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July - August 2014 Issue

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Guam Chamber



 

Feature

As the global economic crisis continues, the companies in Guam's wholesale and retail industries continue to find themselves in a struggle to keep afloat. Of course, these times are as tough on the consumer as they are on the industry itself. In the words of George Chiu, president of Dickerson & Quinn, "It's no secret that our region is not doing well economically. People need to spread their paychecks more broadly in order to cover higher living expenses."

Dickerson & Quinn is one of the leading consumer product distributors of the region, serving Guam, the Northern Mariana Islands, the Federated States of Micronesia, Palau, and the Marshall Islands. Among D&Q's suppliers are a number of Fortune 500 companies and industry leaders, such as Unilever-Best Foods, Campbell's, Connor Brothers Seafood, E & J Gallo, Procter & Gamble, Hormel Foods, Kraft Nabisco, Reynolds, Real Fresh Milk, Tree Top and International Smokeless Tobacco Corp. Despite this impressive portfolio, Chiu recognizes the challenges his company is currently facing, noting that the business climate is generally worse now than it was in the same period two years ago. "But we're fortunate," Chiu says. "We've been able to work more closely with key accounts so that they are buying more locally rather than from off-island sources. This trend has helped grow our business. Having said that, the business climate is very tough and very competitive."

D&Q has noted strategies that shoppers have adopted to deal with the challenging economic times. To deal with the higher cost of living, "Shoppers need to look for the best deal," Chiu says. "It's common to see shoppers visiting multiple stores in order to buy just the products which are on promotion." Consequently, D&Q has employed an advertising strategy that's a marked departure from the traditional promotion and advertising campaign. "The principle is to focus promotional spending as close to the point of purchase as possible," Chiu says. "Essentially, this means that we spend the greatest share of our promotional dollars advertising and promoting our products within our customers' stores."

Despite these trying times, D&Q has some positive news to report for the past year. "We have increased the size of our warehouse space and we have added specialized areas for freeze and chill cargo," says Chiu. Also, during a time when many companies are being forced to downsize to remain operational, D&Q has managed to keep its workforce at a relatively constant level over the past three years, on both Guam and Saipan.

Similarly, Market Wholesale Distributors Inc. has had a relatively good year despite the global and regional economic hardships. "Business has definitely been improving," says Christine Won Pat, general manager. "I believe last year was a very difficult one for most businesses as a result of the Japan disaster." Baleto, of course, refers to the earthquake and subsequent nuclear disaster that struck Japan on March 11, 2011. "Although the visitor industry felt the most immediate and significant impact; the ripple effect was felt throughout our community," Baleto says. "When our visitor industry is not healthy, hotels and restaurants are purchasing less goods; employees have reduced hours (or worse, are laid off) are spending less in retail establishments; retail establishments then purchase less to replenish their goods. In addition to the Japan disaster, there was great concern for government workers and their job status with news stories of potential layoffs or forced retirement. These all affect consumers' purchasing behavior."

Established in 1967 under Payless Markets Inc., MWD operates under Calvo Enterprises, Inc. as a distributor of products throughout Guam and Micronesia. The company counts Folgers Coffee, Crisco Oil, Jif Peanut Butter, Tabasco, Dole bananas, C2 Cool & Clean teas, and Kellogg's Waffles as its most popular products, and just recently added the Smuckers/Folgers line and Kellogg's frozen products to its offerings. "We continue to evaluate different brands to identify products which are appealing and desired by Guam's consumers," says Baleto. Additionally, MWD has recently added Yogurtland, Beard Papa and TGI Friday's to its list of customers.
Though the year has been generally good for MWD, Baleto notes that the marketplace still appears to be on shaky ground, especially from a consumer's point of view. "I have noticed a change in consumer purchases over the years," Baleto says. "Guam historically has a very brand-loyal market. Products such as Folgers Coffee, Crisco Oil, Tabasco, Pepsi, Spam, Best Foods Mayonnaise, etc., have been around for generations. Consumers habitually purchased these products as they are familiar with the brand, quality and taste. As hard economic times hit our island, I noticed a shift to budget brands." Unfortunately, MWD was also hit particularly hard last year. As a result of the sharp economic slowdown, the company was forced to reduce its workforce and now employs just over 40 individuals.

