GraceKennedy Recalibrates Africa Strategy

GraceKennedy to bring new Ghana distributor on-board

(Extract of Jamaica Observer article Friday, May 31, 2019. BY KARENA BENNETT)

FOOD and financial services conglomerate GraceKennedy Limited hopes to bring on-board its new Ghana distributor by the end of 2019 in line with its mandate to achieve 60 per cent revenue outside of Jamaica.

Group CEO Don Wehby made the announcement on Wednesday during the company's annual general meeting at its new headquarters on Harbour Street, downtown Kingston.

GraceKennedy's vision of being a global consumer group includes achieving 60 per cent of all revenue outside Jamaica. For 2018, the group generated 47 per cent of its revenue outside Jamaica, compared to 49 per cent in 2017.

We have said and we still maintain that West Africa is going to be a key revenue driver for the GraceKennedy Group. We have done quite a bit of research on that; I also said last year that we will have to revisit our strategy and business model in Ghana, the CEO said.

We are just about finalising that distributor who represents good brands in Ghana, and I'm hoping that by the second half of this year, we start our business through a third-party distributor, Wehby continued.

GraceKennedy entered the African market through Ghana in 2012. That same year, the company reported $41 million in revenues and later set a target to generate 15 per cent of revenues from the continent by 2020.

1. Given that Grace's investment in Ghana was entirely in US dollars, describe its exposure to exchange rate risk resulting from the project. Explain how the size of the parents initial investment and the exchange rate risk would have been affected if Grace had financed much of the investment with loans from banks in Ghana?

b. Describe the factors that Grace likely considered when estimating the future cash flows of the project in Ghana.

c. What factors did Grace likely consider in deriving its required rate of return on the project in Ghana?

d. Describe the uncertainty that surrounds the estimate of future cash flows from the perspective of the Grace.