Required Report - public distribution

**Date:** 1/6/2005

**GAIN Report Number:** JM5001

JM5001

**Jamaica & Dep**

**HRI Food Service Sector**

**Annual**

**2005**

**Approved by:**

![](media/image1.wmf)David G. Salmon

U.S. Embassy, Santo Domingo

**Prepared by:**

Sylburn Thomas

**Report Highlights:**

This is an update of the Hotel Restaurant Institution (HRI) food service
sector in Jamaica

Includes PSD Changes: No

Includes Trade Matrix: No

Annual Report

Kingston \[JM1\]

\[JM\]

# I. MARKET SUMMARY

### 

### *i. Economic Situation*

Following four consecutive years of contraction (1996-1999), the
Jamaican economy returned to a modest growth trajectory, expanding by
0.7 percent during 2000 and by a further 1.1, 1.5 and 2.1 percent over
the three ensuing years. The economy is expected to grow by two to four
percent over the medium-term.

Since the 1980's, Jamaica's economic performance has been characterized
by an intensifying policy-driven shift from the productive to the
services sector. The services sector\-- driven primarily by
telecommunication, tourism, and transportation and storage\-- has
consistently out performed the goods sector, and its contribution to GDP
increased from 65 percent to 85 percent. This asymmetric pattern of
performance should strengthen, as public and private investments
continue to emphasize a "new" service-oriented economy (see JM4005 for
further discussion).

### *ii. Tourism*

#### a. Performance

The Jamaican tourism sector has shown tremendous resilience over the
last four years, a period characterized by unprecedented challenges
arising from the September 11^th^ terrorist attacks in the United States
and the September 10, 2004 hurricane that ravished the island. Following
the terrorist attacks in the United States and the consequential
downturn in global travel, tourist arrivals to Jamaica declined by five
percent during 2001. However, by the end of 2002, tourist arrivals began
to recover and during the subsequent year registered an impressive 16.5
percent increase to return to pre-September 11^th^ figures (see JM4003
for further discussion). Growth in the sector continued into the first
six months of 2004, with stopover arrivals for the period increasing by
9.8 percent. However, the effects of Hurricane Ivan (9/04) on the
sector, particularly in Negril (where approximately 24 percent of the
country's total hotel rooms are located) are expected to cut into 2004
performance. Based on the rapid response of hoteliers to the hurricane
crisis, with the majority of properties expected to resume full
operations for the 2005 winter season, tourism will undoubtedly return
to normal in 2005.

Over the last four years, the total stock of guest rooms in the hotel
sector has seen a modest 4.2 percent growth. However, extensive
renovations and expansions to existing hotels following the passage of
Hurricane Ivan and the recent opening of the new 360-room sandals and
the 450-room RIU II hotels should accelerate the growth in total
accommodations during 2004 and 2005.

The Jamaican hotel sector is well positioned to experience phenomenal
growth and diversification over the medium to long-term, particularly
buoyed by the increasing appetite of Spanish investors in the sector and
the efforts of the Government of Jamaica (GOJ) to support the
development of the tourism sector.

The increasing presence of Spanish investors in Jamaica's tourism sector
will significantly expand the available stock of hotel rooms and
contribute to product and market diversification. The upscale RIU hotel,
which entered the Jamaican market with the construction of a 396-room
hotel, has recently opened its new 450-room RIU II and immediately began
construction of a third property of similar size. Grupo Pinero has
acquired property to build three 600-room hotels, while the Barcelo
Hotels and Resorts and Grupo Iberostar are both scheduled to enter the
market with the construction of one 850-room hotel each. The Government
of Jamaica has recently announced its decision to construct the
country's fifth cruise shipping pier in the northwestern province
(Lucea) and to support the development of the neighboring areas into a
major heritage-tourism site. According to the GOJ, plans are already
well advanced for the building of a 1,500-room five star hotel by a
Spanish hotel chain in that general vicinity.

With investments of this magnitude over a relatively short time horizon,
the Spanish hotel chains are expected to account for a significant
proportion of the total stock of hotel accommodation in Jamaica.
Similarly, the number of tourists from Spain and other Spanish-speaking
destinations are expected to increase over the medium-term. In fact,
despite the decline in global travel during 2001 and 2002, tourist
arrivals to Jamaica from Spain have almost doubled each year since 2000.

