Opex Awards 2016: Asia, lower mid-market – Navis Capital Partners

When Kuala Lumpur-based Navis Capital Partners acquired a controlling interest in Golden Foods Siam (GFS) in September 2009, the company was one of Thailand’s largest fully integrated chicken processors focused on both raw and cooked added value products.

The long-term prospects of the business looked good as poultry production was big business around the world. But GFS mainly exported to Japan and the UK – developed markets with slower growth rates – and had failed to enter new geographies in Asia. GFS was also operating a single cooking plant that was fully utilised and bought all of its chicken feed from third-party suppliers.

To improve profitability and drive growth, Navis embarked on a five-year plan. Its first strategic initiative was to reduce the proportion of fresh meat sales, which has high price volatility compared with the more stable and higher margin CAV business. To develop more interesting products for the company’s customers, Navis focused on new and more complex product offerings and pushed to expand GFS branded product Grabits – cooked chicken on a stick – which increased sales by 47 percent since 2010.

Navis also worked with management to drive operational improvements in key areas. One was labour efficiency. The company’s more than 9,000 employees were a major cost item, especially after the Thai government increased the minimum wage by 40 percent in 2012. Navis addressed this by increasing automation in production processes and enhancing labour productivity, an initiative which resulted in a 7 percent cost cut per kg from 2012. The new cooking facility, opened in 2011, also further expanded its production capacity.

New market entry was another key priority. Aside from increasing GFS’s customer base in its core markets, the firm targeted new geographies such as Korea, the Middle East and among the Association of Southeast Asian Nations, generating more than 60 percent CAGR from 2011 to 2014 in these markets.

The firm also strengthened GFS’s management team and brought in a senior executive with an agricultural background from one of its investee companies, who played a critical role when GFS bought a feed mill in 2015. The state-of-the-art facility in the province of Lopburi meant that 100 percent of the company’s feed requirements were brought in-house.

“I liked the vertical integration of the company by adding a feed mill which ensures supply chain resiliency, and a new cooking facility to improve the evolution towards higher value added products away from raw sales,” said judge Veronique Lafon-Vinais.
With strong financials, Navis started the exit process in 2015. It hired an advisor, launched a global search and received interest not only from many protein players from various parts of the world but also private equity firms.

Early this year, Navis sold GFS to Brazil’s second largest food company BRF SA for $360 million, generating a 3.6x money return and 25 percent IRR.