First Round: What's the wurst that could happen?

There are few safe bets when it comes to private equity investments. Who can say what the fickle consumer will be into in three years’ time? Who can predict the next high-tech, new-fangled, all-singing, all-dancing “disruptor” that will swoop in and destroy your entire revenue stream?

But there are some things for which there will always, always be a market. Toothpaste. Socks. To most people’s chagrin, car insurance.

And when it comes to the food industry, there is one thing that people will always need. Sausages.

Don’t take First Round’s word for it. Just ask Clayton, Dubilier & Rice. Or Silverfleet Capital. Or Montagu Private Equity. Or CVC Capital Partners.

Over the last 20 years these firms have been the proud consecutive owners of German industrial sausage casings business Kalle.

Among its suite of products Kalle offers value-added casings (which can transfer colours and flavours to the product) fibrous casings (offering “excellent transparency and smoke permeability”), polymer casings (perfect for cooked sausages or cheese), net casings (for a rustic look), textile casings (ripe for personalisation), and, if sausages aren’t your bag, a multi-purpose sponge cloth.

A mere chipolata when CVC acquired the company from German life sciences business Hoechst in 1997, Kalle steadily grew under subsequent owners Montagu and then Silverfleet into the gargantuan kielbasa it is today, producing more than 850 million metres of casing to enrobe meat, poultry and vegetarian protein last year alone.

As a private equity play, it makes perfect sense. Germans clearly have the monopoly on the sausage sector, and is there anyone who can realistically foresee a future in which the world’s demand for sausages wanes? As long as there are baseball games and hungover breakfasts and Oktoberfest, there will be sausages.