South African personal fairness agency Ascension Capital Companions recently acquired a 45% shareholding in Paul’s Muesli, a producer of muesli, granola and cereal bars. The corporate was began within the 90s with founder Paul Ruiter mixing muesli for numerous resort chains from his mom’s storage. In the present day it manufactures muesli merchandise on contract in South Africa for meals firms resembling Kellogg’s, Tiger Manufacturers and Very important.
Jeanette Clark speaks to Kabelo Moja, chief govt officer of Ascension Capital Companions, about why the agency determined to make a wager on Paul’s Muesli and South Africa’s well being meals business. He additionally talks about alternatives to produce the general public sector, and coping with challenges such energy cuts and trade charge fluctuations. Beneath are barely edited excerpts of the interview.
Why did Ascension put money into a muesli producer?
Our mandate at Ascension Capital Companions is assembly or enhancing fundamental human wants. Subsequently, food safety, healthcare, education, and water and sanitation – these are among the sectors that we take a look at. The second key driver of our mandate is innovation, the place we favor [companies] which have expertise underpinning their enterprise that might doubtlessly enable them to grow to be a disruptor, or at least face up to improvements from rivals.
Paul’s Muesli is a really robust participant within the fast-moving client items (FMCG) sector, with a powerful administration crew and an innovator in Paul, the founder. He began the enterprise within the early 90s from his mother’s storage, mixing muesli for resort chains.
The corporate’s merchandise are very a lot consistent with the development for wholesome consuming and ‘snackification’, the place health-conscious shoppers are reaching for a granola bar as an alternative of a chocolate one.
Have the folks of South Africa jumped on the wholesome snacking development, contemplating their usually low earnings ranges?
Let’s face it: granola bars and muesli merchandise are a luxurious merchandise. It isn’t a staple meals that one can find in each kitchen within the nation. Having stated that, I don’t suppose South Africa is lagging behind the remainder of the world by way of the development in the direction of being extra well being aware. Developments that take maintain in Europe and the US are picked up fairly shortly in South Africa.
It is likely to be a luxurious product, however with the nation’s rising upper- and middle-class taking a look at choices for wholesome consuming, we’ve traditionally seen substantial gross sales will increase.
Will the funding unlock new alternatives for the corporate?
Ascension Capital Companions is a majority black-owned fund supervisor and the funding in Paul’s Muesli boosts the corporate’s empowerment credentials. [Black Economic Empowerment (BEE) is a South African government policy aimed at enhancing the economic participation of black people in the economy. Companies with a high BEE score have a better chance of securing government contracts, all else being equal]. This opens doorways for the corporate to develop into offering merchandise to the general public sector. These potentialities embody offering merchandise for college feeding schemes, public hospitals and even prisons.
What are among the potential obstacles that might maintain again the anticipated development of Paul’s Muesli?
As we’re manufacturing in South Africa, clearly load shedding and the ability provide challenges are one thing we’ve to cope with. The corporate has taken a view that it’s right here to remain and due to this fact wants to seek out methods to function in an atmosphere the place loadshedding will most probably stay at stage 4 for the foreseeable future. [Stage 4 load shedding means that up to 4,000MW of electricity generation capacity is not available at any given time]. We have now calculated that assumption into our development projections and are comparatively assured that we are able to nonetheless function properly. At present, the corporate has generator energy for backup, however as a part of our capex spend we’re taking a look at photo voltaic options on the manufacturing unit. The concept, finally, is to function off the grid. That can solely occur over a while, it will likely be an costly intervention, however we imagine that is the place manufacturing companies in South Africa are going.
One of many largest considerations we’ve might be trade charge fluctuations. As we order prematurely we attempt to anticipate what the trade charge will do, however it’s troublesome.
With the continued Japanese European battle, the corporate is alive to the truth that provide of cold-pressed oats will be constrained. As we order prematurely, we are able to mitigate the influence to an extent. Our oats and different flavourants are predominantly imported with some being regionally produced. We are going to take a look at spreading provide threat by diversifying our sources, however by no means on the expense of the standard of the product.
Are there any rivals on the horizon?
Paul’s Muesli does have rivals out there; nonetheless they don’t seem to be [exclusively] targeted on muesli and granola bars. The place new rivals may come from is that if a shopper decides to extend their in-house manufacturing capabilities. We need to service our shoppers in order that there is no such thing as a want for them to internalise the manufacturing of merchandise.
Non-public fairness companies sometimes goal to promote their investments after a sure interval. What are the potential exit avenues for Paul’s Muesli?
We have now acquired a big shareholding within the firm and the opposite shareholders embody Paul and the administration crew. As a personal fairness fund, our mandate is to not maintain belongings in perpetuity; there must be an exit occasion. Normally, this occasion is both an acquisition by a strategic companion the place a shopper may determine that it desires the manufacturing operate to maneuver in-house.
Alternatively, the commonest or anticipated exit avenue could be to have a sale to a different personal fairness fund, at the next a number of than our entry. We may additionally take a look at a possible administration buy-out.
Within the subsequent 5 to seven years there’ll doubtless be an exit occasion.
Ascension Capital Companions CEO Kabelo Moja’s contact info
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