Years of ‘Shartridge’ – 1972 to 1982
Further Growth of the Group
The expansive moves of the 1960s continued for a few more years after 1972. In early April 1973, Carlton Alexander advised the Board of Grace, Kennedy that the plant, brand name and formulae of Cameo Products were available for $35,000 and ought to be acquired for inclusion in Grace, Food Processors (Canning Division). With Luis Fred Kennedy in the Chair, the Board agreed to the acquisition, subject to the satisfactory working out of the details.
In the following months, a merger of Grace Food Processors (Canning) with DaCosta Bros. Ltd., importers and wholesale provision merchants, was proposed. It was completed in the same year.
The Board began negotiations in July with Mr. C. Mucklow who had offered Grace, Kennedy his shareholdings in United Merchants Ltd., General Printing Equipment Ltd. and Pilkington Glass (Jamaica) Ltd. By April 1974, Carlton Alexander was able to report conclusions. With a long-term loan of $70,000 from Barclays Bank, Grace, Kennedy & Co., Ltd. had purchased 40% of the issued shares of Pilkington Glass and would lend that Company $40,000. Mr. Robert McDonnell would manage the Company and would soon meet with epresentatives of Pilkington Glass Ltd. from London. Cecil de Cordova Ltd. had purchased the 100% issued share capital of United Merchants Ltd., and was now reorganizing that business. They had also acquired 50% of the issued shares of General Printing Equipment and Supplies, Ltd. from Mr. Mucklow and would also acquire another 10% from a shareholder in Miami. In July 1976, however, it was decided that this Company should either be liquidated or that Grace, Kennedy & Co., Ltd. should sell its 60% of the equity to the overseas holders of the 40% which remained.
At the same meeting in July 1973, at which Mr. Mucklow’s offer had been first discussed, another offer had been put before the Board. MacIntosh Brothers were offering all or part of their equity in Security Wire Woven Products Ltd. and Metal Fencing Ltd. The MacIntoshes would be willing to take part payment in cash and the balance out of future profits. The two concerns had shown good performance in recent years and, it seemed, would fit nicely with the operations of Sheffield & Co., Ltd. It was decided to negotiate. In October, agreement was reached. Grace, Kennedy & Co., Ltd. would acquire 100 per cent of the two MacIntosh companies for $700,000 and the MacIntoshes would guarantee $350,000 net profit for the two years ending on July 31, 1975.
In August 1973, consultants had recommended a merger of Cecil de Cordova, Ltd. and Grace Agricultural and Industrial Company Ltd. (GAICO), which had been incorporated in March 1968 to continue the trading operations of Grace Agricultural Co. That Company had been much involved in the importation of fertilizers from Holland and Germany and from the United States, as agents for W.R. Grace & Co., which produced Urea, a 45 per cent nitrogen fertilizer, in Tennessee, and as distributors of locally produced fertilizer. Until October 1973, Bryden & Evelyn Ltd. had been partners with Grace, Kennedy & Co., Ltd in ownership of GAICO. In that month, Grace Kennedy bought out the Bryden & Evelyn holdings at $7 per share. In January 1974, the reorganization of Cecil de Cordova and GAICO began. By late 1975 it was ‘virtually complete’ and Carlton Alexander announced the appointments to the newly established entity: Chairman, Simon Soutar; Managing Directors, Raymond Evans and Dr. Hugh Payne. Special mention was made of others who had made notable contributions: Aubrey Grant (retired), Philip Ho Fatt, Lee Moragh, Mable Tenn, and Mervyn Wright.
The Board decided in early September 1973, to examine an offer of sale to Grace Kennedy & Co., Ltd of H. Macaulay Orrett Ltd. That company was also acquired in the same year.
November 1974 saw the announcement that the management of Sheffield & Co. Ltd. was considering the purchase of Rapid Vulcanizing Company, Ltd. and the leasing of their property at Newport East, The Gleaner of April 5, 1975 carried a long and interesting
Grace, Kennedy and Company Ltd. has acquired the business of Rapid Vulcanizing Company, Ltd. and will merge it with another of its companies, Sheffield Limited, which is already in the hardware trade.
Negotiations, which have been going on for some time, reached conclusion on April 1. Grace, Kennedy has acquired all the shareholding of Rapid Vulcanizing, involving its stock and property at Newport East, including buildings, land and pier….
Rapid Vulcanizing, built up by the Campbell family, had grown from a bicycle repair shop at the corner of Duke and Harbour Streets into a major hardware-trading establishment. Property owned by the Campbells at Duke Street and Cross Roads was not included in the deal but, the Gleaner report continued the acquisition of the Newport East property and business ‘marks another move in the steady expansion of the Grace “empire”‘.
Seven months later, another purchase was made.
In November, Grace, Kennedy & Co., Ltd. were approached by Messrs. Richard Groves and Paul Townsend to purchase 51 per cent of the small Caribbean Greetings Corporation which they had formed to sell greeting cards. After negotiation, it was agreed that GraceKennedy & Co., Ltd. would purchase the 100 per cent shareholding, that Richard Groves and Paul Townsend would be employed by GraceKennedy, and that they would each receive 5,900 employee stock units in the parent company. By the end of the year,
Caribbean Greetings had obtained licence from the huge American Greetings, Inc. of Cleveland, Ohio, to publish, print and distribute their wider range of cards and other paper products throughout the Caribbean.
GraceKennedy in the mid-1970s
By the early seventies, the Company’s original operations as an importer-distributor had begun to undergo rapid and fundamental change. Until then the distributive chain in Jamaica (excluding Jamaica Nutritional Holdings which had recently entered the field) had been importers distributing to wholesalers and wholesalers to retailers. As described by Max Lambie in the Gleaner of May 19, 1991.
