May 23, 2008

Gourmet Farms expands to Cebu

SILANG, CAVITE—Gourmet Farms Inc. (GFI), the largest local supplier of freshly roasted coffee to premier hotels and restaurants in the country, is unfazed by the rising inflation and strengthening peso. Its officials are projecting a 23-percent growth in the company this year, with a multimillion-peso expansion plan in place for the Visayas, starting in Cebu.

(GOURMET Farms Inc. chairman and president Ernest Escaler is all smiles as his company continues its growth and expansion despite higher inflation and an unstable peso; (inset) an array of products from his farms.)

In an interview with select reporters, Ernest Escaler, chairman and president of GFI, said: “No [we’re not affected by higher inflation, higher peso rate], because we’re practically domestic. We’re not dependent on anything imported. That’s the whole concept of Gourmet Farms, [which] is to provide world-class products from a purely domestic source. So from Day One, the whole concept of Gourmet Farms is that we can prepare gourmet products without having to resort to imported materials. So the higher the dollar is, the higher prices rise, we become more competitive.”

Aside from its seven types of premium ground coffee blends, including pure arabica and barako (Excelsa), GFI also has three other product lines: six different herbal teas using indigenous herbs and vegetables such as ginger, sambong, banaba, ampalaya, pito-pito and lagundi; 13 kinds of pasta sauces, dips and salad dressings under its Kitchen Exclusives line; and 14 varieties of organically grown lettuce and culinary herbs and spices.

In 2007 the company posted P90 million in sales from its three main lines: roasted coffee and herbal teas (P45 million), dips and dressings (P20 million), and fresh produce (P25 million). This year GFI projects sales hitting P111 million from its gourmet coffee and teas (P60 million), bottled products under Kitchen Exclusives (P23 million), and fresh produce (P28 million).

(Rows of lovely lettuce at Gourmet Farms.)

According to Ronaldo Rizal Pablo, sales and marketing manager for GFI, “The majority of our coffee sales in 2008 will come from Cebu and the Visayas.” In the second quarter of the year, GFI already opened its office in Cebu and has begun making its way into the local supermarkets, such as the Gaisano chain.

About 50 percent of the annual company turnover comes from the sales of its produce and bottled products in premier supermarkets, said Pablo, while the rest comes from food services, which include major fast-food chains, premier restaurants and hotels, which the company supplies with customized coffee blends.

Escaler also disclosed that the company recently signed an agreement with the L’Opera Group of Italian restaurants, “which asked us to supply all their coffee requirements.”

He sees this as proof that there is a market for premium coffee blends created in the Philippines. “The Italians are the world’s coffee connoisseurs. Why should they pay P1,200 per kilo for an Italian coffee, when they can pay P700 per kilo for Philippine superior coffee?”

Escaler also encouraged more local restaurants to offer Philippine-produced coffee, rather than the foreign brands now flooding the market, to help boost farmers’ incomes. “You buy the Lavazza and Illy at P1,200 per kilo, you’re supporting the farmers in Colombia, in Brazil. You buy our coffee, you’re supporting our local economy. Pero itatapat ko, our premium coffee with Lavazza or Illy, we are better than them! Don’t forget they were roasted a year ago, eight months ago. Our coffee was roasted just days ago.”

While it doesn’t grow coffee on its own farm, the company sources 100 percent of its coffee beans from farmers in Benguet and Batangas. GFI also owns the largest coffee roaster in the Philippines, with the capacity to roast 60 tons of beans every day on an eight-hour shift, five times a week. Other coffee companies and food-service companies tap GFI to roast their beans.

(Len Reyes, GFI trading manager, shows off the largest coffee roaster in the country.)

While officials declined to reveal the company’s budget for capital expenditures this year, they said much of it will go into its expansion to Cebu and “developing new products.”

According to its web site, Gourmet Farms was incorporated in December 1987 as a wholly owned subsidiary of ECI Trading Corp. (ECITC), then a Philippine Board of Investments-registered exporter of Philippine green coffee beans. ECITC is the flagship of Ernest Escaler Group of Companies, and was once one of the top 1,000 corporations in the country.

In the 19th century, the Philippines was one of four top coffee-producing countries in the world. A blight in the 1890s wiped out local coffee crops, giving way to South American countries to enter and eventually dominate the world market. At its peak in 1986, Philippine coffee exports reached $186 million. The scrapping of world coffee quotas and the Philippines’ lifting of quantitative restrictions on foreign coffee in 2004 have led to low coffee prices in the country, thus discouraging local farmers from planting the crop.

According to the Bureau of Agricultural Statistics, ground coffee imports amounted to $63,283 (FOB) in 2006, while exports of the same amounted only to $37,676. Local coffee production dipped 1 percent to 104,000 metric in 2006.

(My text and photos were published in the BusinessMirror on May 22, 2008.)

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