Overall, Micronesian Brokers, Inc. managed to have a generally very positive year while still facing the challenges of an unstable economy. Michael Brown, vice president, says, "Because of its world class portfolio of products complemented by a truly remarkable team of wholesale and distribution professionals, MBI continues to experience nice year-over-year growth. That growth is complemented by proper control of expenses that, as a percent of in-market sales, continue to decline." The news comes with a caveat, though, as Brown continues: "The fact of the matter, however, is wholesaling in the islands is a very costly venture, and to be successful requires selling in volume. Constantly. Margins are razor-thin in this business…we're doing OK but we have to be ever vigilant — and we are."

Founded by former U.S. Navy Seabee and entrepreneur Kenneth T. Jones, MBI is an affiliate of Jones & Guerrero Co. Inc. and provides food, beverage, and commodity sales and service to retail and food service and institutional customers in Guam, the Federated States of Micronesia, Palau and the Marshall Islands. The company carries product lines from industry leaders from the U.S., Australia, New Zealand and the Philippines. Of their most popular products, Brown says that "Frito Lay chips, dips and salsas continue to be strong performers for MBI. However, over the last several years, we've seen very good growth out of several of our other brands, most notably Anchor, Abbott Labs, Ox & Palm, Nestlé, Quaker, Colgate-Palmolive, Dispenser Beverages, and more. Kellogg's, which is our newest line addition, shows very strong promise."

The company also offers an environmentally sound alternative to traditional disposable plastic bags. According to Brown, "The biodegradable bags that we offer are more and more becoming the bags of choice with both our retail and institutional accounts, as well as Guam's consumers overall." These bags replace plastic grocery bags and food bags and are guaranteed to biodegrade into water, carbon dioxide and humus in from nine months to five years. "We see these biodegradable bags as being part of the solution to the island's trash and landfill problem," says Brown, "Anyone that says theirs is the only way to go regarding this serious issue that's confronting all of us just isn't giving full and fair consideration to the wide range of trash and landfill solutions that are today available to this U.S. territory."

The past year has seen significant growth for MBI. According to Brown, "over the last year, MBI brought to market new Anchor milk and cheese products from Fonterra; new novelty ice cream as well as Tombstone and DiGiorno frozen pizzas from Nestlé; new chips, dips, and salsas from Frito Lay; and some new Ox & Palm canned meats from Heinz-Australia. We also added Mother's Cookies to our lineup of cookie and cracker offerings and, in December of last year, MBI was appointed by Kellogg's as the exclusive distributor for the Guam, Saipan and Micronesia markets of that American company's cereals, Pop Tarts, breakfast bars, and more."

Due to this increase in product volume, the company needed to upgrade its storage and transport hardware, as well as increase its workforce. "We just recently added new trucks, forklifts and warehousing capacity to handle both our growing volumes from existing lines as well as the demands put on the company by our new line appointments," says Brown. Of the company's workforce, Brown says that "MBI has a total of 80 employees on Guam (Saipan has approximately 30). The bulk of our workforce is dedicated to customer service; in fact, almost 80%, or 63 of our total 80 person headcount, is either in marketing and sales/merchandising or warehouse operations. During the last 12 months or so, the company's headcount on Guam has risen in these two functional areas — marketing/sales/merchandising and warehouse operations — by 22% and 21%, respectively.

The year has also been a success for MBI in terms of its promotion and advertising campaigns. "Last year, the company made a conscious decision to not only continue with its regular advertising and in-store signage promoting," Brown said, "but to also raise the bar relative to the quality and style of the in-store promotions and samplings that it conducts. We implemented very strict guidelines for conducting product samplings with the goal of getting as many consumers to try our products and, in the end, purchase them from our retail customers. Today, MBI is the benchmark for all others when it comes to product samplings and in-store promotions."

