Investment

An alternative food investor offers family offices access to the best deals in fast growing sector

It’s an ill wind that blows no-one any good. One of Asia’s leading food investors is offering family offices unprecedented access to deals in the alternative food sector following Covid-19 and the decision of US institutions to press pause on deals involving natural resources and China.

According to Tai Lin, Taiwanese managing partner of private equity firm Proterra Asia said: “What we have learned, especially this year, is the level of anti-China sentiment coming out of the US and some other Western European countries. Ours is not a China fund. Our firm is not Chinese, although we do have a strong Chinese local team and our fund invests 40% in China, which makes the largest country for the fund.”  

Family offices like the idea of backing alternative protein because it is ethical, sustainable and economical to produce, compared to the rearing, and slaughter, of animals

The pandemic has also reduced funding expectations, given that the fund was launched in the first quarter of this year. US institutions have also pared back their allocations to sectors reliant on natural resources, including food. 

But Proterra Asia’s food fund – its third – has been filling its funding gap with commitments from family offices, mainly based in Asia, with additional support from New York and Paris. His firm, once owned by US food giant Cargill, currently manages $1.4 billion following previous fundraisings. 

Tai Lin has wooed family offices by offering them co-investment opportunities as well as access to a core fund. Before Covid-19, he had hoped to raise $500 million, he is now confident of $200 million, or more, following “elevated” interest from further investors to create a balanced ticket. Australian manager Fidante Partners has agreed to form a partnership with Proterra Asia’s parent, Proterra Investment Parners, to find them. 

Alternative protein manufactured from plants, animal cells or biochemical fermentation has become a beguiling opportunity for family offices. So far this year, they have invested a record $500 million in the sector, according to Dutch bank ING.  

Family offices like the idea of backing alternative protein because it is ethical, sustainable and economical to produce, compared to the rearing, and slaughter, of animals. Alternative food has also become surprisingly tasty. 

But investors sometimes forget the best returns will be generated by investors who can sell food at an acceptable price by selling into a mass market. They like to see a US presence but it has become a highly competitive market, even for alternative food. Proterra argues that Asian food markets, worth $4 trillion, have the best potential to deliver customers due to their demographic and economic growth. 

Analysts say Proterra’s deals in Asia should be capable of delivering a gross return of 25%, or 20% net of costs.

Tai Lin used to be an investment banker, and he likes to mix and match deals with the help of a network of teams and intermediaries which elude small alternative food ventures. He says: “There are three big players in the US – Beyond Meat, Impossible Foods and Just. They are each valued at more than a billion dollars. They have raised hundreds of millions of smart capital. They are selling exciting products in a notable fashion. And all three have produced internal projections that Asia will be the largest market in the future. 

“But they have very little experience there. We have formed a joint venture with one of them – Just –  in a Singapore-based joint venture called Just Asia. It’s a fifty/fifty operation where we control the board and second the CEO.”

There is also the prospect of a capital gain for investors if or when the group, led by Josh Tetrick, opts for a market float, likely to offer a significant premium to the group’s $1.2 billion value, based on historic fundraisings. 

To succeed in food manufacturing, dominated by large players, you need cost control, capacity, trading networks and a committed marketing team.

Just Asia’s new Singapore factory, the largest protein extraction facility in Asia, will end up creating synthetic egg protein out of mung beans, where Proterra has negotiated a price of $900 a tonne, against $1,300 in the US. 

Protein is extracted from 15% of the mung bean. The remaining 50% can be used to make glass noodles in South Asia, while they pay to take it away in North America.  Proterra backs a starch factory in Indonesia which could become a customer.

Just Asia will not package up products for the end-product, preferring others to do so, under licence, like Coca Cola. Two other Proterra companies, in China and Thailand, should have the capacity. Arrangements like these, plus the employment of a dedicated Just Asia marketing team will be part of the Just Asia initiative. 

Proterra also has the option to develop a Just’s cellular chicken business which was recently given the go-ahead by the Singapore government. Right now, alternative chicken pieces are expensive to manufacture starting out with a cost of $4,000 a nugget, now closer to $50. But manufacturing and distribution deals can lead to mass production and an attractive price: “We are hoping this business will se even higher growth.”

Another company the fund is likely to back is an Asian equivalent to Oatly, a venture-backed by industry heavyweights Blackstone and China Resources. It makes vegan dairy products from oats, based on the taste profile of Asian consumers. 

The company is building out of Singapore and Indonesia. Proterra has the position of lead investor. Chains of coffee shops in Asia, all potential customers, have agreed to become co-investors.

Proterra is also planning deals around two separate ventures involving the construction of a dairy farm and health foods.  In all his deals, Tai Lin believes in paying attention to detail: “I believe we are one of the leaders in this space. We work very hard focusing on small things. In all our deals, we make sure we are either the majority owner, or the largest minority next to a founding family.

“We have access to 20 portfolio companies with 200 farms, factories or facilities. When we see new opportunities, like Just, we immediately see 29 things we can bring to the table. We showed Just we could offer them a One Stop Shop and the deal was done.”

Subscribe

You will need a Premium Plus Subscription to access this database.

Exclusive news, analysis and research on global family enterprise and private investment offices.

Access to the most comprehensive fully interactive database on global family offices, principal investment offices, and family enterprises.

Check Deal Data, Senior Staff, and New Analysis on more than 500 family/principal investment and holding groups

Already have an account? Login

Subscribe

You need at least a Premium Subscription to read this article.

The most comprehensive information service on the global family enterprise world, featuring exclusive news, analysis, research and data on global family enterprises, family offices, and private investment offices.

Premium

£299

per year

  • Exclusive reports, analysis and commentary
  • Exclusive access to family/private investment office deal information
  • Exclusive interviews with principals and senior management of family/investment offices
SUBSCRIBE NOW

Premium+

£399

per year

  • Access to All of Premium
  • Access to all of FamilyCapital Analytics, our interactive database with more than 500 detailed profiles of family investment groups

More Info

SUBSCRIBE NOW

Already have an account? Login

You've reached the end.

Continue reading free articles by registering as a Member.
Or choose a Premium Plan.

Membership

Free

  • Exclusive reports, analysis and commentary
REGISTER NOW

Premium

£299

per year

  • Exclusive reports, analysis and commentary
  • Exclusive access to family/private investment office deal information
  • Exclusive interviews with principals and senior management of family/investment offices
SUBSCRIBE NOW

Premium+

£399

per year

  • Access to All of Premium
  • Access to all of FamilyCapital Analytics, our interactive database with more than 500 detailed profiles of family investment groups

More Info

SUBSCRIBE NOW

Already have an account? Login

Leave a Reply