By Zlatica "ZK" Kraljevic
A young entrepreneur with experience in the U. S. logistics industry had identified the opportunity to import perishable products from Latin America to the U.S. The original business plan called for the construction of a refrigerated warehouse near a major U.S. port and a fleet of trucks to distribute the product to local supermarkets. He estimated an initial investment of $18 million.
The entrepreneur’s existing knowledge of the fresh food industry was limited, but based on available secondary information, initial revenue estimates were considered sufficiently attractive. After two years of unsuccessful efforts to secure support from private investors and port authorities, the entrepreneur decided to call on The Anders Frontier Group (TAFG) to assist.
The first step taken by the TAFG team was to review the existing business and marketing plan from the perspective of prospective investors. The plan was found promising but lacking the critical mass to make it sufficiently attractive to large private and institutional investors. Over a period of three months, the team worked with the client to evaluate the risks and returns associated with the creation of a larger scale new venture for the importation and distribution of perishable food not just to the local market but to about 1/3 of the continental U.S. With a new proposal in hand, the TAFG team was able to market the project and secure $2million in bridge capital to assemble the first management team consisting of the client, the TAFG team, project finance and industry experts and representatives of the venture capital firm providing the initial funding.
The second phase of the project called for a rigorous evaluation of the Latin American perishable food industry (e.g. fruits, vegetables, seafood, and meat). The TAFG team led the task of designing a comprehensive entry strategy and a detailed international business and marketing plan.
The team designed a 6-week, on the ground program to conduct a SWOT analysis of the industry value chain. Selecting a primary country, the team identified and completed a number of field interviews with local players in the private and public sectors. Clear understanding of the industry including operations and environments, provided the foundation to decide on the final business structure, choosing the better of two options between a fully integrated operation and a central operation with outsourced services. Close market interaction also enabled the TAFG team to detect and dissect the nuances of the political and competitive ties that dominated a tightly held billion-dollar strong industry. Field team work led to the identification of six strategies for success:
Develop an entry strategy that protected the new venture from pre-empting efforts from well-established competitors during the critical pre-funding stages
Ensure quality of services through a fully integrated operation responsible for securing and managing suppliers, exporters, ocean and land transportation, distribution and sales
Establish credibility and strong ties with local suppliers by demonstrating a deep understanding of the industry weaknesses and strengths and offering clear solutions to improve traditional terms of contractual agreements
Educate local political and community leaders in target countries on the value of diversifying the competitive environment to enable increasingly fair terms and conditions; establish relations with government agencies involved in import/export regulations, sanitary certification and customs at departure and arrival points
Make use of state-of-the-art technology as a point of differentiation to modernize and ensure superb service to an otherwise traditional industry
Manage local media abroad and at home to maximize impact at launch time
During the duration of the project, the TAFG team was directly involved in business structuring, financial forecast, investor relations, competitive market analysis, technology adoption, contract negotiation, government relations, domestic and foreign media relations, and training. Blueprints were developed to guide and accelerate learning of the new industry among pertinent in-house personnel and ensuring that those providing third party services (e.g. port operators) received proper training in the management and handling of perishable food products according to industry standards.
First hand intelligence collected in the second phase of the project plus a solid understanding of the political and commercial environment surrounding the industry guided the final decision on how to structure the business and enabled the team to generate a comprehensive, intelligence-based project finance proposal.
The final project finance proposal attracted over $85 million investment from private and institutional investors in the U.S. and Europe.
The new venture was successfully launched on its fourth year from inception reaching16 states in the U.S. The venture was later sold to a larger U.S. importer.