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The private equity approach to agriculture

Macroeconomic trends such as corporatization and climate change are driving investor appetite, with LPs now seeing agriculture as an attractive asset class of the future. In this Q&A Brad Mytton speaks to Agri Investor about Roc Partners approach to agriculture investing.

Q: What are the macroeconomic trends that make investing in agriculture attractive?

There are several elements that have made it an attractive sector to invest in.

One interesting dynamic is that food production is becoming more corporatized, so there is an increasingly large role for investment like the kind that we provide. We target successful family operations or small corporates that can become even more successful before morphing into large corporates. We love partnering with those businesses that are doing well already and helping them to grow, often dealing with succession challenges and finding ways for them to actively retain that family legacy while moving to the next level.

Secondly, the climate is becoming more volatile, so we see our role in agriculture as preparing a portfolio for a world of increasingly frequent and severe weather events. Our investment in Flavorite, for example, was a move into protected cropping, which is a net beneficiary of more volatile climates in many ways, because it’s less vulnerable to climatic conditions than our counterparts involved in growing field tomatoes.

Next, we focus on food products that command a premium price and aim to maintain those premiums by outperforming in one of three areas: one, they’re extremely nutritious, such as our extremely high-anti-oxidant plum brand under the 555 Super Foods company we’re developing; two, they’re convenient, such as Flavorite’s successful snacking range of baby tomatoes, baby cucumbers and baby capsicum that are ideal for things like school lunchboxes; and three, food can be an experience, such as with Stone Axe’s premium wagyu beef which is of exceptional quality, or Australia’s Oyster Coast, another of our portfolio businesses that produces some of the best oysters on the market under the Appellation Brand.

Stone Axe and AOC are examples of high-end premium products with high barriers to entry – in Stone Axe’s case it’s around the genetics of wagyu beef, whereas in AOC’s case it’s around the oyster leases and the need to be diversified with oyster farms up and down the coast.

View the full article here.

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