Once upon a time, there was a Chinese grocery to serve every block of the capital city.
Equally, too, one could be found in every village in Jamaica. These were the retailers selling everything from mackerel to machetes. But the merchants that were of significance to the inner workings of the economy were the large Chinese wholesalers who operated in the Barry Street and Princess Street areas of Kingston. There were dozens of these firms – in fierce competition with each other. They kept their overheads low [and]…. limited their activities to selling the basic needs of their country -flour, rice and codfish.
Distribution from them to retailers was largely handled by ‘an-up-and coming middle-class cadre of small businessmen who ventured heavily into trucking’.
But all that changed dramatically in the later 1970s. Suddenly, the great economic crash forced the Chinese out of business. Shops closed in rapid succession. And the retailers and wholesalers migrated…. in droves….
and Grace, Kennedy & Co., Ltd. and other importing firms moved into the resulting gap, taking over the wholesaling and distributing services of the departed Chinese.
Grace, Kennedy had, however, begun to move in this direction even in the late sixties. As early as 1970, Bruce Rickards had told a Grace Conference in Montreal:
I think that the strongest asset that Grace, Kennedy has in Jamaica is the fact that we have the widest range of products. Our Mr. Alexander has tried to develop a one-stop shopping centre in Grace, Kennedy, that is, our customers can virtually get everything in one store. We cannot deliver in the rural areas yet. The only thing we do deliver in the rural areas is our cold storage goods for which we now operate four and five refrigerated trucks. These are contracted, not owned by the Company. But we have the best delivery service in the corporate area…
In the rural areas…. the customers send in their trucks for their goods and…. having one large compound with so many products, the trucking-men like to come there and this forms a part of the delivery service in that they are able to get the goods much easier than with the competitors.
This was the beginning of the ‘Cash and Carry’ business. Branches were opened in the Corporate Area and some larger rural towns. Troubles would arise in the late 1970s, but in 1975 they were still considered a successful element of the Food Distribution Group.
At the end of 1974, Carlton Alexander, as Group Managing Director, had set out the managerial structure to come into effect in 1975. The operations of GraceKennedy & Co., Ltd. would be carried out under four groups, each with its Managing Director, as follows:
- Food Distribution – Wallace Campbell
- Wharves, Stevedoring & Shipping Services – L. P. Scott
- Insurance & Properties – Neville Bolton
- Industrial – S.C. Alexander (pro tem)
Alexander would have two Personal Assistants: Mable Tenn, Director in charge of Manufacturing and Agriculture; F. X. Kennedy, Director in charge of Special Projects and Corporate Planning, who would also assist in the Industrial Group. Rafael Diaz would be the Company’s Finance Director.
Shortly after this new corporate structure had been introduced, another step was taken towards the long proposed change in the status of the Company. In late September 1975, at a meeting of the Board of Directors, Luis Fred Kennedy outlined the history of the preference stock units and the rights enjoyed by the holders. These rights would have to be relinquished before the Company could go public, and it was agreed that there should be an independent valuation of then so that preference shareholders might be appropriately compensated. At an Extraordinary General Meeting of shareholders two months later, with 101 persons present, the Special resolution was adopted that: …. the 8% Cumulative Preference Stock Units of $1 each in the capital of the company be
converted into Ordinary Stock Units of $1 each.
In compensation for loss of rights, preference shareholders would receive a total of $378,114 to be paid from the Capital Reserve Account.
The state of affairs in each of the recently established Groups in the Company in the mid 70s was indicated in the various Reports of the Group Managers. As might be expected, the Food Distribution Group was feeling the effects of restrictions on imports, the operations of Jamaica Nutrition Holdings Ltd., and the general economic decline. Import licences granted for basic foods for the last quarter of 1976 had, however, exceeded the licences for the first three quarters by about $300,000. That, no doubt, contributed to the highest ever monthly sales of $8.8 million in November. On the other hand, collections for the first week in December were the lowest ever. Earlier in the year there had been a report that ‘rubber cheques’ were increasing in number and value. Now, in December, there were late payments totaling nearly $230,000 (largely, from rural customers); short payments totally nearly $1.5 million (very largely Corporate Area); and non-trading, stagnant debts totalling nearly $265,000 (almost all rural). Credit controls and the monitoring of indebtedness had already been introduced by the Company and were to be tightened.
The Wharves, Stevedoring & Shipping Agencies Group was also affected by restrictions on imports. Reduced shipping and import tonnages led to protracted discussions between the representatives of Kingston Wharves, Western Terminals and the Port Authority as
the wharf owners sought increases in wharfage rates. Jobs were threatened. Pilferage from the wharves was on the increase and steps had been taken to tighten security. In 1976 the sales of the Kingport buildings and the wharf assets of Kingston Wharves Ltd., was under serious consideration.
The Insurance and Properties Group was, on the whole, doing well. The problem was not that of declining volume of business, but rather an unwillingness to expand in view of existing political and economic uncertainties. Possibilities of additional business lay with Confederation Life in Toronto, Caribbean Atlantic Life Insurance Co., and the Jamaican American Insurance Co., Ltd.
The Industrial Group showed mixed results. Sheffield Ltd. was doing well, though still trying to collect receivables; Metal Fencing and Security Woven Wire were meeting expectations; Grace Food Processors (Meat) were, for the time being, profitable though the fortunes of that Company followed the cyclical movement of local pig production, and were also affected by managerial and technological problems; Grace Agricultural and Industrial Company and National Processors were in doubtful health; and Grace Food Processors (Canning) was said to be holding even. The problems of the Division were outlined by Miss Mable Tenn. The processing plants suffered intermittent shortages of imported raw materials and packaging. Supplies of cans were almost always insufficient. Poor management, lack of qualified technical assistance and uncoordinated pricing and marketing strategies all affected profitable operation. In order to help maintain the level of pig supply for meat processing, a 50-sow unit had been established for the factory at Paradise; but much more needed to be done.
