November 12, 2019

By Lynda Kiernan

Bahrain-based alternative investment manager Investcorp has partnered with China’s Fung Strategic Holdings Ltd. and China Resources, one of the world’s largest food brand owners and distributors, to launch a $500 million private equity fund dedicated to investing in food brands in Asia.

Fung Investments is the private investment arm of the families of Victor and William Fung, who are the controlling shareholders of Hong Kong-based Fung Group, a global pioneer in global consumer goods and supply chains. 

“Fung Strategic is focused on developing the Food Sector with the backing of the Fung Group’s Global Supply Chain capabilities,” said Monica Tsui, managing director, Fung Investments. “Together with our partners, China Resources and Investcorp, we are confident that we will realize major opportunities in China and the region.”

The fund, which will have a specific geographic focus on China, Singapore, and greater Southeast Asia and will be jointly managed by its three founding partners, currently has commitments of $300 million toward its fundraising goal. 

“Investcorp has been actively growing our presence in Asia as part of our strategy to expand and diversify our global reach and offerings,” said Investcorp’s co-CEO, Hazem Ben-Gacem. “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.”

With 120 million households on pace to enter the middle class over the coming decade, China is the world’s largest and fastest growing consumer market set to offer a “once in a generation” surge in consumption, according to Investcorp.

Over the past three decades, China has rapidly undergone a significant shift from being largely rural and agrarian to a more urban and market-engaged society. This rather jolting change has brought food production away from fragmented small holders and into the realm of commercially scaled industrial production.

Indeed, China’s food and beverage industries are set to see revenue amount to US$22 billion this year, and is expected to grow at a surprising CAGR of 13.8 percent per year to reach US$37 billion as soon as 2023, according to Statista. By this same year, users in China are expected to reach 698.1 million, with average revenue per user (ARPU) equaling US$38.35 this year. 

Market conditions and growth prospects such as these have led to a recent surge in fund formation focused on China and its proximate regions.

In 2016, Matilda Ho launched Bits X Bites, the first food-focused venture capital fund and accelerator in China with a mission to invest in food tech startups situated along the entire food value chain from field to fork in order to address the specific challenges faced in China’s food system.

That same year, David Liu, head of China and co-head of Asia private equity at KKR, and firm partner Julian Wolhardt announced they were leaving KKR at the end of the year to launch a new China-focused investment firm.

As two of the most senior executives with KKR, Liu and Wolhardt managed some of the firm’s largest investments. Both oversaw KKR’s first food investment in China in September 2008 – a $150 million investment in China Modern Dairy Holdings.

More recently, last month, ABC World Asia, a geographically-focused impact investing firm launched in May of this year by Temasek Trust, the philanthropic arm of Singapore’s sovereign wealth manager Temasek, announced it had closed on US$282 million for a new fund focused on China, South Asia, and Southeast Asia.

Likewise, Investcorp, which has $28.2 billion in assets under management, including Australian snack food company Yarra Valley, and UK-based Tyrell’s Crisps, has turned its sights toward China as a growth market for Western food brands.

“Together, I believe that we will set the foundation for what we hope will be one of the most successful investment platforms dedicated to Asian food brands,” said Investcorp’s co-CEO, Hazem Ben-Gacem.

– Lynda Kiernan is Editor with GAI Media and daily contributor to the GAI News and Agtech Intel platforms. If you would like to submit a contribution for consideration, please contact Ms. Kiernan at lkiernan@globalaginvesting.com.