Emerging markets specialist The Abraaj Group has secured a majority stake in Colombian food manufacturer QBCo.
The deal was likely made via the firm’s global buyout fund, following a change in strategy reported by sister publication Private Equity International in April that now sees it invest globally from one pool of capital, rather than from vehicles devoted to a particular region or country.
Abraaj declined to disclose financial terms or confirm which fund it used to make the investment.
QBCo is a private-label foods manufacturer that provides edible oils, margarine, pet food, preservatives and canned food to customers in Colombia, Panama, Ecuador and the US. Established as an edible oils company in 1961, it broadened its focus to become a private-label foods producer in 2013 and currently offers more than 55 different products.
“There is an obvious growth story here, against the backdrop of a bullish dynamic across the region, presenting substantial possibilities for companies with strong business models,” said Abraaj partner Miguel Olea.
The firm added that it plans to work with QBCo to expand product offerings and strengthen the company’s retail distribution network as part of efforts to increase its Latin American and US presence.
Abraaj partner Hector Martinez told Agri Investor that the firm’s plans for QBCo include evaluating the potential for exports and bolt-on acquisitions.
Hard discount, easy returns?
Martinez said QBCo stands to benefit from the expansion of quick-service restaurants across Latin America and the increasing acceptance among Colombian consumers of private-label food products. He noted that these accounts for up to 70 percent of sales from discount retailers in Colombia, where he reckons the number of such discount retailers will triple by 2021.
Citing opinion polls from Nielson, he noted that 70 percent of Colombian households report having purchased private-label products and 90 percent of those households have gone on to become repeat consumers.
“During the past few years, hard discounters and private labels have been growing significantly in Latin America, generating an opportunity for QBCo to be used as the platform to build the regional private-label champion and supply multiple retailers across markets,” Martinez said.
He added that Mexico, Peru, Argentina and Panama, which have all seen similar expansions by discount retailers, represent “an attractive opportunity.”