KUALA LUMPUR (March 11): Private equity (PE) firm Creador said it has acquired a significant minority stake in local food industry supplier Custom Food Ingredients for an undisclosed sum as part of its ingredients category platform play.
This marks Creador’s second food investment in the Southeast Asia region in the past five months, with the first being Orion Food Industries, a Malaysia-based seasoning, coatings, and marinades specialist.
In a recent statement, Creador said both companies are part of its new Savourés Group platform, which acquires Southeast Asia ingredients players and enhances their positioning as end-to-end suppliers for global clients.
The PE firm said Custom Food Ingredients — which has been active in the cereal and malt-related additives industry since 1992 — is Malaysia’s oldest high-fat powder manufacturer and a lipid-based ingredients supplier for more than 200 clients in 30 countries.
“The company’s key differentiator is a spray drying system that allows it to produce lipid powder with up to 80% fat content, an otherwise unattainable ratio through conventional drying methods.
“The technology also enables the production of semi-agglomerated powder with greater fluidity and solubility, which is said to translate into better final product quality,” Creador highlighted Custom Food Ingredients’ competitive advantages.
Creador added that the acquisition also comes with a strong focus on sustainability and corporate citizenship as Custom Food Ingredients’ operations are primarily powered by natural gas systems said to produce only carbon dioxide and water as by-products while the company also has its own water treatment plant, opting for more energy-efficient equipment and engaging only suppliers with similar green policies.
On plans for Custom Food Ingredients, Creador said it is expecting its investee to expand into new segments, including ingredients for special medical purposes
The firm said it is shifting further upstream contrary to its previous consumer strategy focusing on end customer-facing models.
“Our investment allows us to support their next stage of growth, including investing in manufacturing, research & development, marketing as well as building a bench strength of food-tech professionals,” Creador founder and CEO Brahmal Vasudevan said.
“Malaysia is a manufacturing hub, but we’re not going after the low-margin commoditised products,” he added.
Meanwhile, Creador’s head of Malaysian investments Livia Chan said that while Malaysia is a manufacturing hub, the firm was not going after the low-margin commoditised products.
“We’re going after high value-added, high-margin areas that are sticky with customers," she said.
Creador had closed its fifth fund in early-2022 with the hard cap of US$680 million (RM2.85 billion) and a mandate to invest between US$40-60 million for each deal.
It added that the fund has already been active in the food sector after backing Indian fast-food franchise operator Sapphire Foods and achieving an exit within three months in an initial public offering at US$227 million IPO that doubled expectations for an exit valuation.