Proterra taps Asian network to secure entry discount for dairy investment

Proterra Asia was able to secure an entry valuation discount on its investment into Chinese yoghurt company Simple Love because it helped the fast-growing business establish a “strategic procurement strategy” for raw milk.

Tai Lin, managing partner of Proterra Asia – the Asian arm of Proterra Investment Partners – told Agri Investor the firm used its longstanding connections with Asian dairy company AustAsia, in which Proterra was a founding investor, to source its supply.

“Because of this dramatic growth for Simple Love, they were faced with a very big challenge – they couldn’t source enough high quality and safe raw milk to fill their factories and to fuel their 50 percent-a-year growth for the next four or five years. So, they are actually currently buying their milk from AustAsia,” explained Lin.

Proterra also helped bring in members from AustAsia’s dairy farming team to support the design construction of Simple Love’s new dairy farm, which has been established next to the company’s new yoghurt factory.

“We even drafted and designed the farm management contract, adapted from another of our companies in China. We basically helped them engineer what is an extremely strategic procurement strategy.”

Simple Love is expected to deliver revenue in excess of 1 billion yuan ($155 million; €127 million) this year and has grown to become the sixth largest fresh yoghurt brand in China, with sales growing at an annual compound growth rate of 102 percent for the past five years, according to a Proterra statement.

Proterra Asia also confirmed its investment into a new oat milk business, which is as yet unnamed and will operate out of Singapore and Indonesia. The firm has been working with the company for more than a year now and is slated to launch in Q4, said Lin.

The PE firm had raised $35.7 million for the 2020-vintage Proterra Asia Food Fund III as of October 2020, which is seeking between $700 million and $800 million. The firm is working with a larger pool of capital through its direct co-investors and co-investment vehicles, Agri Investor understands.

Lin said Proterra continues to see “a very exciting and busy pipeline” and is close to finalizing a further three deals, all of which are food related and focused on nations such as Indonesia, Malaysia, Singapore and China.

One area the firm is unlikely to invest in is vertical farming, said Lin, given Proterra’s analysis that self-sustaining and scalable models are yet to become widespread.

“We evaluate deals on a standalone basis and so far as an industry, with few exceptions and few locations, it’s not [sustainable] yet.

“And even if they were sustainable, the question is, are they actually scalable? Can you make a $400 million corporate out of that? I think the answer will be yes after some time, we just haven’t found the right situation where that’s the case yet,” said Lin.

Proterra launched an Asia-focused joint venture with plant-based egg provider Eat Just last year, which plans to plans to establish a unit for the procurement and origination of mung beans, which are the main feedstock of the company’s alternative egg offerings. The firm also plans to build a protein extraction facility, assume control of Eat Just Asia’s sales and marketing, and establish a network of contract bottlers and packagers throughout Asia.