Summary of Proposed Investment
Project Number
11265
Company Name
Price Ventures, Inc
Date SPI Disclosed
Dec 20, 2001
Country
Jamaica
Industry
Tourism, Retail and Property
Projected Board Date
Feb 15, 2002
Status
Completed
Sector
Retail (Including Supermarkets, Grocery Stores, etc.)
Department
Regional Industry MAS LAC & EUR
Environmental Category
B - Limited
Previous Events
Approved : Apr 10, 2002
Signed : Apr 12, 2002
Invested : May 7, 2002
Project Description
PriceSmart is constantly seeking new emerging markets where it can develop, own and operate new retail warehouse membership-shopping businesses that leverage existing and local capabilities. In line with this strategy, PSMT has formed a joint-venture to expand its operations by constructing and operating 2 deep-discount, "no-frills" membership shopping warehouses in Kingston and Montego Bay, Jamaica. The 50,000 sq. ft warehouses will follow the successful concept adopted by PSMT in its expansion in Central America, other Caribbean islands, and more recently the Philippines. They will sell a variety of food and consumer goods with an emphasis on quality, low prices, and efficient operations. The warehouses will typically carry a much smaller product range compared to supermarkets (2,500 stock-keeping units ("sku") vs. 25,000-30,000 sku for supermarkets) including apparel, food services, bakery, photo centers, tire centers, etc.. The target customers will be consumers and small businesses. About 50% of sales will be derived from products sourced from the local market. The shopping format will include an annual membership fee of approximately US$25 with expected annual purchases averaging US$1,250 per member.
IFC Role:
IFC role is to provide long-term financing not readily available for retail companies in the Caribbean. The project''s requirement for long-term debt with long maturities precludes it from obtaining satisfactory financing from local sources. PSMT''s experiences in the Caribbean and Central America show that the company has not been able to access loans with adequate maturities in these markets. The financial package will meet the project''s needs and strengthen its financial structure. IFC will also provide environmental oversight to ensure that the project meets World Bank Group guidelines, along with its financing.
Development Impact:
The project will have a strong development impact by expanding and strengthening the retail industry in Jamaica. It will provide consumers with lower prices on a wide variety of food and quality consumer goods through increased efficiencies of purchasing, logistics, technology, and distribution. Therefore, the project will, to a great extent, contribute to raising the standard of living for a large portion of the local population.
Lower prices to consumers: PSMT’s strategy is to be the high-volume low-cost operation to provide lower prices in the marketplace. Its goal is to be the "low-price leader" for the markets served. This is achieved by offering a limited range of products in a low-cost, no-frills warehouse type environment.
Product Quality Enhancement: PSMT will source 50% of its products from local sources. To maintain the same high product standards it gets from imported products, the company requires that all its local suppliers meet the same quality standard. This will help uplift quality standards of local suppliers and encourage competitiveness. The project will also introduce international best practices and bring modern technology by inducing suppliers to adopt bar coding and other sophisticated MIS systems
High Quality Job Creation: PSMT employees will receive higher than average pay and will be trained in product display, modern selling and marketing techniques, inventory control and working in a computerized environment. The project will create nearly 300 direct jobs. A number of indirect jobs will also be created. In addition, significant opportunities exist for training, acquiring merchandising skills, and promotion within the group as PSMT advertises job opportunities for domestic, regional, and international jobs internally and on its website.
Ethical Business Practices: Operating in the formal sector, PSMT employs ethical business practices, pays import taxes and duties, V.A.T, and local and income and taxes. This provides dependable revenue source for the governments.
Regional Market Development: PSMT’s operations in the region will link markets in Central America and the Caribbean by providing access to local manufacturers and suppliers in each other’s markets through the company’s buying and retailing network. In addition, the project has mobilized capital from the region, bringing in Latin American investors.
Efficiency of Supply Chain: A significant number of customers of PSMT warehouses are small retailers who buy in bulk and then resell in their own stores in more remote locations of each country. Developing and increasing this line of business allows PSMT to improve the efficiency of the entire supply chain of a particular country. The benefits of variety, quality, and low cost of products are extended to those who do not live close to the warehouses.
IFC Role:
IFC role is to provide long-term financing not readily available for retail companies in the Caribbean. The project''s requirement for long-term debt with long maturities precludes it from obtaining satisfactory financing from local sources. PSMT''s experiences in the Caribbean and Central America show that the company has not been able to access loans with adequate maturities in these markets. The financial package will meet the project''s needs and strengthen its financial structure. IFC will also provide environmental oversight to ensure that the project meets World Bank Group guidelines, along with its financing.
Development Impact:
The project will have a strong development impact by expanding and strengthening the retail industry in Jamaica. It will provide consumers with lower prices on a wide variety of food and quality consumer goods through increased efficiencies of purchasing, logistics, technology, and distribution. Therefore, the project will, to a great extent, contribute to raising the standard of living for a large portion of the local population.
Lower prices to consumers: PSMT’s strategy is to be the high-volume low-cost operation to provide lower prices in the marketplace. Its goal is to be the "low-price leader" for the markets served. This is achieved by offering a limited range of products in a low-cost, no-frills warehouse type environment.
Product Quality Enhancement: PSMT will source 50% of its products from local sources. To maintain the same high product standards it gets from imported products, the company requires that all its local suppliers meet the same quality standard. This will help uplift quality standards of local suppliers and encourage competitiveness. The project will also introduce international best practices and bring modern technology by inducing suppliers to adopt bar coding and other sophisticated MIS systems
High Quality Job Creation: PSMT employees will receive higher than average pay and will be trained in product display, modern selling and marketing techniques, inventory control and working in a computerized environment. The project will create nearly 300 direct jobs. A number of indirect jobs will also be created. In addition, significant opportunities exist for training, acquiring merchandising skills, and promotion within the group as PSMT advertises job opportunities for domestic, regional, and international jobs internally and on its website.
Ethical Business Practices: Operating in the formal sector, PSMT employs ethical business practices, pays import taxes and duties, V.A.T, and local and income and taxes. This provides dependable revenue source for the governments.
Regional Market Development: PSMT’s operations in the region will link markets in Central America and the Caribbean by providing access to local manufacturers and suppliers in each other’s markets through the company’s buying and retailing network. In addition, the project has mobilized capital from the region, bringing in Latin American investors.
Efficiency of Supply Chain: A significant number of customers of PSMT warehouses are small retailers who buy in bulk and then resell in their own stores in more remote locations of each country. Developing and increasing this line of business allows PSMT to improve the efficiency of the entire supply chain of a particular country. The benefits of variety, quality, and low cost of products are extended to those who do not live close to the warehouses.
Sponsor / Cost / Location
Development Impact
Related ESRS/ERS
Contacts
For Inquiries About the Project, Contact
Atul Patel
4649 Morena Blvd.
San Diego, CA 92117
apatel@psmt.usa.com
4649 Morena Blvd.
San Diego, CA 92117
apatel@psmt.usa.com