The Government of Jamaica has conceptualized a project (dubbed Harmony
Cove) to develop 1,400 acres of land along the north central coast into
an exclusive high-end resort area and has been aggressively marketing
the concept to local and international investors. The development, which
aims at increasing Jamaica's presence in the high-end tourism market, is
designed to include, among other things, four five-star hotels, three
golf courses, 200 upscale villas, apartments, a marina and a private
airport. Substantial private sector commitments to the project are
expected during 2005.

It is widely speculated among industry players that the strengthening of
economic and diplomatic ties between Jamaica and China augurs well for
the possibility of Chinese investments in the Jamaican tourism sector,
particularly in the Harmony Cove project. The recent signing of an
agreement between Jamaica and China for Jamaica to be officially
recognized as a designated tourist destination for Chinese visitors is
highly embraced by tourism interests as a necessary penetration of the
Jamaican tourism product in the Asian market.

Jamaica Tourist Board's initiative to intensify its efforts in other
markets, particularly in Europe and Asia, should improve performance of
the sector and change the demographic composition of visitors to
Jamaica. Currently, the United States accounts for 71.8 percent of total
tourist arrivals to Jamaica, while Europe, particularly Germans,
British, Italians and Spanish, represents only 16 percent of total
arrivals.

# *b. Consumption*

Average expenditure in the hotel sector has shown only slight variations
over the last four years, remaining in the neighborhood of US\$95.33 per
person per night for stopover visitors and US\$80.87 per person for
cruise passengers. Using the average length of stay for stopover
visitors of 10.2 nights and the estimated relative contribution of food
and beverage to total tourist expenditure, total food and beverage
consumption in Jamaica's hotel sector during 2003 can be estimated at
US\$110 million. Given the inclination of U.S. visitors to consume
product with which they are familiar, a substantial proportion of this
expenditure is committed to the purchase of U.S. products.

# iii. Restaurants

Fast food restaurants are the single largest segment of the restaurant
sub-sector in Jamaica and provide excellent marketing opportunities for
U.S. high-value food products. Fast food restaurants account for an
estimated 48 percent of total expenditure on meals-away-from-home.
Despite the recent decline in consumption of meals-away-from-home, for
some U.S. franchises demand customarily exceeds supply during peak
hours, limiting the availability of certain services, such as home
delivery. In Jamaica, fast food restaurants, with relatively less
expensive products, provide a convenient and cost effective alternative
to certain types of traditional restaurants. The concept also provides
an opportunity for low to middle-income consumers who desire
meals-away-from-home. As Jamaican consumers continue to embrace North
American culture, fast food franchises are expected to remain strong in
the Jamaican food service market.

Over the last five years more than 30 restaurants have been added to the
stock of fast food restaurants in Jamaica and a further 20 restaurants
are projected to be added within the next two to three years. During
2004, another U.S. franchise, TGI Fridays, entered the Jamaica market,
while Churches Chicken exited the market. U.S. fast food franchises are
well represented in Jamaica, including Wendy's, Burger King, Popeye's,
Kentucky Fried Chicken, Pizza Hut, Domino's Pizza, Subway and
McDonald's. Two of the most successful local fast food chains, Island
Grill and Mother's Restaurant, have experienced reasonable success and
expansion. Island Grill, which boasts mostly local Jamaican cuisine, has
doubling its total outlets from 5 to 10 restaurants and is now competing
directly with the major U.S. franchises. Since opening in 1981, Mother's
Restaurant, a hybrid of local and U.S.-type fast food products, has
expanded by an average of one store per year and now has 22 restaurants
across the country. Other local restaurants have recently entered the
market and are capturing market share by virtue of their delivery
services. In a highly competitive Jamaican fast food restaurant market,
most U.S. franchises have modified their menu to meet Jamaican
consumers' taste preferences.

It is the general belief by fast food operators that, while certain
segments of the market in the corporate and resort areas are maturing,
there are underserved market segments, particularly in the eastern and
western provinces and certain areas that are usually ignored because of
social instability.

While mid-level restaurants have lost market share to fast food
franchises, fine dining restaurants, which are very few in number, are
doing well, patronized by the country's wealthy class and expatriate
residents.

Fast food franchises use between 10-50 percent U.S. food products. The
major local products that are used by fast food franchises are beef,
chicken, fruit juices, vegetables, eggs and pork products. The major
imported products are potatoes, French fries, oils, sauces and salad
dressings, bakery products, chicken fillet and cheeses. High duties and
questionable sanitary/phytosanitary regulations have created a
preference for local meats, dairy products, fruits and vegetables and
eggs in the restaurants sub-sector. Fine dining restaurants depend
largely on imported high-value, specialty food products.

