As a small island with negligible food production, Cayman relies on a complex global supply chain to keep its stores and restaurants well stocked.
A handful of companies, including Progressive Distributors, Jacques Scott and Foster’s, source products and produce from across the globe to feed Cayman. James Whittaker and Michael Klein take a closer look at how they do it and the multiple factors that drive up costs for Cayman shoppers.
Walk down the aisle of any island grocery store and you will see crates loaded with fresh produce, fish and meat of every type laid out on crystals of ice, shelves stocked with brand name products from all over the world.
In this Cayman Compass series, we have highlighted the significant mark-up shoppers on these islands pay for groceries. The simplest explanation for those costs, according to importers, is that they must scour the globe to bring these offerings to Cayman consumers.
Everything from fresh milk to bread and bananas is imported.
The long distances and complex logistics involved in sourcing products and bringing them to a small Caribbean island can be mind-boggling.
Larger countries can either source the bulk of their food locally or use their market size to negotiate rock-bottom prices from farmers and food producers outside their borders.
Neither is an option for Cayman.
Our closest source market, Jamaica, represents just 3% of imports to the islands. By far the most goods, close to 85% in 2019, are delivered from or through the United States.
Regional sourcing of produce and other goods is limited said Peter Dutton, managing director of Jacques Scott, because it lacks the scale of the larger established shipping routes to be cost efficient.
As a result, even imports from the wider Caribbean come to Cayman via Miami.
For distributors, that is neither the most popular nor the cheapest route. The multiple ports around Miami are known for extensive checks, delays and, especially, higher costs.
To ship a 20-foot container 830 nautical miles from Miami to Grand Cayman, for instance, costs between US$2,200 and US$2,500. Sending the same container from Le Havre in France to the Cayman Islands – a distance that is more than seven times greater at close to 6,000 nautical miles – costs $3,500, just $1,000 more.
The main reason for the higher cost on the Miami leg is that Cayman does not export anything back to the US. The fact that most containers have to be shipped back empty is priced into the single journey south.
Ocean freight, the actual transportation of goods on a cargo ship, is only a fraction of the total cost. The shipping company receives about half of the billed amount.
There are additional charges for security, documentation, handling, weighing the container and goods, surcharges for bunker fuel, surcharges for the crane that unloads the container, charges for drayage – the transporting of the container from the ship to a warehouse or storage facility – and port fees.
In Cayman, the port fees alone, which come on top of the shipping bill, can make up more than 10% of the shipment cost.
Because there is the risk of damage, spoilage or theft of goods, distributors also typically have to take out a blanket insurance policy.
Still, containerised shipping has become a lot cheaper over the decades. So cheap in fact that formerly local products were able to turn themselves into global brands.
Take beer, for example. Well-known brewers are often owned by large multinationals that have their own licensed brewery networks around the globe to bring the place of production closer to the end market. But if consumers prefer the original product, it can now be shipped almost anywhere in the world.
In Cayman, Guinness still comes from Dublin, Ireland, and is shipped from Liverpool in the UK, and Heineken is delivered from the Netherlands via Rotterdam, although both beers are also produced in Jamaica. For wine, narrowing the distance between production and consumer is not even an option.
New Zealand wine is transported on a container ship across the Pacific to Panama and from there on to Kingston, Jamaica, before it is delivered to Cayman. Argentinian wine is trucked to Valparaíso in Chile, shipped along the west coast of South America to the Panama Canal and again on to Cayman via Jamaica.
Economies of scale
Shipping and logistics are just one aspect that inflates the cost of groceries in Cayman.
The size of the market is another.
The unit price for Progressive Distributors or Foster’s to buy bananas from a South American farm, for example, is significantly higher than it would be for Tesco, which has nearly 4,000 supermarkets in the UK and Ireland.
For a staple like milk, large British and American supermarket chains are not only able to purchase within their own borders, they are able to exert an outsized influence on the price.
In the UK, farmers have been protesting for decades that the major supermarket chains use their collective hold on the retail market to drive the price of milk below the cost of production.
Cayman has no such market power.
Foster’s, which purchases milk from a Miami-based distributor, can’t make the type of bulk orders direct with dairy farms that grocery giants like Walmart and Publix can.
“We might be big for Cayman but with just six stores we really don’t have much negotiating power,” said managing director Woody Foster.
Before it has even been shipped to Cayman in chilled containers, the milk is already more expensive than it would be in the US.
It also has a shorter shelf life. Because the milk comes through a middleman, the clock is already ticking towards the expiry date before it even gets into their hands.
Then there is the three-day shipping journey from Florida to Cayman.
Supermarkets also have to factor in an extra margin to offset the possibility that fresh produce, including milk, might not sell.
Foster’s has to predict what the milk demand will be two weeks out and hope to sell its inventory before it spoils.
“You have a short period of time to sell it,” says Foster.
Diversifying the supply chain
Mark Nightingale, purchasing manager at Progressive, is a man who knows how to get things.
He has sourced Peking ducks from China, scallops from Japan and once brought in an alligator from Florida for the Cayman Cookout.
Cayman’s diverse population and growing reputation as a culinary destination means that, even outside of exotic culinary festivals, Progressive now goes further and wider than ever before in its efforts to source ingredients for Cayman restaurants and products for supermarkets.
That adds resilience as well as increasing options for consumers, the company believes.
Pasta comes in from Italy, soy sauce from the Philippines, avocados from Mexico and fresh fish from Panama.
For products with a long expiry date, like Gatorade or Quaker Oats, the distributor is able to meet the massive mandatory minimum-order size required to negotiate the lowest price directly with the manufacturer.
Fresh food challenges
In the case of fresh produce that is simply not feasible. Cayman buyers are often required to go through a middleman – usually a US-based food wholesaler – which inflates the price.
There are ways around this, says Nightingale, and Progressive, which has a 30,000 square foot warehouse and an operating arm in Miami, has managed to negotiate some direct contracts with farmers and fishing companies.
That is not always possible, however, with the size of the order and the expiry date of the product influencing the price.
It can seem counter-intuitive for melons grown in Honduras to be trucked to the US, sold through a middleman and shipped back to Cayman, but it is the cheapest way to do it.
“We don’t have a big enough market to purchase a whole container of melons and bring them here directly before they rot,” says Nightingale.
Fresh produce, which must be kept in a chilled environment and is subject to price variations based on conditions in the growing region, represents the biggest challenge.
Anything from storms in Florida to wildfires in California to gang activity in Mexico can impact the supply chain and the cost.