At the end of July 1976, the Board of Directors was informed of the Government’s decision to issue import licences for basic foods only. A necessary protective measure in view of the scarcity of foreign exchange, it heralded still further declining business and profits for importing companies already affected by the operation of Jamaica Nutrition Holdings Ltd.
On September 14, the Board held an important meeting. The Chairman, Luis Fred Kennedy, was away ill but recuperating in Florida. Alexander was in the chair. He outlined the existing difficulties and proposed strategies in view not only of the current economic difficulties but also of the impending General Elections. He emphasized the following:
- a) The country’s balance of payments was in a very negative state.
- b) The state of the economy was not encouraging and Companies were reducing staff.
- c) Government revenues were in decline.
- d) There was, therefore, need for tight and effective management in the Grace, Kennedy Group.
- e) Accounts receivable: management must see to it that overdue accounts were collected, and there should be a target date of 30 days credit.
- f) The Group then owed about $7 million in foreign currency, and that would
have to be reduced.
- g) The existing position of the Group must be consolidated and assets preserved ‘until after the elections’.
- h) Plans should be drawn up immediately so that if they were still relevant after the elections ‘we can move fast’.
- i) No negotiations involving capital expenditure were to be finalized.
Everything must be ‘on hold’ until the elections.
The Board unanimously agreed.
Towards the end of 1976, a week before the national elections, the Finance Director, Rafael Diaz, explained that all funds were being mobilized so that the Group could liquidate as much as possible of its foreign debts. This was a necessary step to minimize any loss, which might befall as a result of a possible devaluation of the Jamaican dollar.
Major problems within the Corporate Group were discussed at a later meeting. There was need for greater understanding and collaboration between the manufacturing and the distributing divisions. This would allow a more efficient scheduling of production and an easier flow from factory to consumer. There was need for more frequent, regular, and accurate reporting on production, raw material needs and usage, labour efficiency, and other matters. Financial and quality controls needed to be made more stringent and enforced. Purchasing procedures should be streamlined, and there was need for a Transfer Pricing Policy for goods moving between companies in the Group.
Clearly, all was not well within the Grace, Kennedy conglomerate. Nevertheless, the Group stood out large, widely ramified, and rich.
Towards the 1976 Elections
In early 1976, Carlton Alexander had been instrumental in launching the PSOJ; a group dedicated to supporting the cause of free enterprise. In April of that year, at a function honouring him as ‘Salesman of the Year’, he declared:
There will be no Communism in this country and we as salesman must be dedicated to see to it that this will never happen; but in doing so we must face up to the many social problems of the country…. The realities of our situation are: serious balance of payments deficit, twenty-one per cent unemployment of our labour force, a very young and inexperienced population, the high cost of money, the low level of productivity, poverty and illiteracy.
Problems there certainly were; but they did not equally affect everybody. The Government’s decision to licence the importation of basic foods only, for instance, hardly affected the life-style of the majority long accustomed to a very basic standard of living. Indeed, the disappearance of goods of comfort and luxury could well be interpreted as a desirable levelling-down of consumption patterns.
During the following months, there was continuous and increasing dispute between those who contended that the PSOJ was attempting to undermine the Government, and those who held that the Government was undermining the freedoms of individuals. There were
those who questioned the political propriety of an increasing Cuban presence and a seemingly increasing Cuban influence in Jamaican affairs, and there were others who claimed that this was a more beneficial presence and influence than the English and the
Americans had long inflicted. But the general longing for a ‘socialist’ society and economy, as had been described by Norman Washington Manley, and which was apparently the motivating force behind his son, led to the popular political decision.
On Wednesday, December 15, 1976, the People’s National Party was returned to power with an overwhelming majority, and the popular voice rang out in the celebratory Message:
My father born ya
My grandmother born ya
I an’ I born ya
My leader born ya
Das why I nah leave ya
No I nah leave ya
This was followed by a recital of the achievements of the PNP under Michael Manley who, unlike those people ‘who no love poor brethren’, was leader in the struggle.
The listed benefits were many: land-lease, the Pioneer Corps, JAMAL, free education, equal pay for women, minimum wage, the Cuban (José Martí) school, the Cuban-built microdams, the basic schools, and more. The opposition JLP, led for the first time in a National Election by Edward Seaga, who was not ‘born ya’ and all those who supported them were ‘under heavy, heavy manners’.
At a meeting on February 24, 1977, Carlton Alexander reported to the Board of Directors that he had been officially informed by the Hon. Vivian Blake, Minister of Marketing, that the Government intended to commence negotiations leading to its acquisition of
Grace, Kennedy & Co., Ltd. In fact, it had not been as straightforward as the record suggests. Ever since July 1976, when the Government had announced its intention to issue licences only for the importation of basic foods, the importing-distributing firms
had felt an increasing concern that their business would soon be very largely undermined by the activities of Jamaica Nutrition Holdings. On the principle ‘if you can’t beat them, join them’, this had led one large company to suggest that Government might wish to
acquire it and use its assets in support of the larger operations of Jamaica Nutrition Holdings. News of this offer greatly disturbed the competition, including Carlton Alexander and Grace, Kennedy & Co., Ltd. Moreover, as the more radical members of
the Government were inclined to press for state ownership of all large and influential social and economic enterprises, the private sector became increasingly apprehensive. The large suspicion raised by the openly ‘pro-socialist-communist’ stance of some members of the Government was enough to trigger anxiety in the minds of many, including Carlton Alexander.
