• BISX-listed group to purchase Exuma Markets
• Targeting up to seven ‘neighbourhood stores’
• Roll-out to spark 45% top-line rise by 2030
By NEIL HARTNELL
Tribune Business Editor
AML Foods yesterday said its Exuma Markets acquisition kicks-off a key element in an expansion strategy that aims to drive group-wide sales to $250m by 2030.
Gavin Watchorn, the BISX-listed food retail and franchise group’s president, told Tribune Business the purchase of the 30 year-old Georgetown-based business represents the launch of AML Foods’ bid to establish a network of smaller neighbourhood food stores across several Bahamian islands.
Disclosing that the concept was being developed “throughout COVID-19”, Mr Watchorn revealed that Exuma Markets could be the first of up to seven such stores that are considerably smaller than the larger destination-type outlets the group has focused on to-date. While other locations have yet to be finalised, all will be less than half the size of its existing Solomon’s Yamacraw store.
He added that the group will use its existing store and supply chain infrastructure to drive synergies and cost savings in providing inventory to the smaller outlets, thereby eliminating the need for extensive capital investment in stock room expansion while still maintaining a product range matching that found in AML Foods’ larger Solomon’s and Cost Right formats.
The strategy is also designed to respond to consumers’ desire to shop closer to home, a trend Mr Watchorn said had merely been “reinforced” by the COVID-19 pandemic, and which required AML Foods to physically become nearer those communities “we don’t serve” right now.
Revealing that the small neighbourhood store strategy is a key element in efforts to increase AML Foods’ group-wide sales by 45 percent over the remainder of this decade,” Mr Watchorn said: “We have a goal to build our company up to $250m sales or plus by 2030, and these small stores will play a large part in getting us there and achieving that target.”
AML Foods expects Exuma Markets, which has been owned and run by the Minns family, to account for around five percent of total sales within two-three years of the acquisition’s closing, with Mr Watchorn describing the deal as “a good fit” for both Exuma and the company.
“Exuma is an island that really has a vibrant economy and has been growing for some time, and while it had the impact of COVID-19 like many other islands and countries, we feel it will bounce back pretty quickly,” he told this newspaper of the rationale for purchasing Exuma Markets.
“We have been developing a strategy to focus on smaller stores in new markets, and when the opportunity came up we felt it’s a good fit for us and we can be a good fit for Exuma. We believe we can be a great community partner. The Minns family have done a great job running that business for 30 years, and we look forward to building on that legacy.”
Neither Mr Watchorn nor AML Foods revealed the purchase price for Exuma Markets, with the deal to acquire the latter and its existing assets set to close on May 29 this year subject to satisfactory due diligence checks by the BISX-listed buyer.
The final purchase price is to be determined by the value of assets such as stock/inventory that Exuma Markets holds when the deal closes, with AML Foods to also make a $250,000 investment to upgrade and remodel the existing store.
“We’re not changing the name,” Mr Watchorn said. “Exuma Markets has been around for 30-something years, and is a great name that is known in Exuma by boaters, yachters and visitors. We’ll retain the name and operate it like Solomon’s.
“We believe that in 24-36 months we’ll be able to increase overall revenues, AML Foods’ group revenues, by about 5 percent from this transaction. We expect that we will end up with a full-time staff there of about 12-15 persons, and we would increase that during the busy season period.
“The concept will be a Solomon’s neighborhood store, but we will also offer residents the opportunity to shop our Fresh Market and Cost Right brands by leveraging our existing operations and supply chain.” Based on AML Foods’ $172.445m revenues for its 2020 full-year, it is aiming for an $8.622m top-line for its acquisition by 2023-2024.
The Exuma Markets acquisition marks AML Foods’ first return to the Family Islands since it exited Abaco around 14-15 years ago. The BISX-listed food group has focused on New Providence and Grand Bahama ever since, and some shareholders and observers will likely be concerned about repeating ventures that did not meet expectations in the past.
There are also potential supply chain and logistical difficulties, not to mention extra costs, involved in supplying food stores outside Nassau, and Mr Watchorn acknowledged these were valid concerns when they were raised by this newspaper.
“I would say we exited Abaco 14-15 years ago. It has been some time,” he replied. “We were a different company then than we are now. We are very confident we have the management, the structure in place that will allow us to service the store efficiently, and the management talent that will be able to run the store to our standard and the standards that will get results for our shareholders.”
Turning to the wider strategy unleashed by the Exuma Markets purchase, Mr Watchorn told Tribune Business: “We’ve been working on this smaller format throughout COVID-19. We feel AML Foods can open up seven locations for smaller food stores in markets we don’t serve or have a lot of customers in right now.
“I don’t want to actually commit to do that, but in planning we believe there’s an opportunity for up to that number. We have to do our due diligence and make sure there’s a return for our shareholders in this. There’s opportunity for five to seven locations for these new stores, whether in New Providence, Grand Bahama or the Family Islands, but we’re not in a position to say categorically they’ll be here or there.
“The existing store in Exuma is 5,000 square feet, and the size of the neighbourhood stores we’re looking at is between 5,000 square feet to 15,000 square feet. Solomon’s Yamacraw is 35,000 square feet.”
This means AML Foods’ new format will be between 16-43 percent of the size of that latter store, but Mr Watchorn explained that the BISX-listed group will ensure they carry the same product range - while minimising its capital investment - by supplying them from its existing facilities to eliminate the need for large stock rooms.
“We will be using our existing supply chain synergies to service those stores without the need for expansive back rooms or investment in them,” he said. “This is something that we were looking at prior to COVID-19. We can use the support facilities in our bigger stores to support the smaller ones. We will not have space in the back with those stores; we will use the space in the existing stores.
“The consumer’s habits are changing. Persons want to shop closer to home, and COVID-19 has reinforced that. The pandemic has shown that while there is variety in the larger stores, the core make-up of what customers want can be provided satisfactorily in smaller stores. We will bring it to the communities that they live in.”