Private equity firms to invest US$785m in Asia’s food and beverage industry

ASIA – Global private equity firms have launched a series of funds that will see the companies invest upto US$785 million in the food and beverage industry across various markets in Asia.

Bahrain-based alternative asset manager Investcorp has partnered with China Resources and Fung Strategic Holdings Ltd to launch a US$500 million private equity fund focused on food brands in Asia.

The investment platform will primarily focus on capturing the growth and market opportunities of China’s highly fragmented food sector, with China Resources being one of the world’s largest owners and distributors of food brands in Greater China.

Investcorp, China Resources and Fung Investments have already committed US$300 million of capital to the new fund, which will mainly focus on China, Singapore, and greater Southeast Asia and jointly and managed by its three founding partners.

According to a DealStreatAsia report, the fund seeks to build a diversified portfolio of investments to support fast-growing businesses with anticipated higher margins and defensive franchises.

It also seeks to invest in premium brands in niche sectors, such as condiments, packaged food, and health snacks.

The launch of the Asia food brands-focused fund comes as China, one of the fund’s target market, remains the world’s largest and fastest-growing consumer market.

The market is poised for further growth as Chinese millennials spend more on premium and healthier brands.

“We are investing not only in what we consider to be the world’s largest and fastest-growing consumer market, and in one of the most defensive sectors, but also in partnership with some of the most respected entities in China,” said Hazem Ben-Gacem, Co-CEO of Investcorp.

Liquor industry gets US$285m boost

Singapore-based private equity firm Tembusu Partners has partnered with Renhuai Moutai Flavor Liquor Industry Development & Investment (Jiutou) to launch a fund that will invest invest up to US$285 million in China’s liquor industry.

Tembusu in partnership with the government-linked company will inject the funds into the procurement, storage and processing of top-quality liquor foundation spirits Guizhou province, southwestern China.

Jiutou has committed to invest up to US$96 million through the fund. The fund will concentrate on Guizhou Province – the birthplace of China’s national distilled liquor brand, ‘Maotai.’

The fund will allow international investors to access the explosive growth in Maotai-flavoured liquor, also known as sauce-aroma liquor, through the early years of the production process. The production process spans five years.

According to a Euromonitor report in 2018, the consumption of baijiu, a category of at least a dozen Chinese liquors made from fermented sorghum and grain, is set to grow at a compound annual growth rate (CAGR) of 10.1% by 2022.

Baijiu makes up 90% of total spirits sales in China and half of China’s alcohol sales, representing a market of great investment opportunities in the country.

“The value of baijiu [liquor] appreciates with age, thus presenting opportunities for stable investment returns,” Tembusu said in a statement.

“China continues to be an important and strategic market for Tembusu,” said Lim Hwee Hua, co-chairman of Tembusu Partners.

“Tembusu is pleased to launch the first Guizhou Baijiu Fund to finance promising baijiu businesses and support their development towards high-quality growth, as we expand and deepen our commitment in China’s dynamic economy.”

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