Alexander had no wish to sell out to the Government, or to have GraceKennedy & Co. Ltd. acquired by government take-over. Equally, he feared for Grace, Kennedy’s future business if any large competing company should either sell out to or be acquired by Government in that way. If, therefore, the Government was minded to acquire a large private importing-distributing firm, then let it be Grace, Kennedy for the highest negotiable price. Thus the ‘negotiations’ would be conducted between representatives of GraceKennedy & Co., Ltd., who had no wish to sell unless the Government was determined to acquire a company such as theirs; and representatives of a Government which, despite the leftist nudgings of some members, had no plan to buy, and knew full well that even if they would like to acquire such a large and profitable company they could not afford it. Nonetheless, the uncertainty of the whole situation was disturbing to Carlton Alexander and, as soon to be seen, unacceptable to Boerries Terfloth.
Defending the Group
Immediately, the Board of Directors named their negotiating team of Carlton Alexander, Rafael Diaz, F.X. Kennedy, and Paul Chen Young who had, a month before, been contracted as Economic Adviser to the Company. They were instructed…. to formulate alternative strategies to negotiate with the Government’ following the Board’s approval of such strategies.
On March 8 Carlton Alexander reported to the Board that he had met with the Hon. Vivian Blake and that he had explained to the Minister…. the history and nature of GraceKennedy & Co., Ltd.’s operations’. At the same meeting, Alexander referred to:
…. a [current] dispute between Grace, kennedy & Co., (Canada) Ltd., Boerries H.Terfloth and Greven Holdings Limited, as to their ongoing relationships as shareholders of Terfloth and Kennedy Limited, Terfloth and Kennedy (U.K.) Ltd., and Terfloth and Kennedy (U.S.A.), Inc.
After discussion it was decided that the only course open to Grace, Kennedy & Co., Ltd. was to dispose of its interests in these companies and in the Grace Trademark to Boerries
H. Terfloth and Greven Holdings for a consideration of not less than $700,000 Canadian, and that this action be recommended to the shareholders. There had not, been any ‘dispute’ between Terfloth and Grace, Kennedy. On learning of the possibility of a Government take-over of the Company, Boerries Terfloth had simply made his position clear. He was unwilling to be a partner in business with any government. Moreover, the apparent leftist leanings of the Government of Jamaica at that time made it even less attractive as a partner with a large private enterprise. If the takeover went through, Boerries Terfloth would, as he had once before threatened, set up on his own. He would continue to be happy to trade with Jamaica, but the Terfloth companies would not be associated in a business partnership with any government. The next move would have to be made in Jamaica.
For the Grace, Kennedy Board of Directors the issue was clear. Following Carlton Alexander’s persuasive discussions with the Hon. Vivian Blake, there was a possibility that there would be no problem. If, on the other hand, however, there was a take-over, GraceKennedy & Co., Ltd. would no longer exist as a private company.
The overseas subsidiaries were a key factor in the whole matter. Through them, that is largely through the work of Boerries Terfloth, supplies of some basic foods, for example chicken necks and backs, came into Jamaica. In addition to any trading profits for GraceKennedy & Co., Ltd., there was the very important consideration that through the Terfloth Companies lines of credit were available. A few months previously, in late November 1976, Boerries Terfloth had accompanied Carlton Alexander, Raf Diaz, Peter Moss-Solomon and F.X. Kennedy on a round trip including London, Rotterdam and Montreal. That was one of similar business missions.
If Government were to take over Grace, Kennedy, this very advantageous relationship with Boerries Terfloth & Co. would be lost.
However, if the Grace, Kennedy Board were to move first and sell their interest in the overseas Companies to Boerries Terfloth and Greven Holdings (the Terfloth Holding Company) they would achieve three clear advantages: they would remove the possibility of the subsidiaries coming into the possession of the Jamaican Government; they would acquire a considerable sum in scarce foreign currency at a time when Government and private enterprise were all eagerly in search of it; and, relying on the long-proven loyalty and integrity of Boerries Terfloth, there was a strong possibility that if, after the hue and cry, the Board remained in control, they would be able to reestablish the partnership which had worked so well for both sides. The deal with Boerries Terfloth went through. The Government did not acquire Grace, Kennedy and Co., Ltd. or any other similar enterprise.
Five Hard Years
The re-elected Government declared 1977 ‘The Year of Economic Emergency’. Taxes on incomes were increased, a six-month wage-freeze was ordered, prices of essential commodities and rentals were also to remain fixed at current levels, and the call was made for increasing production so that there could be a 20 per cent replacement of imported goods by 1980. Speaking for the PSOJ, Carlton Alexander gave support to the Government’s plans and proposals, but with some reservations:
…. I would like to say that, in this time of economic stringency, it is only reasonable that the higher income-earners make the sacrifice required in the terms of reduced incomes and higher taxes; but I must…. sound a note of caution against confiscatory income taxes,
which so reduce earnings that the incentive to produce is removed.
Nonetheless, the Government and the PSOJ did not always move in the same directions. On October 15, 1977 ten members of the PSOJ, led by Carlton Alexander, left Jamaica on a twelve-day mission to the United States and Canada. Their stated aims were to boost tourism, to present a favourable account of Jamaica as a nation, to demonstrate the existence here of a vigorous and progressive private sector, and to meet with financiers and potential investors. At the same time, the Government was preparing to welcome Fidel Castro on a visit to Jamaica. The Gleaner reported:
…. some members of the PSOJ were annoyed that Dr. Castro’s visit was kept so secret that they had no opportunity to change the dates of their tour in order to be in Jamaica at this time. They were particularly ‘miffed’ that they received last minute briefing from a Minister of Government who said nothing about Dr. Castro’s visit.
