LPs seek direct exposure to organic supply chain

Eric Jackson, chief executive at AMERRA-linked Pipeline Foods, tells Agri Investor that he expects to bring in at least one direct institutional investor by the end of next year.

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Eric Jackson, CEO of AMERRA-backed Pipeline Foods, expects to bring in at least one direct institutional investor by the end of next year.

LPs are increasingly interested in direct investments designed to strengthen the supply chain for organic and non-GMO grains and oilseeds, according to the chief executive of Pipeline Foods, a company backed by AMERRA Capital Management.

Eric Jackson told Agri Investor that his recent discussions with investors have shown a higher level of education about agriculture and the food system and a desire for longer duration.

“It’s clear in my mind that the LP community is looking for more direct opportunities – whether it’s direct as a sidecar, through an LP that’s behind our PE shop or through another LP,” he said.

While the company’s partnership with AMERRA has meant that Pipeline has not yet had to take on additional backers, Jackson noted he expects to add at least one institutional investor by the end of 2018. He said he has been “blown away” by the interest from family office investors, many of which are attracted to the social and environmental benefits of direct investments in the organic supply chain.

AMERRA announced the creation of Pipeline in February, which it said was designed to provide dependable agricultural supply chains, with organic and non-GMO produce as the initial focus.

In addition to working with a network of farmers to help facilitate the three-year transition process required to attain USDA organic certification, Pipeline said that it planned to amass a network of organic and non-GMO grain and oilseeds handling and processing assets in both origin and destination markets.

Jackson told Agri Investor in March that the existing organic and non-GMO supply chain consists largely of small, inefficient producers who are struggling to meet booming demand as consumers increasingly tend towards healthy and more traceable foods. Jackson described then how large food companies had been reluctant to invest in what is still a comparatively small market, but that they could be enticed by something of a larger scale.

Continued ‘chaos’

Speaking to Agri Investor last week, Jackson said that since March, Pipeline has tripled its workforce, established regional headquarters in Winnipeg, Canada and Argentina and found more US acquisition opportunities than even they had been expecting.

He described continued “chaos” in the organic and non-GMO supply chain, but said that as awareness of Pipeline’s venture has grown, the company has begun to be approached by small family-owned food or ingredient businesses with relevant operations interested in a sale.

Jackson described how the hypothetical operator of a grain-processing company, having built a small dedicated facility for a customer that needed organic product and who is now considering retirement, might approach the situation.

“I built that little business because it added value to my farming operation and then, lo and behold I got a second, and third customer,” he said, speaking as the hypothetical operator. “Now, here comes Chipotle, and Chipotle wants to go national with my product. That is going to require investment that I am not willing to make, but it’s an opportunity that I don’t want to let go.”

Pipeline plans to deploy between $300 million and $500 million over the next five years, forming an organic and non-GMO grains and oilseeds supply chain made up of such small operations.

Often, Jackson said, operators Pipeline works with are around 60 years of age and interested in arranging an exit, or a “mostly-exit” arrangement under which they continue to interact with select customers or on specific projects.

“It’s the Baby Boomer generation. I totally get it,” Jackson said. “But, I didn’t know how many of these [small-scale organic processing facilities] there were out there!”