rectified in 1988. There was concern about the quality of management in some divisions. In the food-processing factories, for instance, there appeared to be some reluctance ‘…. to look, at radically new ways of making money and this is a cause for concern’.
Between July 1 and the end of November, prices on over two hundred items had been reduced. Sales benefited, but this had not brought a concomitant increase in profits.
Nonetheless, there had been some expansion of the activities of the Group. Equipment Care Ltd. had been added to the Grace, Kennedy & Co. (Shipping) group; and, in a quite different category of business, Caribbean Basin Electronics (CBEL) Ltd. was established late in 1987. It was a small operation located in Montego Bay and employing about thirty people. Planned, financed, and set up by Grace, Kennedy, CBEL was to assemble electronic and electromechanical equipment, especially printed circuit boards, solely for the export market. However, an early contract came from a Barbadian source for one thousand printed circuit boards. CBEL successfully fulfilled the order, and looked forward in hope.
On January 1, 1988, a joint arrangement between GraceKennedy & Co., Ltd. and UNISYS, the second largest computer firm in the United States, came into effect. GraceKennedy would market the wide range of UNISYS computers to begin with and, later, other equipment including their FAX machines.
In the same month, Alexander tabled a paper reorganizing the managerial portfolios of the Group. Not all the companies listed were wholly owned by GraceKennedy & Co. Ltd., but where Grace, Kennedy was not sole owner the Company held shares or a management contract or both.
Carlton Alexander would be responsible for:
- GraceKennedy & Co. (Shipping) Ltd. &
- Grace Tours Ltd.
- Jamaica Producers Shipping Co. Ltd.
- International Shipping Ltd.
- Port Services Ltd.
- Kingston Terminal Operators Ltd.
- Terminal Services Ltd.
- Kingston Wharves Ltd.
- H. Macaulay Orrett Ltd.
- Harbour Cold Stores Ltd.
- Dairy Industries (JA) Ltd.
- Grace Foods Ltd.
- T&K (Bermuda) Ltd.
- GraceKennedy (U.K.) Ltd.
- Equipment Care Ltd.
E.G. Muschett would be responsible for:
- Agro-Grace Ltd.
- Rapid & Sheffield Co. Ltd.
- Pilkington Glass (JA) Ltd.
- Armour Metal Fencing & Construction Ltd.
- Security Woven Wire Products Ltd.
- Grace, Kennedy Properties
- Allied Insurance Brokers Ltd.
- H. Macaulay (Insurance) Co. Ltd.
- Jamaica International Insurance Co. Ltd.
- GraceKennedy Travel Ltd.
Douglas Orane would be responsible for:
- GraceKennedy (Merchandise)
- Grace Food Processors Ltd.
- Grace Food Processors (Canning) Ltd.
- National Processors Ltd.
- Fish Importers Ltd.
- Domestic Sales Ltd.
- Hi-Lo Food Stores (JA) Ltd.
- Caripic (JA) Ltd.
- GraceKennedy Export Trading Ltd.
- GraceKennedy (Belize) Ltd.
- GraceKennedy (Ontario) Ltd.
- GraceKennedy (Barbados) Ltd. and business within CARICOM.
Rafael Diaz would be responsible for:
- GraceKennedy (Caribbean) Ltd.
- GraceKennedy (Canada) Inc.
- GraceKennedy (Europe) Ltd.
- George & Branday Ltd./Vortex Ltd.
- Inter-Grow Ltd.
- Versair In-Flite Services Ltd.
- WTG Systems Ltd.
- Grace UNISYS (Jamaica) Ltd.
- Caribbean Electronics Ltd. (CBEL)
- Trafalgar Development Bank Ltd.
- Pan-Caribbean Merchant Bank Ltd.
At the end of the first quarter of 1988, Alexander was not satisfied with the Group’s performance, which showed identical results with those of January-March 1987. Of the three new acquisitions, only Grace-UNISYS had made a profit. He wanted the Group to show a monthly profit of $7 million. Rafael Diaz expressed the view that this would be attainable only in three years time. Carlton Alexander pressed on: all the following had so far shown losses – Grace Food Processors (Canning); National Processors; Addis; WTG Systems; Grace, Kennedy Export Trading; Grace Tours; Grace Travel; H. Macaulay Orrett; CBEL; Grace, Kennedy (Ontario); and Inter-Grow Ltd. (a relict of the large agricultural endeavours at Halse Hall and Spring Plain). There had also been stock losses of $1.4 million. There was need for improved cash-flow management, and, ‘We would have to close those companies that are currently making losses in the Group, if they do not start realizing profits’. In particular, Grace, Kennedy would have to sell out is share in Equipment Care Ltd. if it continued unprofitable; there was much concern about the lackluster performance of Agro-Grace. Carlton Alexander, understandably, did not want to leave an ailing Group.
In July 1988, Alexander was away, leading a JAMPRO team on the promotional tour of the Far East during which he was taken seriously ill. The Government had earlier decided to merge the Jamaica National Export Corporation (JNEC) and the Jamaica National Investment Promotions Ltd. (JNIP), both of which he headed as Chairman, within the Jamaica Industrial Development Corporation (JIDC), to form a single agency, Jamaica Promotions (JAMPRO), to promote both trade and investment. Carlton Alexander had been appointed to head this new body.
