Cargill fund boosts agri firm expansion
Published: 21 Aug 2012
Powered by a $34.45-million (P1.3-billion) capital infusion only seven months ago from a Singapore-based hedge fund owned by U.S. agribusiness and trading giant Cargill Inc., the expansion and acquisition binge of local agricultural food products conglomerate AgriNurture Inc. (ANI) has accelerated into a buildup of farm hectarage that will see the company splurging from P560 million to P980 million in Mindanao to buy up some 1,400 hectares of producing banana plantations in the remaining five months of the year.
This will give the firm the capability to grow its own banana supply to support robust export shipments hobbled only by what company officials described last week as a chronic lack of supply.
“Our problem with bananas is that we can never get enough,” said ANI president Luigi S. Bernas as he and the company’s chairman and CEO, Antonio L. Tiu, updated reporters on their ongoing expansion program.
“We used to ship 1,000 containers of bananas to markets worldwide, yet still supply was not enough,” Tiu confirmed..
Previously the agricultural powerhouse seemed to have no problem making large banana export shipments without owning a single plant. But it has decided to integrate backward into banana farming this year, realizing that the company earns more from its fruit exports than from its widely diversified other agri-based businesses.
Founded 25 years ago to engage in the trading of farm equipment, the former Mabuhay 2000 Enterprises, Inc. is now into wide-ranging enterprises from wholesale trading and distribution of commercial crops and fresh farm produce, to the manufacture and distribution of processed foods including fruit beverages here and abroad, and and farming of certain crops other than bananas, among others.
ANI’s live land acquisition program is proceeding at full speed, beginning with the recent purchase of an initial l00 hectares in Davao. It is to be followed by the programmed addition of 200 more hectares this week.
An additional 400 hectares more are planned to be bought under a joint venture arrangement, and the final push before yearend is to get ANI’s hands on yet another 700 hectares in Maguindanao, currently under negotiation.
“We don’t have much choice,” said Tiu in explaining the rationale for his company’s backward integration. The “banking” of live, producing land is being handled by ANI’s farming subsidiary, Best Choice Harvest.
With each hectare ranging in price from P400,000 to P700,000 depending on it’s state of development, the 1,400 hectares being targeted will cost AgriNature between P560 million and P980 million.
The purchases will be in cash, said Tiu. This means that beginning a few weeks ago until the end of the year that much stimulative liquid resources will pour into local economies in Mindanao.
Financing for this latest phase of AgriNurture’s multi-billion-peso expansion will also come from Black River Capital Partners Food Fund Holdings (Singapore) Pte. Ltd., the same Cargill-affiliated fund that only last January put into ANI $30.450 million in fresh capital – in the process acquiring a 28.11-percent stake.
AgriNurture’s new 1/3 owner is a hedge fund managed by Black River Asset Management LLC, also based in Singapore, which is a unit of commodities giant Cargill Inc. with headquarters in Minneapolis, Minnesota.
In last week’s briefing Tiu and Bernas explained the reason for the major shift in ANI’s operations from being just a buyer of the agricultural products it deals in, into becoming a grower/producer as well.
The move also effectively recast the conglomerate’s business structure that has flung them into a determined pursuit of full forward and backward integrations. It will thus reinvent itself from a purely a farm-to-market trader to one following the more encompassing concept “from farm to plate.”
Even before the capital infusion from Black River, AgriNurture had been aggressively pursuing a dizzying program of acquisitions and expansions under the leadership of Tiu. The reason, perhaps, for the progressive-minded ANI CEO’s being chosen as one of 2011’s Top Outstanding Young Men (TOYM) of the Philippines, for entrepreneurship.
Its direction was into business related to its core activities, particularly into beverages, and geographically into foreign markets like Hong Kong and the U.S.
Establishing a larger presence in the food retail business, it bought 51-percent controlling interest in The Big Chill Inc. (TBC), whose flagship products are fresh and preservative-free fruit juices and shakes under the brands Big Chill, Fresh Bar, C’Verde and Canefusion.
ANI seeks to expand overseas from the present 40 outlets in the Philippines to 1,000 stores particularlly in China and the U.S. in the next five years.
Among ANI’s latest expansionary deals was an agreement to carry Tully’s coffee, a well-known brand of a leader in specialty coffee and coffee makers of the same name that is based in Seattle, Washington State.
Another coup was to supply Philippine coconut juice to U.S.-based Vita Water. This has fired up production at the Cagayan de Oro facility of ANI’s production subsidiary Fruitilicious.
Locally a key core business of ANI is the regular supply of fresh farm produce to leading supermarket chains. It also buys in bulk homegrown fruits such as banana, sweet pineapple and papaya which it exports to the Greater China region, Japan, Korea, and the Middle Eastern, European and North American regions.
Its additional capital from Black River only added more fuel to push this strategy.
Bernas said his company was relatively unhurt by the Chinese government’s refusing large shipments of banana exports from Mindanao three months ago.
China tightened quarantine regulations on already contracted-for Philippine bananas, citing as reason the finding of scale insects in fruit shipments. Costing Philippine banana growers hundreds of millions of pesos worth of shipments that just rotted in Chinese ports, the squeeze was suspiciously coincident with China’s dispute with the Philippines over the Scarborough shoal just off the coast of Masinloc, Zambales.
“We didn’t then own plantations when it happened,” Bernas said, but added that by the end of this year when they shall have expensive plantations “it will hit us.”
“We were not affected much with the halt of China accepting our bananas, since we were able to divert our bananas to other countries,” Tiu explained.
But, he added, he was hopeful of “tapping China again.” The bulk of ANI’s fresh fruit exports go to China.