CHICAGO, IL -- Agamya Capital has published a report on its proprietary “Innovation-Enablement-Scale (IES)” framework to assess investment opportunities in the food industry.
Private equity investors and executives in the food industry, alike, are confronted with the daunting challenge of sifting through numerous ideas to identify long-term winners and support those ideas with significant capital and resources. Furthermore, the relatively low success rate of new products exacerbates this challenge -- according to Datamonitor, failure rates for new food products can be as high as 50%.
The IES framework (see Figure 1) helps identify companies with increased likelihood of success, by emphasizing market positioning and product development capabilities that best account for the following key principles:
- Understanding demographic shifts can immensely help identify long-term winners.
- The role of government in food safety and cross border trade can be a critical determinant of success.
- Vanishing information asymmetry among producers and consumers will make it increasingly difficult for companies to differentiate.
The IES framework is considered to be a precursor to assessing critical organizational capabilities such as operational and manufacturing efficiency including co-packing relationships, distribution network and supply chain, organizational structure, and brand awareness and sales.
To predict the return on investments in Innovation (“I” in IES), the framework utilizes a “means” and “ends” argument (see Figure 2). For instance, aspects such as gluten-free and all-natural are ubiquitous. The IES framework considers gluten-free as the means, and Health & Wellness as the end. The framework further links the end (i.e., Health & Wellness) to demographic shifts (e.g., increasing lifespan combined with increasing healthcare costs) and government influence (e.g., Nutrition Labeling and Education Act) (see Figure 3).
After making such simple yet subtle linkages, the framework recommends assessing the relative weightage of organizational capabilities between means (gluten-free) and end (health & wellness) and posits that the greater the emphasis on the end, the higher the long-term staying power of the company. Simply put, the means can have short shelf life (e.g., Atkins, South Beach), and companies who are in tune with underlying themes and have the requisite adaptability can survive and thrive.
Furthermore, the framework provides a simplified lens through which to view, articulate, and segment innovation (see Figure 4). The Innovation Models (i.e., Product vs. Business Model vs. Process Innovation) provide a powerful tool to assess the competitive landscape and the relative differentiation and sustainability of a company’s product offerings.
About Agamya Capital
Agamya Capital invests patient and flexible capital in privately held companies and helps management teams overcome resource and capital constraints. We also apply our deep operating and consulting expertise to help companies identify and implement actionable strategies to drive significant growth and operational improvements.
Our capital is family office permanent capital, which gives us unique flexibility and access to substantial resources. Our approach is driven by disciplined investment thesis combined with deep industry insights.
For more information, please contact Will Rosler at wrosler@agamyacapital.com or at 312-277-0116.
Agamya Capital invests patient and flexible capital in privately held companies and helps management teams overcome resource and capital constraints. We also apply our deep operating and consulting expertise to help companies identify and implement actionable strategies to drive significant growth and operational improvements.
Our capital is family office permanent capital, which gives us unique flexibility and access to substantial resources. Our approach is driven by disciplined investment thesis combined with deep industry insights.
For more information, please contact Will Rosler at wrosler@agamyacapital.com or at 312-277-0116.