Rafael Diaz, chairing a meeting of the Board at this time, gave a somewhat reassuring summary of the state of the Group. The factories were now much improved ‘and we no longer have to put money in them’, except for Grace Food Processors (Canning) which needed a major replacement of equipment. But that had not prevented a small profit in the half-year’s operation. The Finance, Insurance, and Shipping Divisions were all operating at a profit. Versair In-Flite Services was about breaking even. It had been necessary to ask the airlines for price increases. They had responded by downgrading the meals.
Under pressure were the Trading Division, especially Rapid & Sheffield, Agro-Grace, and (and here Alexander would have been less comforted) GraceKennedy & Co. (Merchandise). Dairy Industries Ltd. was also in some difficulty because while the New
Zealand Dairy Board had increased the price of cheddar cheese to them, they could not increase the price to the local consumer. The star commodity of the moment was QuenchAid, at home and abroad.
In September there came Hurricane Gilbert. That month’s performance inevitably slumped. Harbour Cold Stores had been smashed. The probable loss there was $6 million. Stocks of corned beef, cheese, salt, and matches were very low, but it was hoped supplies would be restored by the end of November. Relief goods and trade supplies were coming in and Grace, Kennedy & Co., Ltd. would forego commission and agency fees on goods brought in on the French Line, the Laser Line, and the West Indies Shipping Corporation – all of which they represented. As for supplies to be acquired locally, the GraceKennedy factories would soon be in full production and, as Douglas Orane pointed out:
We have to devise a strategy of how to deal with the Jamaica Commodity Trading Co. Ltd. [formerly Jamaica Nutrition Holdings] to receive supplies on a timely basis which their bureaucracy is holding up on the docks.
In November it was time to decide the staff bonus for the year. In 1987, the total amount disbursed had been $12 million, based on a pre-bonus, pre-tax profit of $56 million for the year. In 1988 the total to be spent would be $14 million based on a projected pre-bonus, pre-tax profit of $66 million. However, if a Company’s profits for 1988 were only equal to or less than they had been in 1987, then bonus payments should not exceed those of 1987. If, on the other hand, the 1988 profits exceeded those of 1987, the bonus payments should, for each Company in this category, be increased proportionately.
In January 1989, Carlton Alexander was back in the Chair for a review of performances in 1988. He was satisfied. At the beginning of 1988 he had said that all companies then making losses should realize profits in 1988. Most had done so. The exceptions were Grace Travel Ltd. and Caribbean Basin Electronics Ltd. Grace, Kennedy (Ontario) Inc., which had lost Cdn. $600,000 in 1987, had lost only Cdn. $54,000 in 1988, and expected a profit in 1989.
At the start of 1988, Alexander had requested Group profits of $7 million per month. That had not been realized, but just over $6 million had been made. Management in the factories and in the Merchandise Division was to be congratulated. So, too, was the management of Kingston Wharves Ltd., which in 1988 had earned the highest profit ever, made there. Indeed, the Shipping Division as a whole deserved commendation. There had also been a new addition.
At a press conference on January 17, it was announced that the Carib Star Shipping Company Ltd., a totally owned subsidiary of Grace, Kennedy & Co., Ltd. was being launched. Carib Star would be the exclusive agent for ZIM American-Israeli Shipping Company, at the time responsible for 90 per cent of transshipment cargo passing through Kingston.
In February 1989, Douglas Orane advised the Board that Bovine, Fish & Poultry on Retirement Road, was being advertised for sale and should be purchased by GraceKennedy. The land, building and equipment were acquired through Grace Food processors Ltd. for $4 million. About $300,000 would be needed for repairs and upgrading to bring the plant into good condition for meat processing.
Early in the year, the Challenge Group of companies, which included Challenge Enterprises Ltd., The Road Runner Ltd., CEL Investments Ltd., International Merchant Mart Ltd., and Shazamm Ltd., was heavily indebted and losing money. GraceKennedy & Co., Ltd., in equal partnership with Desnoes & Geddes Ltd., acquired the Challenge
Group in March. In the same month, Caribbean Basin Electronics was closed down. Its main client had been acquired by an English company, which had a wholly owned subsidiary in Costa Rica. In consequence, business, which had come to CBEL, was now being sent to Costa Rica. On the other hand, the Hi-Lo Supermarket chain was expanding. In addition to its four outlets in Kingston, and one in Mandeville, another would be opened in Spanish Town at the beginning of June, and consideration was being given to further expansions in Negril and Montego Bay.
Carlton Alexander was again absent from the April Board Meeting because of ill health. With Rafael Diaz in the chair, the Board approved another increase of the authorized share capital by the creation of $16 million shares of $1 each. This would bring the share capital to $ 48,000,000. And, on April 14, 1989, S. Carlton Alexander signed the Chairman’s Statement to be presented at the Annual general Meeting of GraceKennedy & Co., Ltd. to be held at the Jamaica Conference Centre, Seabed Building, Ocean Boulevard, Kingston, on Friday, July 28, 1989, at 10:00 a.m.
On Thursday, April 27, at the University Hospital he underwent the last of a series of operations performed during the past few months. Leaving his wife Beryl and five children by previous marriages, Selwyn Carlton Alexander died peacefully at the age of 73 in the University Hospital at 7 p.m. on Labour Day, Tuesday, May 23, 1989. The tributes were many.