Private equity fund aims to boost F&B growth in UAE and beyond

SCP

• SCP fund to invest in food and beverage brands not yet in region
• In talks with F&B brands from US, Canada, Europe and Australia
• Saudi, Egypt and Turkey also targets

A new private equity fund dedicated to scaling food and beverage brands in the Gulf has been launched by UAE-headquartered Shatranj Capital Partners.

The fund will invest in launching select brands that have not yet made it to the Mena region.

It will also focus on growing proven Mena franchise food and beverage (F&B) brands, as well buying out promising names already operating in the region.

It has already signed 50 letters of intent with international F&B businesses.

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The SCP fund plans to sign at least two brand commercial development agreements and execute two buyouts by the year’s end.

The UAE’s F&B industry is fiercely competitive. Today there are more than 35,000 F&B venues in the country serving a population of 9.4 million, according to the UAE Restaurants Group (UAERG).

Currently, 18 percent of new businesses close within 12 months.

“The UAE F&B industry ranks among the highest per capital ratios in the world,” said Naim Maadad, CEO and founder of Gates Hospitality and UAERG treasurer.

“So the market is well catered for. However, building and fuelling an economy is all about creating opportunities, providing ample avenues for innovation and growth and a healthy competitive environment.”

The SCP fund is the brainchild of two Dubai-based American F&B professionals. Peter Schatzberg is the founder and former CEO of Mena-based cloud kitchen company, Sweetheart Kitchen, and Brandon Guthrie headed up finance for Wendy’s in the Asia Pacific Middle East and Africa.

“It’s a very well-known problem that iconic F&B franchise brands often fail to scale in this region,” Schatzberg told AGBI.

“In the US and various other markets that have successfully scaled global F&B brands, it has traditionally been done under private equity. This has a number of unique attributes that resolve a lot of the issues that brands have had here, such as the deployment of capital or poor corporate governance,” Schatzberg said.

Both Schatzberg and Guthrie think that the composition of the fund’s expertise gives it a USP.

“A lot of groups who participate in F&B in the UAE, or attempt to at scale, are diversified holding companies that don’t specialise in it,” said Schatzberg.

Guthrie added: “Even within the private equity space, we’ve introduced more of an operations-led, operations-focused private equity group that is the tip of the spear of how things are now being deployed.”

Longer-term goals

He noted that while, historically, private equity would focus on highly leveraged debt to drive the returns through complicated financial engineering, those sorts of deals are not as efficient as they used to be.

“What is more desirable in the industry now is value generation rather than quick in-and-out plays,” he said.

“And given the operations focus and capabilities of our fund in terms of value creation, we have strongly mitigated any exposure to global credit risk that is currently plaguing the markets.”

SCP is currently in talks with a couple of F&B brands from Australia and looking at the US, Canada and Europe.

“We’re also going to be looking at reverse-franchising local brands that we think could have potential outside of the region,” said Guthrie.

In terms of target markets today, the Gulf looks set to dominate and the letters of intent SCP secures with brands will be applicable to the GCC region as a whole.

“A lot of benefits can be derived from operating across the region because not all supply chain is sourced in one country and there’s a lot of cross-pollination within the GCC,” said Guthrie.

Saudi, Egypt and Turkey are also high up on SCP’s list.

“But we’re operating with a very long-time horizon of around 10-12 years which is another reason why we chose to approach this through a private equity fund,” added Schatzberg.