Investment Potential in the 'Halal' Sector

Rafi-uddin ShikohE: [email protected]: advisory.dinarstandard.com

Presented at:

By:

Nov 10th 2010London, UK

Growth Strategies for Emerging Muslim Markets

Developing Investment Potential in the Halal Sector

mailto:[email protected]

Most comprehensively, the Business of Halal is Muslim Lifestyle driven

First…lets define the ‘Halal Sector’

Developing Investment Potential in the Halal Sector © DinarStandard 2010 2

The large and demographically

attractive Muslim consumer

lifestyle, at varying degrees, is

driven by faith-based values

Dietary law/ healthy

Family values

Modesty

Just and equitable

financing

Just business

Charity

Social

responsibility

God consciousness

This lifestyle translates to unique

Muslim consumer opportunities

and supporting B2B infrastructure

Business to Business Infrastructure

Logistics - Infrastructure - Reach (Media)

…whose appeal

transcends the Muslim -

-based on shared values

Large gap in ‘Halal’ market potential vs. brands/suppliers


Halal market $ size realized

OIC* major players

Government

Small and

Mid-Sized businessesHal

al m

arke

t c

on

sum

er

reac

h

Gap

1.8 bill

Muslim

$ 2 trillion + (min market size)

Gap

Number of Companies/ Organizations

Industry Orgs

Multi-Nationals

Within the existing market opportunities, SME’s form a large part of this space

Small and

Mid-Sized

businesses

OIC* major players

Government

Industry Orgs

Multi-Nationals

Focusing on developing SME Investments


Because, SME’s are…

• engines of economic growth; a

big part of this emerging market

• highly fragmented/ inefficient

(e.g. UK est. $ 4 billion in Halal

food market ; France $7.5 billion

– how many $100+ mill pure

plays? None)

• high energy/ committed

• Innovative and creativity

Halal market $ size realized

Hal

al m

arke

t c

on

sum

er

reac

hHalal Sector SME’s/ private companies offer the greatest opportunities

Levels of Investment Opportunity


CAPITAL MARKETS OR RETAIL INVESTMENTS

For-- Institutional and individual investors –

Approx. 90% of base projected Halal market not on the Public

markets

(Rushdi Siddiqui, Thomson Reuters–Islamic Finance Global Head, estimates $99 bill in market capitalization from OIC food

companies . Compared to the global Halal food est. potential of $640

billion annually)

Where’s the rest?..

MNC’s and within the SME’s (specially in Western markets)

MERGERS/ ACQUISITIONS, AND

CORPORATE INVESTMENTS

For--Halal Sector companies (OIC and multi-nationals) for growth & expansion and Private Equity firms

ANGEL/VC

For--or other such investments in individual entities

SME Focus

Migrate

SME’s to

Capital

markets

SME’s are not on the public markets; private financing means will help migrate

Halal Lifestyle Sector - SME Investment Examples


Mergers/ Acquisitions:

• AlIslami could sell up to a 30% stake in Al Islami to drive its international growth. Had already acquired halal fast food chain Al Farooj Fresh *

• Canada based Premium Brands Holding Corporation’s USD 2.1m acquisition of the Vancouver-based halal meat distributor South Seas Meats

Corporate Investments:

• “GHANIM International Food Corporation Sdn Bhd, which manages and markets “Brunei Halal Brand” is in negotiations to buy shares in one ofthe largest distribution networks based in United Kingdom and Europe.”**

Angel/VC:

• Saffron Road (American Halal Company) US based premium organic Halal packaged food brand

• Muxlim: largest Muslim lifestyle online network attracting European investors

* Megamarket 27 Oct, 2010

** Brunei fm, March 4th 2010

A few transactions are taking place – but still very much rare

• US - premium and organic Halal food line by a food industry and investment veteran, Mr. Adnan Durrani.

• Distributed across “Whole Foods Markets” in US, the largest organic products supermarket chain. “Historical launch.”

Saffron Road: Halal Lifestyle Sector SME Case Study


Investment:

• 2009 – targeted $5 million raise; was oversubscribed and closed at above target.

• Investors: 60% Swiss/ 40% US

• More capital raise anticipated 2012 ($10-20 mill)

Challenges:

• First went for Islamic Capital – very disappointed

• Islamic capital investors were seeking quick return, no investment in brand, apathy toward Ummah. Ended up with success with non-Muslim traditional food industry investors.

Opportunities:

• Two key food segments: High-end premium brands building and Logistics and management.

• Food industry is very attractive.

• Current quality is low. Eg in UK. Focus on shelf-life and freshness needed

• Mr. Adnan Durrani , built:

• Crystal Rock (2nd largest bottled water co. in NE - US),

• Built Stonyfield Farms, Inc from $25 mill to $75 milland sale to Danone. Today at $300 mill in rev.

