A responsAbility-managed private equity vehicle focusing on food and agriculture has completed its second investment and taken a minority stake in Suminter, a leading global organic products supply chain management company which sources, processes and exports certified 100% organic and GMO-free products from Asia and Africa. Rik Vyverman, Head of Agriculture Equity Investments, explains how the fast-growing company fits into responsAbility’s growth capital structure.
“Suminter combines an attractive financial risk/return profile with creating tangible impact at scale.”
Rik, you have just concluded the second investment for the responsAbility-managed private equity fund focusing on agriculture and food. Can you briefly describe what the company does?
Suminter is a fast-growing, market-leading, global supply chain management company focused on organic GMO-free products. Simply said, the company starts by providing small holder farmers, across Asia and Africa, with agricultural inputs (seeds, bio-fertilizer etc) combined with training. It arranges that the crops from these small holder farmers receive a ‘bio certification’ and subsequently purchases the agricultural produce for the farmers. Afterwards, the company processes these crops locally and sells them to a wide range of marque clients in the US and Europe.
From seed to sale: financing agricultural value chains
How does the company fit into the fund’s portfolio?
Suminter meets our investments criteria very well as it combines an attractive financial return / risk profile with creating tangible impact at scale. From a financial return / risk perspective – the company is well poised to continue its high growth trajectory, while enjoying attractive margins and being profitable and being very diversified in terms of product portfolio, clients and sourcing. Also, and not in the least (for sure in the current volatile environment), the company has almost 100% hard currency income given it exports all is products to the US and Europe.
As we are talking about impact investments: What sort of impact does Suminter deliver?
From an impact point of view Suminter makes a real difference in the lives of poor farmers across Asia and Africa by creating or connecting them to global supply chains of large international companies. These farmers are able to increase their income by 50% to 100% right from the start: they receive inputs for and training in sustainable farming and the company shares the pricing premium for organic goods back with the farmers. As farmers we met during our various visits on site mentioned – ‘Suminter has made a big difference for us as we able to send our children to school, pay for healthcare and improve our housing conditions. And above all, these are honest people who really care about us. The company also creates hundreds of jobs locally by investing in local processing facilities and through the farmers has thousands of hectares of land under sustainable cultivation.
What are the growth expectations for Suminter?
The company has been growing in double digits over the past 10 years, while being profitable and despite the size the company has in the meantime we expect this to continue for the foreseeable future.
What will Suminter use the additional funding for?
Suminter will use the capital predominantly to fund expansion of its production facilities in India, the Philippines and Uganda. The remaining part will be used for working capital.
Interested in investing? Fund facts
In general, what type of investments are you looking for in this fund?
Firstly, let me re-emphasize that this is a growth capital strategy and not a real asset-based investment strategy. As such we do not invest in primary agriculture such as agricultural land or forestry. We look for high growth companies with large addressable markets, which have a certain size and are profitable. Furthermore, alignment with management and shareholders regarding our objectives of attractive financial returns and inherent developmental impact are key. We do seek to exit from these companies within a 5-7-year time frame while achieving an attractive financial return.
“The investment universe is immense given we target food and agriculture, the largest sector in the world.”
How big is the investment universe?
The investment universe is immense given we target food and agriculture, which is about the largest sector in the world. And I believe our pipeline testifies for this as we analyze more than 300 companies on an annual basis, which allows to be extremely selective.
Are you looking for majority or minority shares? How big?
We predominantly make significant minority investments, which guarantees us a board seat in the company and allows us and justifies us implementing our added value focused investment strategy. We are partners to these companies in the next steps in their growth trajectory.
What ticket size would you generally be targeting?
We typically invest around USD 15 m per company, starting from USD 5 m and going up to around USD 25m. However, the lower end of the spectrum will be more of an exception.
Do you have preferences as to geography?
We are a global fund and we select the most attractive opportunities regardless of the geography. However, we do try to build a geographically diversifies portfolio in line with our investment guidelines.
Interested in funding? Capital offering
When do you target to be fully invested?
We target to be fully invested by mid-2020, in other words within three years of the life of the Fund.
Who are the investors?
The investors are a mix of institutional investors like pension funds, large foundations combined with family offices.