Pacific Agri Capital raises $10m for cacao project – exclusive

Latin American agri-focused investment firm Pacific Agri Capital (PAC) has raised $10 million to develop a high-density cacao project in Colombia.

Led by a North American institutional investor, the raise will be used to convert 650 hectares of grazing land into a high-density cacao plantation for the newly formed subsidiary Andean Cacao.

PAC principal Xavier Sagnieres told Agri Investor the company plans to acquire up to 5,000 hectares through future financing rounds for similar greenfield cacao development projects.

The group, led by PAC and run jointly with a local management team, hopes to build a large-scale, high-density cacao production and distribution hub in Colombia to rival the world’s cocoa export centres in West Africa.

“The objective is to create a regional cacao hub and compliment that by partnering with small farms in the area,” said Sagnieres.

Andean Cacao, he said, will offer training in high-yield farming methods, as well as microfinancing, to neighbouring small-scale cacao farmers, in order to bring their production into the company’s distribution network. The company will rely on mechanised pruning, drip irrigation and high density planting to reduce costs and increase yields. The group plans to plant roughly 1,450 cacao trees per hectare on its farms.

“It’s not a new model, but we’re not aware of anybody who’s using it yet in Colombia,” said Sagnieres.

In addition to nearly 1 million cacao trees on its first 650 hectare plot, Andean Cacao will undertake additional planting on land now used for grazing in order to give shade and wind protection to the cacao crop. Sagnieres said the company is looking into whether the project qualifies for carbon offset credits.

PAC chose a direct investment model for the project, said Sagnieres, because a corporate structure fits the group’s cacao strategy better than a private equity play. Sagnieres estimates it could take four years to reach its acreage goals, and each cacao crop takes five years to reach peak production. The non-private equity structure means the group has the flexibility as operations scale up to either continue taking in profits or launch an IPO, depending on developing market conditions and exit opportunities.

In addition to cacao, PAC targets impact investments in citrus, forestry and palm oil production.

PAC currently has investments in roughly 30,000 hectares of palm and cacao production in Latin America and south-east Asia. The group’s founder, Bill Randall, was listed as an investor with Peruvian company, United Cacao, prior to its $10 million IPO in December of 2014. The company invests through special purpose vehicle, single asset fund, direct investment and private equity structures. Its investors comprise family offices, high net worth individuals and institutional investors.

Cocoa production in the Americas has been slowly but steadily rising over the last five years, from 14.2 percent to 15.3 percent of global output, while Asia’s share of cocoa production has fallen. Until recently, cocoa has defied the downturn in international commodity prices, but the International Cocoa Association’s January review suggests that a steep price drop at the start of 2016 could indicate the beginning of a downward trend.