In a prevailing atmosphere of mutual mistrust, there is always the probability of misunderstanding and misinterpretation of words, deeds and motives; but the divergence of interests was clearly indicated.
There were matters, however, on which Carlton Alexander, who had been called ‘the left wing of the PSOJ’, proclaimed more moderate views than were held by some of his colleagues in the organization. He frequently expressed a fundamental optimism in the future of Jamaica, based on a very positive assessment of the island’s human and natural resources. He openly called, not for the downfall of Government, which he believed leaned dangerously to the left, but for collaboration between the public and private sectors to achieve economic stability. As Chairman of the Jamaica National Export Corporation, he emphasized as much as Government did the need for a massive expansion of earnings from exports. On the question of the import trade, however, there was sharp difference in view. While Alexander, as head of a large firm heavily dependent on imports for profitable pursuance of its business, sought freedom from restrictions, the Government, in attempts to stem foreign exchange expenditure and to protect consumers against rising prices of basic food items instituted extensive restrictions.
In April 1977, following a devaluation of the Jamaican dollar, the Government announced that they would eventually become, through Nutrition Holdings Ltd., the sole importers of all basic foodstuffs. The largest importing firms, of course including GraceKennedy & Co. Ltd., immediately sought clarification. In particular, would Jamaica Nutrition Holdings also distribute the basic foods? There followed negotiations in which the dominance of Grace, Kennedy & Co., Ltd. in the market was clearly illustrated. Nutrition Holdings would purchase imports through local agents and by tenders. They would operate on a basis of 30 days credit with 13 per cent interest on overdue accounts. These new arrangements would come into effect on July 1, 1977, when, as a beginning, rice and counter flour imports would be taken over. As for distribution, it remained in the hands of ‘traditional’ private distributors. In late November, however, the Government requested Jamaica Holdings to undertake distribution in those areas not the served by or soon to be served by those distributors.
Nonetheless, by mid-June, Grace, Kennedy & Co., Ltd. had received import ‘quotas’ for the third quarter of 1977 for chicken necks and backs, pickled beef, frozen meats, and ‘strangely enough for rice and counter flour. They were to have 40 per cent of the flour and over 40 per cent of the bulk rice imported. Price controls, however, meant that their profit margins, like everybody else’s, would be reduced. In October, Danny Williams, Minister of Marketing and Commerce, announced Government’s plan to establish five more State Trading Corporations, similar to Jamaica Nutrition Holdings, to deal in hardware, textiles, energy, paper products and equipment.
The year 1977, all considered, was a good one for Grace, Kennedy & Co., Ltd. Total sales had exceeded the 1976 values, though some allowance had to be made for the devaluation of the Jamaican dollar: inventories had been reduced; Accounts Payable had decreased; the Company had invested in short term deposits and Government securities; and dependence on the banks for working capital, a highly undesirable condition, had been greatly reduced. The following year would be not quite as good in material rewards, but there would be compensation in the form of public recognition attaching to the firm.
In the annual National Honours List, Carlton Alexander was awarded the Order of Jamaica
‘…. for outstanding service to the nation in both the public and private sectors’.
It was high tribute from a Government whose policies he often outspokenly opposed, but without rancor and always apparently in search of compromise. On one point alone he remained absolutely adamant. His opposition to any sign of an increasing ‘communist’ influence was unyielding:
…. it troubles me deeply that Democratic Socialism and those who embrace this a political philosophy have acquired the…. support of the recently formed Communist Party of Jamaica, which stands ready to inherit the minds and the will of young people. Democratic Socialism has failed to fulfil their expectations of a better life.
And in March 1979, he reportedly told the Prime Minister, Michael Manley, that revival of the Jamaican economy was impossible ‘…. if we continue to have this fear that your Government and Party are slowly but surely linking themselves to the International Communist Movement’.
These were years in which local entrepreneurs and business managers moved cautiously at home and vigorously in migration, chiefly to the United States.
Between 1978 and 1982, proposals for further expansion of the Grace, Kennedy Group were given longer and more careful consideration. Mergers and joint ventures with other Companies were predominant. In May 1973, Carlton Alexander informed the Directors that discussions with visiting Directors of Unilever Export Ltd. of England and John Harrison, Managing Director of SEPROD Ltd., were in progress. He also proposed the acquisition of Domestic Sales Ltd. That purchase was finalized by September.
In the same month, three other deals were put through. Grace, Kennedy & Co., Ltd. purchased the premises at 75 1/2 Harbour Street for $35,000 net to the seller. The building was at first used to store documents and house furniture and fixtures, which had been acquired with Domestic Sales Ltd. On the waterfront, Terminal Services Ltd., with a share capital of $30,000 equally subscribed by four partners (Port Services Ltd., Port Contractors Ltd., Jamaica Freight & Shipping Co., Ltd, and Grace, Kennedy & Co., Ltd.),
was incorporated; and Kingston Terminal Operators Ltd. was being established with Kingston Wharves Ltd. and Western Terminals Ltd. as equal partners.
In December 1980, the Group offices were moved from 64 Harbour Street to the Scotiabank Building on Port Royal Street where two-thirds of the tenth floor had been leased from Pan-Jamaican. Space left at 64 Harbour Street was taken up by some of the Merchandising Division staff. The new offices would be occupied by the Chief Executive Officer, Carlton Alexander, the Grace, Kennedy Holding Company and its staff, the Group Finance Director, the Secretary, and the Accounting and Inspection Divisions of the Holding Company.
