Centennial Specialty Foods Corporation, a distributor of ethnic Southwestern food products, has reported an increased loss in its first quarter and says it continues to struggle in the Californian market.

The company's net loss was $118,821 for the three months ended 31 March 2005, compared to a net loss of $94,376 for the same period in  the previous year.

Gross sales of the company's products decreased $61,465 or 4.7% over the same period last year, due to a decrease of $90,678 or 22.6% in gross sales of the Ellis line of products which was offset by an increase of $29,213 or 3.3% in gross sales of the premium Stokes line of green chile sauces.

Centennial continues to struggle in the California expansion market, it said.  Its products have been discontinued by three retailers in the California market, representing approximately 550 stores.  Sales to its remaining six customers, representing approximately 1,200 stores, continue to be slow, but the company's products have not been discontinued at this point. 

"We are very disappointed with the difficulty of introducing our products to consumers in California," said Robert Beckwith Jr,  Centennial's chief marketing officer.  "We received favourable responses to our products, but have not been able to reach enough consumers to sustain retail sales at a level required by some retail customers." 

During the first quarter of 2005, the company incurred certain additional costs associated with the California expansion. Such costs included $86,000 in slotting fees charged by a retailer in the California market.  The company is pursuing repayment of these slotting fees which were deducted by the retailer from the retailer's normal payment to the company, but it cannot be certain that repayment efforts will be successful.

In addition, an increase in reserves related to the potential return of discontinued products by California retailers was also recorded, further reducing the first quarter results.