Finally, July 2012 marked yet another success in MBI's recent history, with the opening of its new, state-of-the-art wholesale and distribution complex on Saipan. Brown is especially proud of the new facility — "Despite a really difficult business environment, and much to the credit of our team in the CNMI under the leadership of MBI-Saipan's general manager, Kitz Barja, our Saipan operations have been doing very well the past five to seven years. With their new and expanded dry, chill and freeze facilities, we look for even better business results in the months and years ahead."

In terms of consumer purchasing trends, MBI sees customers remaining loyal to their brands even when the prices increase. "We've noted that many if not most of Guam's consumers, especially when it comes to the food that they serve to their families, will more times than not pay for good, proven quality even though cheaper options may be available," says Brown. "The fact of the matter is MBI represents some of the most popular brands in the world … over 20 world-class brands in all. But these brands aren't always the least expensive – indeed, they're sometimes the more costly of the different options available. … Our read of the Guam market is that the majority of the consumers here want good and proven quality rather than cheap for cheap's sake."

As with MBI, Pay-Less Markets Inc. has observed a general increase in business as opposed to last year. Specifically, Michael Benito, general manager, says he has observed an increase in demand for healthy and organic products. "Our health-conscious customer base definitely continues to grow," Benito says. 'We have seen continued growth in all categories from dairy products such as healthier milk products (rice milk, Silk, organic, skim etc.), organic items, to the grocery sections such as wheat and whole grain breads and greater amounts of brown rice moving through our stores. Guam has always been a "dark meat" consumer when it comes to chicken, but recently chicken breast regularly outsells chicken thighs. In every department we have healthier alternatives and they all continue to do well. … Of course, we still sell a lot of Spam, Diamond G Rice, short ribs, pork bellies and all the other local favorites."

Pay-Less Markets Inc. is truly a homegrown company. The company was founded in 1950 as J&G Payless Supermarkets with just a single store in Agana by Kenneth T. Jones of Jones & Guerrero. For years, the company expanded under Jones' leadership and was sold to its current owners more than 20 years ago. The company now has seven stores — in Yigo, Dededo, Micronesia Mall, Oka, Sinajana, Mangilao and Agana. Pay-Less currently has a workforce of more than 600 employees, and that number has remained steady throughout the economic downturn.

The company's most successful campaign in the past year has been its "Go Green" initiative. "Every Wednesday we put away our plastic bags and encourage all customers to use our recyclable bag — or any recyclable bag. When they use the bags on those Wednesdays, we always provide discounts such as 10% off produce or 10% off all meat items (not on sale, of course). We want people to see the advantage of using recycled bags. Not only does it protect our environment, but it can save you money as well. Some of our customers were upset because we were charging 5¢ for brown bags on those days. We understand their frustration but we wanted to really push the use of the recycled bag." Any income the campaign generates helps the Go Green initiative further. "The money collected doesn't go to Pay-Less," says Benito. "We use that for mini-grants for schools and organizations who have green initiatives."

Pay-Less also saw significant expansion in the past year. "We put in a new freezer, chill box, and meat preparation room at the mall Pay-Less," says Benito. "We installed a full set of LED lights in our Agana store and plan to outfit all our stores with them to help reduce our power consumption. Most importantly, we completely renovated our Yigo Pay-Less location."

Yet another wholesale company that has experienced an increase in business in the past year is Triple J Five Star Wholesale Foods Inc. "We have had a very strong year," says James Herbert II, general manager. "Particularly when compared to the March to August period of last year — mainly due to the decrease in visitor arrivals after the tsunami in Japan. We are very optimistic for business growth in the coming months."