Grace, Kennedy & Co., Ltd. also moved in a new direction involving other Caribbean entities in 1981. Negotiations were concluded between the Company, the Marriott Corporation and Goddards Ltd. of Barbados jointly and the Government of Jamaica for the purchase from Government of ‘Versair In-Flite Services Ltd.’, catering for air traffic personnel and passengers. In the same year, the Caribbean Food Corporation, a regional statutory body in Port-of-Spain, Trinidad, invited Grace, Kennedy & Co., Ltd:
…. to lead and negotiate, on behalf of the private sector in the Caribbean, for the establishment of a Trading Company to be located in Bridgetown, Barbados.
The new Company would be owned 51% by the Caribbean Food Corporation, and 49% by the Caribbean Private sector. The authorized share capital was $10 million Barbarian, of which $400,000 initially paid up would be proportionately subscribed by the Corporation and Grace, Kennedy, and other private individuals and companies. The Company would be formed by the beginning of October.
In the Merchandising Division, the two most important developments of this period were the merging of Cecil de Cordova Ltd. and Grace, Kennedy & Co., Ltd. in 1978, and the rise and fall of the Grace, Kennedy ‘Cash and Carry’ business between 1976 and 1982. Like many other businesses, both Cecil de Cordova Ltd. and the Merchandising Division of the Grace, Kennedy Group had lost staff members through migration. The merger allowed a more economical and efficient employment of managerial, sales, accounting and other personnel. Following the establishment of Jamaica Nutrition Holdings Ltd., the private sector had lost its freedom to import certain goods. It had also lost some of its influence on related businesses such as shipping and insurance. The merger was an attempt to consolidate in order to protect remaining business and profits, and to allow broader planning of strategies to alleviate the dollar shortage.
The migrations of the 1970s also led to the departure of many wholesalers and the disruption of the traditional chain of distribution. Grace, Kennedy & Co., Ltd. now sought to move from the distribution of bulk products into the development of Product and Brand Management distribution. To this end, it was decided to expand the existing Cash and Carry operations.
The first two of these centres had been set up at Breezy Castle in east Kingston and at Newport West. In 1972, GraceKennedy & Co. had acquired premises at 5 Bond Street (formerly Coombs Cold Storage) on the death of its owner and later converted it into a Cash and Carry outlet to serve small catering businesses. Larger buyers, such as hotels and Government institutions were supplied by GraceKennedy & Co. Food Distribution Division. As with the other centres, the Bond Street outlet, which had a staff of over thirty by 1976, offered meat, fish and poultry in lost of ten pounds or more, and a wide variety of other food-stuffs such as canned vegetables and juices, ketchup and rice. Meat supplies, most of which came from overseas – New Zealand, Canada, Australia, the United States – were, however, increasingly limited by foreign exchange restrictions. In October 1976, another Cash and Carry was opened on Marcus Garvey Drive.
By the start of 1978 there were five centres, two in Kingston and three in rural towns, and there were plans to open two more in that year. But then the troubles began. By mid-1978 it was announced that the Cash and Carry centres, of which the one in Mandeville was doing best, were not performing according to expectation. Marcus Garvey Drive was the worst down $250,800 on budgeted sales. By the end of the year the business appeared to be unprofitable. Offices, warehouses, cold stores had to be maintained and there was a lack of goods for sale. Moreover, price controls and a continuing pressure on firms to keep prices down helped to reduce profit margins considerably.
By the middle of 1979, the Bond Street centre was beset by higglers who obstructed the trade with regular customers from further afield. The prevailing political gang warfare made the workers feel unsafe and they threatened to leave. Flooding in western Jamaica in June put the Frome outlet under five feet of water with 70 per cent of its stock lost. By the end of the year pilferage was generally rampant. As the political violence escalated in 1980, the business became untenable. The first quarter of 1981 saw a loss of $99,000. During that year, the country outlets were sold to managers who offered to purchase. Grace, Kennedy & Co., Ltd. provided redundancy and notice payments to employees who were not kept on and the premises were leased to the new operators. In April 1982, the last remaining Cash and Carry, that on Marcus Garvey Drive, was closed down.
In the Products Division there were equal difficulties. Here, the particular area of anxiety was Grace, Kennedy Food Processors (Meat) Ltd., ironically established in Paradise in Westmoreland. Ever since it started operations, this enterprise had faced fluctuations in
local pig production, managerial and labour problems, the inadequacy or malfunctioning of processing equipment, shortages of containers for products, low productivity, pilferage, and lesser though equally unwelcome hindrances to a smooth-running
operation. Most of the problems were the result of managerial inexperience, scarcities of even basic commodities causing daily increasing hardships for working people and the all-pervasive effects of worsening external trade balances and growing foreign indebtedness. But there were other reasons for unsatisfactory results.
There is hardly a published work on the husbandry of pigs and the marketing of pork products which does not make reference to what is commonly referred to in the North American context as the ‘hog cycle’. An English reference to the same phenomenon is explanatory:
…. it is unlikely that the degree of fluctuations of price in the pig cycle will be as great as they used to be, for the following reasons. In olden days [in England, but as in Jamaica today] a substantial part of the pig output…. was produced by small producers and by semi-extensive pig units on large general farms. When prices were bad these people just scrapped their pig units and went on with other types of farming, which in due course resulted in a shortage of supply and therefore a subsequent rise in pig prices. When pig production then became very profitable, these people would go back into pigs and, because the pigs multiplied so quickly, in due course there would again be a surplus of pigs followed by a sharp fall in prices, and so the cycle went on.
In recent years in England, as the industry has become more competitive with lower profit margins and tighter carcass grading, it has become concentrated in the hands of large and highly efficient specialists who produce top-grade animals and who distinguish between ‘Porkers’ and ‘Bacon Pigs’.
