Jammin Java Corp., d/b/a Marley Coffee (OTCQB:JAMN)
(www.marleycoffee.com), the sustainably grown, ethically farmed and
artisan-roasted gourmet coffee company, has issued the following
letter to its shareholders:
Dear Shareholders,
It's been an exciting and, in our opinion, a tremendous 18
months. We believe that the goals that we have met this past year
have the potential to set the company up for exceptional growth
moving forward. We are very excited about what Fiscal 2015 has to
bring.
In Fiscal 2014, we established a national grocery distribution
network, increased our brand awareness, strengthened our
international presence and are now truly aligned with a large and
innovative organization, Mother Parkers Tea & Coffee, Inc.
Our story this last year is one of expansion and this upcoming
year we are prepared to build on that platform with organic growth.
We've outlined our strategy for the rest of calendar 2014 below and
will be judging ourselves on how well we execute on that
strategy.
Relatively speaking, this company is less than 18 months into
"full" distribution in the grocery retail sector. We hired our
Senior Vice President of Sales only 18 months ago. We
established our corporate headquarters in Denver in July of 2013
and brought on two regional sales directors in October of 2013.
Category managers and brokers were hired shortly
thereafter.
Over the course of the last year, we've gained distribution in
over 5,000 stores in North America and have authorization in
approximately 10,000 stores. We've established distribution in
two of the largest chains in the country, Safeway and Kroger, and
tripled our revenues year-over-year from $1.8 million to $6 million
from Fiscal 2013 to Fiscal 2014.
While this growth is substantial, we've been able to maintain
our core principles, to create the best tasting and most
sustainable coffee in the world. Throughout the year we've been
honored with wins from Singleservecoffee.com, which stated "this is
the first time that an entire brand line-up have all scored the
excellent category," and from the food editor of the British GQ as
the best celebrity coffee in the market. All of our coffees
continue to be either organic or Rainforest Alliance certified.
The past year was a "developmental year" in the retail grocery
space for the company; we've gotten our products on
shelves. Coming out of last year, we've put an infrastructure
in place that can help our next phase of growth. In October we
hired Red Button Consulting, LLC to help manage our accounts plus
establish and execute the promotional support our retailers and
distributors require. Working in partnership with Red Button,
we believe that we have effectively deployed our trade and consumer
marketing dollars, with the goal of ensuring gross margin goals in
our current accounts. We also hired two top-tier food
brokerage companies, Alliance Sales & Marketing and National
Sales Associates, to represent, merchandise, and market the company
at a store level with over 400 brokers on the ground.
Marley Coffee has what every brand strives for but very few
obtain; a powerful emotional response from consumers. Because
of the day-to-day guiding principles and decisions of our founder
and Chairman, Rohan Marley, our products provide a tangible
connection to Bob Marley's music and philosophy, resulting in a
deep, long-lasting affinity for the brand. However, just
because we have this brand doesn't mean we can take our marketing
strategy for granted. We have to focus on getting consumers
to try our products. The heart of this year's goals is to build
brand awareness, drive trial of our products, and increase velocity
at current retailers. This was one of the main impetuses for
securing our relationship with Mother Parkers.
While we are still looking to gain additional distribution, we
are not pursuing it at the same pace we did during the past 18
months. We can "buy" our way onto shelves by paying listing fees,
but, unless we're supporting new accounts with a full range of
marketing programs, we don't believe the strategy would be nearly
as effective as building sales in our existing accounts.
We have four primary strategies for the remainder of Fiscal
2015:
1) Increase our turn rate (velocity) within existing
distribution while strategically looking for new stores to expand
into.
2) Focus on building brand awareness to drive that growth.
3) Capitalize on our relationship with Mother Parkers, both from
a revenue and innovations perspective.
4) Continue building our ancillary businesses such as our
international distribution and Office Coffee Service (OCS) program
locally.
In Fiscal 2014 Q4 and Fiscal 2015 Q1, we established an annual
promotional calendar for our retailers and
distributors. Promotions range from discounts at store level
to in-store tastings. To date, promotions and trial programs,
especially at some of our larger accounts such as Kroger, Safeway
and HEB, are increasing product velocity. Additionally we are
constantly evaluating cost effective tools to generate brand
awareness and trials outside of the retail environment. We
will continue driving these efforts with the goal of seeing
revenues from organic growth increase quarter-to-quarter after
Fiscal 2015 Q1.