While the proportion of food and beverages consumed as
meals-away-from-home has trended downward over the last five years,
total consumption in the sub-sector remains a respectable US\$82 million
in 2002. Of this amount, fast food restaurants account for US\$39.4
million.

# 

# 

# 

# iv. Institutions

Foods consumed in public institutions (hospitals, infirmaries, schools
and prisons) are mostly supplied through government contracts with
domestic producers groups, including the Jamaica Dairy Farmers
Federation, the Beef Farmers Association, Rural Agricultural Development
Authority and the Jamaica Agricultural Society. The institutional
segment of the HRI market is not attractive for U.S. high-valued food
and beverage products. However, bulk, unbranded commodity-type products
and nutritionally enhanced lower-value products can find opportunities
in this segment.

**Advantages and Challenges for U.S. Products in the Jamaican Market**

+-----------------------------------+-----------------------------------+
| Advantages                        | Challenges                        |
+-----------------------------------+-----------------------------------+
| The United States accounts for an | High tariff barriers, strict and  |
| overwhelming majority of          | many times arbitrary sanitary and |
| Jamaica's annual tourist          | phytosanitary requirements,       |
| arrivals, creating demand for     | burdensome labeling and other     |
| U.S. high-value products, such as | standards, and strong government  |
| fruits and vegetables, wines and  | support for domestic agriculture  |
| beef.                             | have caused most fast food        |
|                                   | franchises to revert to some      |
| U.S. fast food franchises         | local products, e.g., beef,       |
| dominate Jamaica's restaurant     | fruits and vegetables, chicken    |
| segment and continue to expand.   | and fish.                         |
|                                   |                                   |
| The proximity of Jamaica to the   | Higher prices for U.S. products   |
| United States, the prevalence of  | (e.g., wines, beers and frozen    |
| U.S. cable television, and travel | french fries) have caused U.S.    |
| has created a distinct preference | products to lose market share to  |
| for U.S. foods and other consumer | cheaper products from Canada,     |
| goods in Jamaica.                 | Chile, Italy, New Zealand and     |
|                                   | domestic production.              |
| Seasonality of domestic           |                                   |
| production and inconsistent       | Inefficient customs procedure and |
| quantity and quality of local     | inadequate refrigeration          |
| products creates opportunity for  | facilities at ports of entry have |
| imported products in the HRI      | reduced the quality of imported   |
| sector during certain periods.    | perishable products and increased |
|                                   | final prices to consumers.        |
| The growth of the tourism         |                                   |
| industry and the services sector  | Green Globe Certification         |
| in general fuels greater demand   | influences hotels in favor of     |
| for imported products.            | certain local food and beverages. |
|                                   |                                   |
| Increasing direct importation by  | Advances in CARICOM negotiations  |
| large hotel chains and fast food  | will allow cheaper products       |
| franchises also creates           | (breakfast cereals, bakery        |
| significant and growing           | products, fish and rice) from     |
| opportunities.                    | other CARICOM countries.          |
+-----------------------------------+-----------------------------------+

# 

**II. ROAD MAP FOR MARKET ENTRY**

**Entry Strategy**

The best way to enter the hotel and traditional/fine dining restaurants
segments of the Jamaican HRI food service sector is through an
institutional-type local representative. Most independent hotels either
do not import or import smaller quantities of specialty products that
would be uneconomical for a local distributor to handle. Direct sales to
local hotel chains can be successful, since in some cases the local
purchasing department acts on behalf of branches in other parts of the
Caribbean. Most fast food restaurants are involved in direct import and,
as such, the best way to enter the fast food segment is direct sales.

Most traditional restaurants procure a wide variety of imported products
from local intermediaries at frequent intervals due to the small
quantities demanded. In addition to careful pricing strategies and
follow-up product support on the part of the U.S. exporter, the success
of imported products in the HRI sector is highly dependent on the
intermediary's knowledge of and focus on institutional distribution.

**III. MARKET STRUCTURE**

The market structure of Jamaica's HRI food service sector has changed
slightly over the past three years, but is still very simple and
straightforward.

