By Lisa Walls-Hester on 30th September 2016
In its recent portfolio update, Seedrs reported that food and beverage (F&B) is its most popular and best-performing sector with a 22.77 per cent non-tax-adjusted IRR.
In light of this insight from the Seedrs report, I reviewed the current F&B offerings on the platforms and opened my mind to the idea of including more of them in my portfolio. Until now I’ve largely sidestepped this sector due to a misconception that it hosts too many synonymous offerings in a highly competitive space. In five years I have so far only invested in one F&B company.
There is currently seventeen F&B equity crowdfunding raises vying for investor funds across the major platforms. Most are the usual suspects of artisan sauces, snacks, brewers and beverage manufacturers, but there are also four restaurants, two food delivery companies and a catering equipment manufacturer and distributor.
The constant presence of specialty food and beverage brands on the platforms is being driven by consumer demand for these types of products.
Shoppers increasingly shun mass produced, over salted, over sugared products and the fast moving consumer goods (FMCG) giants make no secret of the fact that they want to give consumers the hand-crafted, healthy, organic or natural product brands they prefer and will make acquisitions that fill their brand portfolio gaps.
For us investors trying to spot which brands could most likely be snapped up by the industry behemoths and give us a quick exit with a healthy return is like the proverbial needle in a haystack; however, there is one company that might short circuit the competition.
World of Zing offers investors an established portfolio of brands. The company specializes in bringing innovative foods and drinks to the market by developing both in-house products and collaborating with exceptional artisans. The company says it has over 50 products listed at Whole Foods, as well as supplying many of London's leading artisan delis.
The entrepreneur behind the venture is Pritesh Mody. Mody hails from the family responsible for Gandhi Oriental Foods, which the pitch (running on Crowdcube) claims is one of the UK’s most respected spice merchants and the inspiration for World of Zing.
World of Zing launched in 2014 after Mody noticed an emerging disconnect between the exciting food and drink being consumed in restaurants and out-dated retail offerings.
The company is raising £150,000 for a new production facility and marketing. It has a pre-money valuation of £850,000 and has so far funded 25 per cent of its target with 41 investors.
Its exit strategy makes no mention of possibly selling individual brands but its expanding portfolio makes it more of a target for acquirers than those companies raising money for single brands.
Artisan food is not the only stuff tempting investors, there is a need for large brewers to get with the trend and add craft beers to their brand portfolio too. According to Crowdcube craft beer now represents 11 per cent of the total beer market in the US and by acquiring craft brands, larger players are aiming to tap into the growth of the craft segment.
Craft brewers are probably the most popular campaigns on the crowdfunding platforms due to an already successful exit from one, Camden Town Brewery. This success story has become a benchmark in the sector for aspiring entrepreneurs who hope they can repeat the achievement of the brewer.
In 2015, Camden Town Brewery announced that it had been acquired by AB InBev, the world’s largest brewer and one of the biggest companies worldwide. The acquisition came just eight months after Camden’s successful raise of £2.75m on Crowdcube and gave its 2,173 investors a healthy return on their investment when it sold, according to The Guardian, for a reported £85m.
Crowdcube has a successful track record of funding other brewers and its funded club include Flavourly, DeskBeers, UBrew, Bellfield Brewery and BrewDog.
Source: Crowdcube magazine
Another campaign of note is Aveqia. Its core business provides a unique “Interactive Cooking Experience” for corporate and private groups. In other words, it’s a corporate event venue as well as a restaurant. Guests have to cook their dinner (with the guidance of professional, Michelin star chef) before they can eat it and Aveqia describes itself as a “luxurious restaurant and a social event rolled into one.”
The company says its corporate events are its main source of revenue but it also receives income from champagne lounge events, master classes, venue hire, mini-conferences, seminars and private dining.
The company taps into the high-margin corporate hospitality and team building industry and offers a fresh concept to the stale corporate event market. It already has a big name client list which included Goldman Sachs, Baker Tilly, Black Rock, Tate & Lyle, Coca Cola, Deloitte, Deutsche Bank, Unilever, JP Morgan, Morgan Stanley, Warner Bros. and Nissan.
The company is planning on adding a new venue in 2017 and forecasts to have 26 by 2020 with projected sales of over £7.5m. It is raising £750,000 but here is the catch, this campaign is running on “The platform for sophisticated investors”, Envestors, and has a minimum investment amount of £25,000.
Those businesses which operate in a highly competitive environment have to be more dynamic and productive which in turn makes a more robust company, the companies or brands that can successfully see off their contenders drive higher returns than other industry sectors.
One thing has become clear to me and that is there are some interesting companies raising funds in the F&B sector. Some campaigns are worth a closer look and this is a sector I won’t be overlooking in the future.
AltFi is returning to Amsterdam for its second annual Summit in the city. The inaugural event last year was a roaring success, with key figures from across Continental Europe's alternative finance and digital banking sectors highlighted. These included Jeroen Broekema, managing director of Funding Circle Netherlands, and Mieke van Engelen, head of innovative partnerships at ABN AMRO's standalone lending platform, New10.