Sunny Khatnani, the Managing Director of Divico Distributors only came to the business in 2006, when his uncle, Danny Ramchandani, alerted him to the fact that the company might be for sale. “The owner was a Nestlé executive handling brands all over the Caribbean, and Central and South America,” says Khatnani. “When he retired from Nestlé, he decided to open on the island of St. Maarten. He started with one or two brands, and then he built the company up from there.” In order to decide what the business would be like, Khatnani offered to work for free for three months. “I realized that I was enjoying what I was doing – organizing the company and making it better.” Within a few weeks, he was sold.
Today, Divico Distributors, which was originally founded in 1991, is one of the largest distribution companies on St. Maarten, and celebrating its 25th anniversary. “Back then, we were really a smaller player,” Khatnani says. “We’ve tripled in sales and we’ve tripled in size. We started off with 17 employees and today we have 60. We are distributing for 30 additional companies, so we represent about 45 companies, now. We were only primarily focused on retail distribution, and now we’re also doing food service distribution, as well. So, we’ve come a long way.”
Divico’s products are all imported – 60 percent come from the USA and 40 percent from Europe. The company’s distribution network extends to more than 900 clients in St. Maarten, French St. Martin, St. Barts, Anguilla, Saba, St. Eustatius, Dominica, St. Kitts & Nevis, Antigua, and Tortola. “A typical customer can range from a large supermarket, a large club store, a small convenience store, a gas station, a hotel, a restaurant, a bar, a business. We sell to auto parts stores; we sell to mechanics. We sell to everyone. We have a very, very large portfolio of products,” Khatnani says. That portfolio includes: food and drink; candy, snacks, and chocolate; health and personal care products; baby and pet products; and household and outdoor products.
In addition to some small, local operators, Divico’s main competition comes from Prime Distributors, the largest wholesale, food distribution company in the Caribbean. “They represent all the competing brands,” says Khatnani. “So, for example, if we do Huggies diapers, they do Pampers. Basically, the market is divided between us two and many smaller players.”
While Divico can hold its own against Prime, Khatnani says that competition also comes in the form of “parallel trading,” which exists when an importer finds a cheaper price of a good on the world market and imports that good instead of paying the generally higher local price. “People just buy from Miami and ship it down,” he explains. “And because there are no duties on this island, these things are not recorded by customs and it’s not against the law for people to bring in products. So, continuously, we face parallel trading and have to fight it. We have to negotiate with our vendors because the larger wholesalers in the U.S. don’t provide the service, they don’t provide the merchandising, they don’t provide the credit – all they do is provide better pricing. And, of course, we have to pay our taxes, which are much higher than the U.S. So, it’s been challenging. We continuously have to look for ways to be as efficient as possible.”
Even though Khatnani claims that the distribution business is “always a battle,” he’s happy to have found a niche that suits him better than his previous stints in the jewelry and telecommunications fields. “You have to enjoy the distribution business to be in it,” he states. “It requires experience in a little bit of everything. And it’s very complicated; especially when you’re doing business on St. Maarten, where we have a hundred nationalities living here. In any meeting, I might be speaking in Spanish, or in French, or in English, or in Dutch. It’s not easy to operate on a small island like this – we’re unique.”
So, in order to keep winning the battle, Khatnani says that the company is planning to expand its product line. “We have to look for other categories to grow in,” he asserts. “We’ve been such an aggressive company for the past 25 years; we’ve matured in many of the categories that we were representing. So, we’re getting into the alcohol category, which we never have been in. We’re also getting into pharmaceutical distribution – we’ve got everything in place for that. We see ourselves getting stronger in all the different categories.”
Divico is also planning to move into the retail supermarket business, and hopes to open 10 to 15 outlets throughout the Caribbean over the next several years. “We already purchased our own supermarket on the island of Saba,” Khatnani says. “We haven’t yet started supermarkets on our own island because it’s completely different from running a distribution company. Of course there are a lot of synergies: accounting, human resources, etc., etc. The pricing model will still be the same. However, we will be able to get more shelf space because our brands would take preference over other brands.”
Meanwhile, Khatnani says that his company will continue to serve its current clients, especially those smaller businesses that can best benefit from Divico’s competitive prices. “Because of our purchasing power, we’re able to help smaller businesses,” he avers. “The larger businesses can always purchase direct, or purchase container loads, but the smaller businesses don’t have access to that.” Of course, new clients are always welcome, as well. “If you want to do business in St. Maarten, you should definitely look us up and see how we can help you,” he adds. “And for a potential customer out there in the Caribbean, there are no taxes shipping out, so there is definitely a large opportunity there!”
AT A GLANCE
WHO: Divico Distributors
WHAT: A wholesale distribution company
WHERE: Cole Bay, St. Maarten, N.A.