###### Structure of the HRI Sector

# 

# 

The three major changes in the structure of the hotel sector, i.e., the
increasing direct importation by larger hotels, increased proportion of
all-inclusive hotels in the total hotel stock, and the increased
emphasis on environmental/eco-tourism, have resulted from three major
factors:

1\. Market liberalization and increasing price competition from
all-inclusive hotels.

2\. The continuous aggressive expansion, promotion and positioning of
the all/super-inclusive concept by Jamaica's two largest hotel chains -
Sandals and Couples Resorts- and the increasing demand for these
products and services by North American visitors.

> 3\. The introduction of Green Globe Certification as a marketing tool
> in the tourism industry.

Within the Jamaican tourism sector, hotels account for 70 percent of the
total room capacity, with rooms dedicated to all-inclusive properties
representing almost 60 percent of total hotel accommodation. Supported
by demands from North American visitors, and aggressive marketing by the
two largest domestic hotel chains -- Superclubs and Sandals - the
all-inclusive concept has grown in prevalence and reputation in the
Jamaica tourism sector. Over the last five years, occupancy levels of
all-inclusive hotels have almost doubled that of non all-inclusive
hotels on successive years. Central to the all-inclusive concept is a
rigid cost control system, particularly in food and beverages, without
compromising the quality of service. While some properties have
successfully differentiated to cater to less price sensitive non
all-inclusive customers, the all-inclusive concept has exerted
significant competitive pressures in the sector, forcing a large number
of hotels to at least adopt a hybrid of both concepts.

To achieve cost competitiveness, approximately 30 percent of the larger
hotels, a few with elaborate storage facilities, have started direct
importation of consolidated containers of less perishable food products
and specialty items that are not available from local intermediaries.
Large chain hotels, some with a Caribbean network, import products
directly through a central purchasing department. Most hotels still rely
on local importers, due to the lack of adequate storage facilities, low
quantities demanded of individual products and lack of specialized
skills to effectively handle import procedures and logistics.

In the Jamaican tourism industry, the highly desired Green Globe
Certification, an eco-tourism thrust, has being changing all aspects of
hotel's operations, from architectural design, equipment and
furnishings, food and beverage procurement to sporting activities. The
certification is based fundamentally on a holistic approach to
environmental preservation and tourism. Under the Green Globe
Certification, hotels are encouraged to, *inter alia*, maximize the use
of local products, particularly food and beverages. This has sparked an
increased propensity by certified hotels to procure products of domestic
origin. Five of Jamaica's larger hotels are Green Globe certified and
several others are modifying operations to fulfill the certification
criteria. The Green Globe concept is an effective tool in targeting the
European market.

# IV. SUB-SECTOR PROFILE 

# a. Hotels

###### Company Profile

+--------------+--------------+-----------+-----------+--------------+
| **Name of    | **Location** | **Number  | ## To     | **Purchasing |
| hotel/       |              | of        | tal Rooms | Agents**     |
| Resort**     |              | Hotels**  |           |              |
+--------------+--------------+-----------+-----------+--------------+
| Jamaica      | Ocho Rios    | 1         | 720       | Dir          |
| Grande       |              |           |           | ect/Importer |
+--------------+--------------+-----------+-----------+--------------+
| Halfmoon     | Montego Bay  | 1         | 419       | Dir          |
| Hotel        |              |           |           | ect/Importer |
+--------------+--------------+-----------+-----------+--------------+
| FDR          | Runaway Bay/ | 2         | 172       | Importer     |
|              | Trelawny     |           |           |              |
+--------------+--------------+-----------+-----------+--------------+
| Holiday Inn  | Montego Bay  | 1         | 500       | Importer     |
+--------------+--------------+-----------+-----------+--------------+
| Super Clubs: |              |           |           | Dir          |
|              |              |           |           | ect/Importer |
+--------------+--------------+-----------+-----------+--------------+
| Grand Lido   | Neg          | 2         | 582       | N/A          |
|              | ril/Trelawny |           |           |              |
+--------------+--------------+-----------+-----------+--------------+
| Hedonism     | Negril /     | 2         | 514       | N/A          |
|              | Runaway Bay  |           |           |              |
+--------------+--------------+-----------+-----------+--------------+
| Breezes      | Montego Bay/ | 2         | 400       | N/A          |
|              | Runaway Bay  |           |           |              |
+--------------+--------------+-----------+-----------+--------------+
| Wyndham      | Montego Bay  | 1         | 487       | Importer     |
+--------------+--------------+-----------+-----------+--------------+
| Sandals &    | Ocho Rios /  | N/A       | 2,315     | Dir          |
| Beaches      | Montego Bay  |           |           | ect/Importer |
| Resorts      |              |           |           |              |
+--------------+--------------+-----------+-----------+--------------+
| Couples      | Negril/ Ocho | 3         | 577       | Importer     |
| Resort       | Rios         |           |           |              |
+--------------+--------------+-----------+-----------+--------------+
| RIU          | Negril       | 1         | 396       | Importer     |
+--------------+--------------+-----------+-----------+--------------+