Our relationship with Mother Parkers provides us an
infrastructure for fast growth on many fronts. Mother Parkers
is the largest independently held roaster in North America. A
company of their size and history of success and innovation can
make a huge difference for us, and help increase sales before we
consider looking for additional financing. We've highlighted
the terms of the transaction with Mother Parkers in the past, but
for the upcoming year, investors should know the following:
- It gives us a cash infusion that will allow the company to
continue our projected growth. Cash flow no longer becomes an
issue; rather we believe with this cash infusion that we have the
ability to capitalize and grow quickly.
- It enables us to continue to focus on selling and marketing
instead of worrying about logistics.
- Marley Coffee will be the Mother Parkers' premiere brand as
they take us to market. This commitment comes with a large
marketing budget that will be impactful for both the US and
Canadian markets.
- The deal also helps improve our margins as we have the buying
power of a much larger company like Mother Parkers and the renewed
transaction with them will improve our economics.
- Canadian sales, where Mother Parkers is headquartered, are
expected to deliver significant revenues via a licensing agreement,
as we will have distribution in all the major retailers via Mother
Parkers. Within the next few months we will be deployed in ~
2,000 retail locations throughout Canada to places like Loblaw's,
ECS Coffee, Sobey's, Metro, IGA, London Drugs, and Best Buy/ Future
Shop.
- It aligns with our mission and creates key innovations for the
upcoming year such as eco-cup, a differentiator that we believe
will drive sales.
We are excited about our other business lines as well. Our away
from home business has been growing, especially in the Denver
area. Its growth helps feed our grocery retail business at a
minor cost. Our international growth is picking up pace as
well. Europe is growing, as has our commitment to foster the
region. Chile and South America still remain one of the most
exciting markets for us as our distributors and partners in that
region have done a phenomenal job marketing and growing the
brand. Our Chilean distributors just ordered their first full
container of coffee and their goal is to buy a container per month,
which would make them a $600,000-per-year account.
Numbers
Sales revenues for the years ended January 31, 2014 and 2013
were $6 million and $1.8 million, respectively, an increase of $4.2
million or 234% from year-to-year. We do not expect to grow at
the same rate in the upcoming year; however, our goal for Fiscal
2015 is to break $10 million in revenues. We believe this major
objective can be met by fulfilling our current authorization in
10,000 retail locations and increasing our velocity through
effective marketing programs. We are confident in meeting this
objective by maintaining that number of storefronts, increasing our
items per store by 15% and our velocity to half a case per store
per item per week, all goals we believe we can achieve, we estimate
we can obtain a run rate of $25 million with our existing
distribution.
Gross profit as a percentage of gross sales was approximately
10% for the year ended January 31, 2014 compared to 21% for the
year ended January 31, 2013. Gross margins were very tight in
Fiscal 2014 as significant discounts and deductions were given to
gain distribution and market penetration. As these accounts
mature, we expect our gross margins to return to 20% or above in Q2
of this year.
We incurred a net loss of $6.7 million and $4 million for the
years ended January 31, 2014 and 2013, respectively, an increase of
$2.7 million or 67% from the prior year. The principal reason for
the increase in net loss was a $2 million increase in total other
expenses, mainly due to the extinguishment of certain liabilities
in connection with our 2013 Ironridge Transactions and a $1 million
increase in total operating expenses, offset by a $0.3 million
increase in gross profit. Ironridge was a very good financing
partner and had provided financing when we needed it last year,
which fueled our significant growth; however, we have no
intentions, nor do we anticipate doing another transaction in the
same format as we did with Ironridge in the foreseeable
future. We believe we've built the company well enough to get
a direct financing into the company similar to what we did with
Mother Parkers. We also expect to incur much smaller losses in
Fiscal 2015 assuming we are able to continue implementing our
business plan as described above.
As with the launch of any new brand, Marley Coffee has seen
fluctuations in sales from quarter-to-quarter as we grow. Our
distribution grew from 1,000 authorized stores to 10,000 last year.
Without this critical expansion of retail coverage, we would
not have the opportunities facing us today. The tremendous
leap in the number of storefronts carrying Marley Coffee required
considerable pipeline fill for both retail and distributor systems,
enabling us to post what we believe were phenomenal Fiscal 2014 Q2
and Q3 numbers. With the pipeline fill complete, our revenues
are now primarily based on a sustainable growth model driven by
increases in product velocity. This is the natural evolution
of all grocery retail companies and we are prepared for the
challenge. This is also one of the main reasons for our
quarter over quarter dip in revenues for fiscal Q4 Fiscal 2014.
Our Fiscal 2014 Q4 numbers also reflect an aggregate of
adjustments made throughout the year for manufacturer allowances
and discounts/promotions.