• Principal of Delicious Brands Inc – build it to 5th largest cookie brand in the U.S.

A rough road to investment for an early hit in the Halal Sector

• Comic book series and superhero brands based on Islamic culture and traditions

• Creation of Dr. Naif Al-Mutawa, founder and C.E.O. of Teshkeel Media Group and a team of comic book industry veterans from Marvel and DC Comics.

• Licensing deals with e.g. Nestle and theme parks and merchandise.

• Launching an animation series, with global market launch including U.S.

Investment:

• Vision round: $1 million from classmates from Columbia University

• Total of $40 million raised thus far.

• Expecting in a few week closing of 3rd round of double-digit million dollar 3rd

round.

Challenges:

• Local market acceptance / religious rulings

• Had to see it as a global product, one that has ‘Muslims’ as one of its audience. No overt Islamic mention of identity.

Opportunities:

• To make and market products that apply to and have a global appeal and not just limited to Muslims.

The 99: Halal Lifestyle Sector SME Case Study


A successful investment pitch of an offering with global positioning

Investors to-do: A few key lessons


DinarStandard consultancy is to launch a Emerging Muslim markets corporate

database for investment community & marketers - God willing - May 2011

Halal sector companies are worth taking a good look, but with a long-term view

• Islamic capital needs to look at key ‘Halal’ sectors, especially food and media.

• Needs long-term (5-10yr) investment horizon to build sustainable brands (5x-15x returns/ 25-50% IRR in food industry)

• Investors need to do homework and due diligence (visit plants/ operations) and have industry specialist on team.

SME’s to-do: A few key lessons


• Look at having great management team to be attractive to investors

• Build sustainable brands (rather than private-label) strategy

• Pursue global positioning within Halal values system. Makes the market size larger and attractive for investors.

• Focus on quality.

• Innovate with a global halal view: solve the problems of the world

Strong management, sustainable branding focus and quality are key

CR

ISIS

OP

PO

RTU

NIT

Y

Hunger

• Increased food prices in 2007/ 2008 has increased malnourished people worldwide by 119 million. Total to nearly one billion people . – Oxfam

Financial

• Collapse of major Wall Street institutions leading to a worldwide recession.

Climate

• Global carbon emissions rose 3 percent last year. Could result in large-scale melting of glaciers. With a dangerous rise in sea level. - NowPublic

Ignorance

• One in five children in developing countries does not complete five years of basic education; one billion illiterate adults.– PBS, Wide Angle

Health

• 14 million people in developing countries die from infectious diseases. Mostly due to expensive medicines. No Insurance. - Oxfam

Management

• Inaccurate financial reporting; executive pay excesses; bribery; labor/ employee abuse. Enron, Tyco, WorldCom, Satyam scandals.

Islamic Finance

• Unprecedented Opportunity to take global leadership

• A new guide to the Global Finance industry

• Take ownership of real-economy sectors with biggest human development impact.

Agriculture sector Leadership

• Egypt, Bangladesh, Pakistan, Sudan, Nigeria - are some of the most agriculturally endowed in the world however with dismally low productivity.

Sustainable Tech. Leadership

• Renewable energy initiatives – solar; wind power, other.

Education sector Leadership

• World-class education/ research institutes

• Thought leadership

Healthcare sector Leadership

• Healthcare management development

• Medical research leadership

Management Leadership

• Lead by example with ethically conscious management practices

• Sector investment focus • Sector investment focus • Sector investment focus • Sector investment focus • Management practices

Values driven global business opportunities for SME’s

*Based on DinarStandard analysis © DinarStandard 2010 11

Expanding the perspective - variety of profitable sectors exist with social impact

How Industry bodies can nurture Investment Potential


Industry Bodies

• Visionary leadership

• Support enforcement of standardizations and quality benchmarks

• Build the ‘Halal’ reputation. Drive a common Halal lifestyle campaign backed by the industry. Eg Milk Industry in the US

Got Halal?

Collective industry initiative on a broader concept of Halal brand development

Conclusion: Developing Investment Potential


Investors

SME’sIndustry

Envisioned Future:

A global Halal Lifestyle Sector

• Needs real leadership• True opportunity to

Innovate• Not tentative; Not

tactical; not siloed• Else, risks failing in

realizing true potential • Biggest risk of all is to

our collective reputation and divine accountability

CONTACT:

Rafi-uddin ShikohManaging Director

DinarStandard80 Broad Street, 5th Floor, New York City, NY 10004, USA T: 1-347-624-7454F: 1-201-526-8404E: [email protected]: advisory.dinarstandard.com

Growth Strategies for Emerging Muslim Markets

© DinarStandard 2010

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