Experts from Archipelago Capital Partners, Everstone Capital and TBV Capital weigh in.
In the QSR space, the idea of a new brand exploding into popularity because of a unique concept or offering is often an idealized one: whenever a new name becomes a success, it is guaranteed to make waves in today’s competitive market.
But in equal measure as industry movers and shakers are the multinational investment firms that signal when a brand has successfully entered the big leagues, standing toe-to-toe with industry heavyweights like McDonald’s and Starbucks.
Three executives from some of Asia’s top investment firms spoke at the QSR Media Asia Conference to share their insights and perspectives on private equity, and their continued role in the Asian food and beverage industry.
The key qualities that institutional investment firms are looking for, the speakers agreed, was branding and scalability.
Kiat Chan, Managing Director of Archipelago Capital Partners, noted that as the F&B industry is a tough enough industry in itself, which is why they look for brands that have a unique, indispensable brand that has the capacity for the scale needed to justify an investment.
“Those are two main things. And thirdly, maybe most importantly, in cases where we take an active approach, we will look at situations where we can make a material difference to the companies we work with,” Chan said.
With those elements alongside the right strategy and good execution, he added, firms can make a good sizable difference in a measurable time frame for investments, which could be anything from three, five, or even seven years.
Amit Manocha, Managing Director at Everstone Capital, noted that he divides the F&B sector into two main classifications: art and science.
“We have an artist, by definition is casual, family, and fine dining. And in that the scalability from an institutional investor perspective is always hard to achieve. Because you can scale an artist only so much,” Manocha said.
“So in that box, when we find a brand or a good company the bet is always on the artist, whether number one, the artist good. And number two, whether it's commercially viable. We have seen so many successful chefs who are not good businessmen. And that's not the right model for private equity. It may be a great restaurant to eat your dinner but not a good investment.”
The science box, where they put the QSR market alongside coffee chains, pubs, and bars, has more appeal, as he said these concepts are easier to scale and replicate across countries.
Many QSRs in the region have great products and services, but struggle to find a market overseas. That is where investment firms like Everstone can come in. But first, the brand has to be right.
“You have to find your IP right in that box. Transformation of a consumer brand is something which we don't think is possible. Consumer brands take time to evolve and transform themselves,” he said.
Opportunities in innovation
Whilst innovations have massively disrupted the F&B market in the form of food delivery platforms like Grab, Go-Jek, and Deliveroo, much of the industry is still ripe for fresh solutions, specifically on the supply chain side.
Andrew Tan Yan Hoang, Managing Partner at TBV Capital, said that as the industry continues to evolve, investment firms also consider the long-term sustainability of their partnerships.
“Food costs are rising, diet is shifting, people are changing the way they look at food,” Tan said, adding that moving forward he believes the future lies in farm-to-plate innovations.
“I will prefer to see more about farm-to-plate solutions, from fresh ingredients, to the strict direction of the restaurants, that kind of solution.”
For his company, the focus is on sustainable farming methods and on using emerging technologies like robotics, the Internet of things, artificial intelligence, and data analytics to optimize operations.
Focusing on the source, he said, is more sustainable in the long run. This means that as the industry moves towards more sustainable operations and sourcing practices all over the world, the success of the brands of the future lies in not simply serving people food, but in becoming a social enterprise to help society as a whole.
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