**b. Restaurants**

  -------------- -------------- -------------- -------------- -----------------
  **Name of      **Type**       **Location**   **Number of    **Purchasing
  Restaurant**                                 outlets**      Agents**

  Wendys         Fast Food      Kingston       2              Importer

  Kentucky Fried Fast Food      Country wide   22             Direct/Importer
  Chicken                                                     

  Pizza Hut      Fast Food      Kingston       4              Direct/Importer

  McDonalds      Fast Food      Kingston/      8              Direct/Importer
                                Montego Bay/                  
                                St. Catherine                 

  Island Grill   Fast Food      Country Wide   10             Importer

  Norma\'s       Traditional    Kingston       2              Importer
                 Family Type                                  

  Rib Cage       Steak House    Kingston       1              Direct/Importer

  Bull\'s Eye    Steak House    Kingston /     2              Direct/Importer
                                Montego Bay                   
  -------------- -------------- -------------- -------------- -----------------

# 

# 

# V. COMPETITION 

In general, the primary competition to U.S. products in the HRI food
service sector is from local production. Most hotels and fast food
franchises source beef, chicken, pork, fruits and vegetables from the
domestic market. However, local products typically loose market share to
imports, due to inconsistent quantity and quality. High-priced U.S.
wines have captured only a small share of the estimated US\$21 million
market for wines and other alcoholic beverages in the hotels sub-sector.
The major competitors to U.S. wines are Chile, Italy, France and Spain.
In addition to local production, high-end U.S. beef, lamb and specialty
dairy products face competition from Australia and New Zealand. Guyana
is the major competitor for U.S. seafood. French fries and whole
potatoes from the U.S. have been losing substantial market share to
price-competitive products from Canada and the Netherlands. Most sauces,
salad dressings, some fruits, vegetables, bakery products, and nuts are
imported from the U.S. As U.S. products become more expensive, their
overall share of the Jamaican HRI food service market could decrease in
the medium term. Perceived value (price-quality relationship) is the
main variable in the purchase decisions, particularly for all-inclusive
hotels.

Imported food and beverages in the hotels sub-sector varies between 40
and 60 percent of total food and beverage consumption, with the U.S.
presently accounting for approximately 82 percent of total imported
products. The relative size of the restaurants sub-sector and its high
consumption of local products have drastically reduced the position of
U.S. products in the overall HRI food service sector.

**VI. BEST PRODUCTS PROSPECT**

**a. Products present in the market with good sales potential**

In the Jamaican hotel and restaurant sub-sectors, there is high demand
for wine, lamb, seafood (fish, lobster, shrimp), special cut beef and
veal, pork products, pasta, nuts, cheeses and other dairy products,
French fries, potatoes, bakery products, sauces, vegetables and fruits
(especially apples, grapes, peaches, and pears). Hotels are targeting
particular groups that will create seasonal demands for certain items,
such as kosher products.

**b. Products not present in significant quantity but which have good
sales potential.**

All sub-sectors of the Jamaican HRI sector have unmet demand for pork
products. However, Pseudorabies has been used as a non-tariff barrier to
restrict entry of U.S. pork products into Jamaica. Specialty cheeses are
also not available in sufficient quantities to hotels. The demands for
seafood and kosher products are also not being completely met.

**VII. POST CONTACT AND FURTHER INFORMATION**

Office of Agricultural Affairs

U.S. Embassy

1^st^ Floor - Mutual Life Building

2 Oxford Road

Kingston 5

Jamaica, W.I.

Telephone: (876) 920 - 2827

Fax: (876) 920 - 2580

Email: [agkingston@usda.gov]{.underline}

####### Other Sector Reports

View other reports on the Jamaican market at
http[://www.fas.usda.gov]{.underline}