Singapore family office eyes scalable food and beverage investments
Two Trees Capital is taking a forward-looking investment approach to the food and beverage industry.
The Singapore-based single-family office of the Genting Group is leveraging its hospitality and operational expertise to back scalable brands in a constantly evolving industry.
"We make it a point to consider brands that provide quality offerings in exchange for recurring patronage," said Xuan Feng Ong, senior investment manager at Two Trees Capital, in an exclusive interview with AsianInvestor.
Ong emphasised that value-for-money is a critical driver of consumer loyalty across all price segments in this sector.
Asia's F&B market is set to grow amid rising consumer demand for health-conscious and sustainable products.
The sector is expected to have a total revenue annual growth rate (CAGR 2022-2029) of 9.11%, resulting in a projected market volume of $1.84 billion by 2029, according to Statista.
This growth presents significant opportunities for investors like Two Trees Capital, which is strategically positioning itself to capitalise on these trends.
Elaborating on the due diligence process, Ong shared that the family office focuses on both new and established brands with the potential to scale sustainably while delivering compelling value and unique, top-in-class dining experiences.
"These factors should also translate to profitability at both the unit level and group level. We apply these filters when evaluating each investment and monitor against these metrics for portfolio our portfolio companies," he said.
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SUPPLY CHAIN AND MARKET COMPLEXITIES
Resilience in supply chain operations has become paramount for food and beverages businesses.
According to a recent report by WTW on the 2024 Global Food and Beverage Risk Outlook, about 48% of food and beverage companies identified business interruption as their biggest internal risk. Supply chain issues followed closely at 40%.
The rapid shift in consumer preferences is another major concern, cited by 36% of companies.
Two Trees Capital evaluates companies on their ability to mitigate risks associated with global commodity markets and climate change.
"Companies should always have business continuity plans that include a diversified procurement strategy," said Ong.
For F&B, this means adhering to the "rule of three" in risk diversification, according to Ong.
This involves diversifying across procurement sources, sourcing raw materials from multiple suppliers in different regions, and spreading production facilities across various locations to mitigate risks such as natural disasters or local regulatory changes.
Additionally, diversification in distribution channels—through retail partnerships, direct-to-consumer models, and digital platforms—is crucial to adapting to shifting consumer behaviours and supply chain disruptions.
"Deciding where to invest in the F&B space is both an art and a science," Ong said.
"Tracking the pulse of the market preference is important as we often have to extrapolate our assessment and make the judgment for the wider population."
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This approach aligns with broader industry trends, as supply chain diversification becomes critical for businesses grappling with volatile input costs.
A WTW survey in July 2024 found that 73% of business and industry leaders stated supply chain-related losses had been higher than expected over the previous two years.
While supply chain technologies, including artificial intelligence, can enhance optimisation, their adoption in the F&B sector remains cautious.
"We should be cognizant not to overapply AI frivolously, especially in the tight-margin food and beverages businesses where the cost of implementation might not be justifiable for most small and mid-sized companies," Ong said.
Although Two Trees Capital has not yet invested in AI-related food-tech companies, it remains open to exploring game-changing technologies that could drive transformative results.
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THE BLURRING LINES BETWEEN MARKETS
With consumer sophistication rising globally, distinctions between emerging and developed markets are narrowing.
"We prefer brands that are scalable across geographies with the potential to become strong regional or global players," Ong shared.
Asia remains a fertile ground for scalable brands, driven by the region's burgeoning middle class and rising disposable incomes.
Food spending in the region is projected to surpass $8 trillion by the start of the next decade — up from $4 trillion in 2019 — making it the world's largest F&B market, according to a report by PwC, Rabobank, and Temasek.
Two Trees Capital's preference for scalable brands aligns with its flexible investment approach and ability to hold for long-term, if preferred. Ong described F&B as "an endearing sector that can offer good synergies with our operating businesses."
The family office evaluates exit offers holistically, balancing financial performance with strategic alignment for the Genting Group.
This dual focus allows Two Trees Capital to remain agile, whether in seizing immediate opportunities or committing to a long-term strategic vision in the food and beverages space.