In Jamaica, where the costs of pig production were, and still are, influenced very largely by the cost of imported ingredients for the manufacture of brand feeds, the problem of securing a sufficient and regular supply of pigs for various processing tests the competence of any factory manager. It is not always greed that pushes the pig farmer to demand more per pound of ‘warm dressed’ as feed and other prices escalate. It is not always greed that holds the pork-processor to reluctant agreement in the face of consumer resistance to increasing trading losses when volume of sales declined as bacon prices went up.
Throughout the 1980s, a succession of local and foreign advisers, managers and skilled meat-processing technicians, was brought in to lend assistance. Two who came from Swift Company in 1978 summarized their findings. They compared costs of production
in the United States (11-12 cents per pound) with costs in Jamaica (36-41 cents per pound). The factory, they said, needed improved managerial technical skills and was overstaffed. The salesmen were apparently unfamiliar with the various products of the factory and were consequently unable to push sales. The reporting format needed to be changed in order to provide more precise information on all aspects of production; and they suspected losses of produce through theft.
None of the suggested or implied remedial measures was successfully adopted in the period up to 1982. Indeed, in May 1982, Carlton Alexander threatened to call in the
Union and close the factory since it was apparent that ‘theft of great magnitude was taking place’. Instead, in a calmer frame of mind, he later traveled to Westmoreland and addressed the staff.
Of the other companies in the Products Division, none was highly profitable. Lack of cans and bottles, bad debts, shortages of imported supplies of trading goods and raw materials and reduced sales resulting from higher prices to the consumer all had their
effect. In the Insurance Division, a formal merger of Allied Insurance Brokers and Gamble and Davidson Insurance Brokers was completed in early 1978. In 1977, a strike in ports on the east coast of the United States which had held up shipments of raw materials for National Processors, Ltd. had, however, brought windfall benefits to the Shipping Division as vessels bound for the United States had been diverted to Kingston. In fact, it was mainly transshipment container tonnage that supported the wharves in the later 1970s as domestic tonnage handled was much diminished.
For a time, a merger between Kingston Wharves and Western Terminals was considered.
At the end of 1979, the Grace, Kennedy Group financial assessments showed that the Company had performed far below expectation. Group profits for the year were $11.2 million as against projected $16 million. The Merchandising and Products Divisions had both turned out $2 million below budget. The Industrial and Insurance Divisions had done better at about $1 million above budget. Much had been spent on promotions and advertising: the costs of security protection and advice had been great; and the Group now had foreign debts equivalent to $17 million. Early in 1980, Carlton Alexander and Rafael Diaz went to Montreal and Toronto ‘…. to meet with our bankers regarding future financing from overseas’. At the end of January 1981, Alexander was still ‘deeply worried about management and expense control’.
Under a New Regime
Prime Minister Michael Manley had indicated in February 1980 that elections might be held before the end of the five-year term, which had begun in 1976. On October 30, 1980, the electorate went to the polls. The result was a huge victory for the Jamaica Labour Party. The Gleaner commented on the result as the final votes were being counted:
Described by most political observers as the most crucial election in Jamaica’s contemporary history, yesterday’s poll concluded an election campaign that was marked by two special factors: the extraordinary length of the campaign, and the unprecedented level of violence.
Following appeals from all sides and a ‘peace pact’ between Michael Manley and Edward Seaga, the violence which ‘reached a crescendo following Nomination Day, October 15’, subsided to allow the estimated eighty per cent turnout of voters under a massive ‘security blanket’ of police and military personnel to vote without much hindrance. This time, the result brought no euphoric wave. The return to power of the Jamaica Labour Party, overwhelmingly supported, was greeted with relief rather than radiant expectation.
The Grace, Kennedy Directors gave their views on current problems and future policies. They referred to the pressures of day to day administrative preoccupations, which left small time for thought about future directions. They spoke of the need for people with managerial skills to fill the gaps left by emigration and to control new projects in which the Group had relatively little experience. They referred to an increasing pressure of competition in a much-subdued local market. Above all, they emphasized the need to develop an export business in order to earn foreign exchange; and it was at this time that a large agricultural project to grow vegetables for the North American market was launched at Halse Hall in Clarendon.
The fundamental concerns of those who managed the affairs of the Grace, Kennedy Group were amply illustrated by the frequent calling in of local and foreign experts to give aid and advice. The assistance of some of these was certainly helpful. With equal certainty, the performance of others was not. During the 1970s and 1980s, reshuffling of various Companies, Divisions, Groups and nomenclatures marked the continuing search for a corporate structure appropriate to the needs of a growing, albeit temporarily restrained, Group.
The Board of Directors from time to time established various committees. Some prevailed, others did not. One of the most notable was an ‘Economic Monitoring Committee’ formed in April 1979, at the suggestion of Rafael Diaz ‘to monitor and take corrective actions’ regarding inventories, receivables, pricing policies and expenses. Another, formed by Carlton Alexander in January 1981, was an ‘Executive Committee’ of the Board which ‘would have and exercise the powers of the full Board of Directors’ in the following matters delegated to it: Accounts and all financial matters; Corporate Planning; Reports from Divisional Directors; Government and Community Relations; Employment of Management Staff and all Salaries and Employee benefits; the Group Inspection Departments; and the Overseas Companies. These last named were now reduced to operations in Belize, Toronto and, soon, in Barbados, in which Boerries Terfloth had not shared. The Executive Committee, clearly, was to act as a Standing Committee of the full Board. Its membership would consist of the Chief Executive Officer, the Group Managing Director, the Finance Director, the Senior Divisional Director and four external Directors.