On May 7, 2014, the company filed a current report on Form 8-K
with the Securities and Exchange Commission (and also filed a press
release) to disclose the preliminary "Results of Operations and
Financial Condition" of the company. Such numbers were unaudited.
In it, we showed revenues of approximately $6.4 million for Fiscal
2014; however in the audited financial statements included in our
final Form 10-K for the year ended January 31, 2014, we show actual
revenues of $6 million for that period. The differences were
due to various accounting and auditing adjustments, including
certain significant customer orders which were moved to the first
quarter of Fiscal 2015 and will be recognized at that time.
Changes to the company's revenue accounting based on recently
adopted GAAP standards (as described in greater detail in Note 16
to the company's audited financial statements as filed in its
January 31, 2014 Form 10-K Annual Report), resulted in two orders
totaling approximately $450,000 that were "in transit" to customers
as of January 31, 2014, being recognized, in the first fiscal
quarter of 2015, instead of during the fourth fiscal quarter of
2014, as originally set forth in the May 7, 2014, Form 8-K. We
anticipate that moving forward the net effect of the adoption of
this accounting standard will have minimal impact on our financial
results.
One of our main concerns for Fiscal 2015 is a shortage in
Jamaican Blue Mountain (JBM) beans and products. Hurricane
Sandy and coffee leaf rust has impacted the production output of
JBM by about 40 percent for 2014. Jamaica and the industry
expect a slow recovery in 2015 and to be back in full production by
2016. The company is diligently working to secure more JBM as
the market we created for it continues to expand. Limited JBM
supply hampered our growth in Q4 of Fiscal 2014 and Q1 of Fiscal
2015. Our retail partners understand the supply issues and we
believe that we will be in a far better position coming into Q2 of
Fiscal 2015 with respect to JBM availability.
We've established our strategy for the coming year and we
believe that we have the tools and the infrastructure to get
there. The bottom line for investors is that we expect to see
more brand awareness campaigns and revenue growth in 2014.
It'll be a bumpy line up, but the line will go up!
Sincerely,
/s/ Brent Toevs Chief Executive Officer
About Jammin Java Corp., d/b/a Marley
Coffee
Marley Coffee (corporate name Jammin Java Corp.) is a US-based
company that provides premium, artisan roasted coffee to the
grocery, retail, online, service, hospitality, office coffee
service and big box store industry. Under its exclusive licensing
agreement with 56 Hope Road, the company continues to develop its
coffee lines under the Marley Coffee brand. The company is a fully
reporting company quoted on the OTCQB under the symbol "JAMN".
Learn more at www.MarleyCoffee.com or visit the Investor Relations
section at Investor.MarleyCoffee.com.
Join us on Facebook at http://www.facebook.com/MarleyCoffee, or
follow us on Twitter at http://twitter.com/marleycoffee, where we
post information that's material and non-material about the
company.
Forward-Looking Statement
This Press Release includes forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Acts"). In particular, the words "believe," "may,"
"could," "should," "expect," "anticipate," "estimate," "project,"
"propose," "plan," "intend," and similar conditional words and
expressions are intended to identify forward-looking statements and
are subject to the safe harbor created by these Acts. Any
statements made in this news release about an action, event or
development, are forward-looking statements. Such statements are
based upon assumptions that in the future may prove not to have
been accurate and are subject to significant risks and
uncertainties. Such statements are subject to a number of
assumptions, risks and uncertainties, many of which are beyond the
control of the company. These risks and others are included from
time to time in documents we file with the Securities and Exchange
Commission ("SEC"), including but not limited to, our Form 10-Ks,
Form 10-Qs and Form 8-Ks. Other unknown or unpredictable factors
also could have material adverse effects on our future results.
Accordingly, you should not place undue reliance on these
forward-looking statements. Although the company believes that the
expectations reflected in the forward-looking statements are
reasonable, it can give no assurance that its forward-looking
statements will prove to be correct. Investors are cautioned that
any forward-looking statements are not guarantees of future
performance and actual results or developments may differ
materially from those projected. The forward-looking statements in
this press release are made as of the date hereof. Actual results
may differ from anticipated results sometimes materially, and
reported results should not be considered an indication of future
performance. The company takes no obligation to update or correct
its own forward-looking statements, except as required by law or
those prepared by third parties that are not paid by the company.
The company's SEC filings are available at http://www.sec.gov.
CONTACT: Marley Coffee
303-396-1756
Dian Griesel Int'l.
212-825-3210
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