Triple J Five Star was founded as a food product distribution division of Triple J Enterprises. The division's network of operations spans Ebeye, Saipan, Guam and Majuro, with affiliated representatives in Pohnpei and Palau. "We also service many national accounts such as Wendy's, Burger King, Outback Steakhouse, California Pizza Kitchen, Hard Rock Café, Tony Roma's, Capricciosa and KFC," says Herbert. Triple J is currently the exclusive distributor of Certified Angus Beef, Tyson foods, AA Shrimp & Seafood, Dreyer's Ice Cream, Pampanga products, Hawaii Water, Stars & Stripes soda, Hereford canned meat, Little Debbie and others. "Our most popular products continue to be Certified Angus Beef, California Sunshine Milk, Tyson, Hormel, Hawaii Water and of course, Dreyer's Ice Cream," says Herbert. Triple J has also noticed a recent customer trend in increased sales of healthy food products. "One item that we have had good success with is a trans-fat-free oil for frying," Herbert says. "People are also looking for better value and convenience."

Like its competitors, Triple J is also looking to expand its operations on all fronts. "We continually seek to add new customers," says Herbert. "Our most recent addition is Hard Rock Café — while Hard Rock has always been a customer, we are now handling all of their spec items. We are always exploring opportunities with new suppliers." On the advertising and promotions front, Triple J implemented a new strategy earlier this year. "We conduct individual promotions with our customers," Herbert says. "However, our largest advertising expenditure this year would be the Guam Hotel & Restaurant Association's PHARE, which was held at the Hyatt Regency Guam." As for the year to come, Herbert says the company is "looking to expand our capacity in the near future. This year, we have added two new forklifts and we have two new refrigerated trucks on order."

Understandably, Guam's wholesale and retail companies share many similar tests and foresee many of the same challenges. Two dominant and familiar issues for the present and near future are the island's tourism industry and military presence. As Chiu of Dickerson & Quinn says, "We're hopeful that tourism and the military presence will continue to expand. If they do, there will be many new challenges and opportunities for all distribution companies." Both Brown of Micronesian Brokers and Herbert of Triple J express concern about the recent drought in the U.S. mainland, as it has had a huge impact on key agricultural regions. "I don't think people understand yet the full scale of the impact this will have on our economy," Brown says. Herbert adds that the drought "will have a significant negative impact on supply and pricing industry-wide."

The past year has also seen generally positive growth for Titan Imports. Coming from a unique part of the wholesale spectrum, Titan is a supplier of wines and spirits. According to John Antenorcruz, Titan managing director, the company has seen growth "not particularly in volume but more in premium value. We have seen our customers moving toward the premium aged whisky spirits and California Sonoma and Napa Valley wines. The business continues to progress and this has benefited Titan Imports as a premium luxury wines and spirits distribution company." Antenorcruz continues, "customers have acquired an exceptional level in premium aged whisky. They are coming to understand the premium value of The Glenlivet Single Malt 21 year old, Chivas Regal 12yo and 18yo, and The Royal Salute 21yo whisky."

While based on Guam, Titan's customers include the Northern Mariana Islands, Chuuk, Kosrae, Pohnpei, Yap and Palau, as well as Guam. "Titan Imports distributes several luxury and premium brands throughout Guam and Micronesia," says Antenorcruz, "but the flagship brand of the company is Chivas Regal Scotch Whisky and Absolut Vodka. They are huge iconic global brands known throughout the world." Recently, the company has expanded its offerings to match evolving market trends. "The company has increased its California premium wines, as we understand there a few customers are looking for great quality wines at value pricing," says Antenorcruz. "This was one area Titan has increased its portfolio in 2012."

Like many of Guam's distributors, one of Titan's greatest challenges is, and has been, transportation. "As Guam is miles away from Scotland and the wineries, the biggest challenge is pricing as shipping and suppliers cost continues to escalate," Antenorcruz says. "We never like increasing prices but it is unavoidable. The majority of Guam's consumers are knowledgeable and sophisticated; they know brands and would pay top dollar for premium wines and spirits from Titan's portfolio."

Despite these challenges, Guam's leading wholesale and retail companies remain hopeful. While they may at times experience understandably conflicting trends in the industry, the overall picture of the economy is one of steady and positive growth.

 

 
 
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