A very important innovation in the last quarter of 1980 had been the Inspection Division, recommended to the Board by Cyril Tame, an external Director, and headed by Peter Moss-Solomon who would report directly to Carlton Alexander. An immediate task of the Division was to establish:
…. a basic organizational structure to evaluate systems and controls in the most crucial areas of the Group…. [and] to evaluate the performance of the job incumbents of the Grace, Kennedy Group.
In the longer term it would be required:
to inspect and audit the systems and internal controls in all areas of each Company in the Grace, Kennedy Group…. to safeguard the assets of the Group and improve efficiency.
In late 1978, one of the visiting consultants, Robert Keiser, who was a volunteer with the International Executive Services Corporation, had discussed with Carlton Alexander means by which the Group’s volume and value of exports might be increased. GraceKennedy & Co. Ltd. had entered the export market in the mid-70’s under the Managing Directorship of Mable Tenn, and with Sydney Masters as Departmental Manager, with early successes. In 1978, products from DaCosta Bros. (in 1981, to hit the market with ‘Grace Cock Soup’) and other Grace, Kennedy & Co., Ltd. factories, with about twenty per cent of the exports coming from companies outside Grace, Kennedy, earned for the Group a small amount of foreign exchange and a third successive award as an Export Trader. Nonetheless, despite early growth and with exports almost doubling in 1979, there were problems, which would be later addressed by Boerries Terfloth and others. In August 1982, Rafael Diaz listed some of the existing complaints.
Most arose from improper or inconvenient packaging and labeling, and some products had had to be withdrawn from shipment because of a high bacteria count. One month later, two reports on a Grace export were perhaps indicative of a wider Jamaican propensity to lapse into slovenliness while striving for excellence. On September 2, Seville Orange Marmalade, manufactured by Grace, Kennedy & Co., Ltd.:
…. received the highest number of points of all entries in the 21st World Selection of Canned Foods and other Food Products held in Brussels, Belgium.
Four other Grace Products – Calypso Punch, Barbecue Sauce, Zest Orange-flavoured Crystals, and Pineapple-Mango Drink -had all won gold medals; but the marmalade had won the even higher Gold Medal with Palm Leaves. In the same month, however, the GraceKennedy & Co., Ltd. Board of Directors was informed that Boerries Terfloth had called to complain that marmalade samples sent to his Company in Montreal had arrived in dirty bottles with crooked labels.
Sixty Not Out
Grace, Kennedy & Co., Ltd reached its Sixtieth Anniversary on February 14, 1982. It was a time for celebration, but also for reminiscence and for concern. The celebration included two thanksgiving services, a long-service awards ceremony, and a staff party, which was clearly a success. Still to come was a sports club festival planned for May, a series of cocktail parties to be hosted islandwide and an exhibition to reflect all aspects of the work and achievements of Grace, Kennedy & Co., Ltd. A Gleaner Supplement and aCorporate Brochure summarized the Company’s history and set out the now very diverse subsidiaries and partly-owned businesses which comprised the Grace Group:
- a) The Merchandising Division including the Distribution, Sales and Marketing
Departments, ‘Grace Kitchens’ Caribbean Greetings Corporation, and Versair
- b) The Trading Division made up of Rapid and Sheffield, Pilkington Glass (JA.)
Ltd. and GAICO;
- c) The Manufacturing Division in which there were Grace Food Processors
(Meat), Grace Food Processors (Canning), DaCosta Brothers, Dairy Industries
(JA.) Ltd., National Processors, Addis (JA.) ltd., and Metal Fencing and
Security Woven Wire Products Ltd.
- d) The Shipping Division including Grace, Kennedy & Co. (Shipping), Grace,
kennedy Travel (which was a Department of that division), International
Shipping Ltd., H. Macaulay Orrett Ltd. (Sealand Services), Port Services Ltd.,
Terminal Services Ltd., Kingston Wharves Ltd., Harbour Cold Stores and
Kingston Terminal Operators Ltd.;
- e) The Export Division recently established to handle mainly Grace, Kennedy & Co., Ltd. products. This Division was, by 1982, an embryonic Trading House;
- f) The Insurance Division with Allied Insurance Brokers Ltd. and Jamaica
International Insurance Co., Ltd.
- g) The Human Resources Development Division including the Cultural Affairs
- h) The Inspection Division with its large assignments; and
- i) The Quality Control Division whose presence in each company was intended to safeguard quality of product and to monitor legal requirements and
standards with regard to products.
In 1982, Grace, Kennedy & Co., Ltd.’s employees numbered over two thousand, and staff ownership in the Company, at widely differing individual levels, was 23%. Although the GraceKennedy 50% ownership of the overseas Terfloth and Kennedy Companies had been sold to Boerries Terfloth, the Company had continued to trade with the various Terfloth Companies and others overseas and thus their export trade had been encouraged.
This was far, far different from Grace, Kennedy & Co., Ltd. in 1922 with its 50 per cent share of the Grace Wharf, the Shipping Agency for the Aluminium Line of America, representation of the North British and Mercantile Insurance Co., and two local rural branches of short-lived prosperity. There were other very important differences. James Moss-Solomon, who had been there in 1922, had gone. He had retired from his directorship in December 1972. On Tuesday, October 6, 1977, he had died at his home in lower St. Andrew. Luis Fred Kennedy, having gradually withdrawn from his governing directorship and other demanding managerial commitments because of ill health, would not long survive the celebrations of February 1982. Hr died in Toronto on May 27 of the same year. Ten members of the Company, including Directors, and led by Carlton Alexander, attended his funeral there; and on Thursday, June 2 all offices closed early so that staff in Jamaica might attend his Memorial Service at the Church of Saints Peter and Paul in Liguanea. Another era had gradually come to a close.