Investment Potential in the 'Halal' Sector

Developing Investment Potential in the Halal Sector Presented at: Nov 10th 2010 London, UKBy: Rafi-uddin Shikoh E: rafishikoh@dinarstandard.com W: advisory.dinarstandard.com Growth Strategies for Emerging Muslim Markets

First…lets define the ‘Halal Sector’ Most comprehensively, the Business of Halal is Muslim Lifestyle driven The large and demographically This lifestyle translates to unique …whose appeal attractive Muslim consumer Muslim consumer opportunities transcends the Muslim - lifestyle, at varying degrees, is and supporting B2B infrastructure -based on shared values driven by faith-based values God consciousness Family values Modesty Dietary law/ healthy Just and equitable financing Just business Charity Social responsibility Business to Business Infrastructure Logistics - Infrastructure - Reach (Media)Developing Investment Potential in the Halal Sector © DinarStandard 2010 2

Large gap in ‘Halal’ market potential vs. brands/suppliers Within the existing market opportunities, SME’s form a large part of this space 1.8 bill Halal market consumer reach Muslim Gap Number of Companies/ Organizations OIC* major players Multi-Nationals Small and Gap Mid-Sized businesses Industry Orgs $ 2 trillion + Government (min market size) Halal market $ size realizedDeveloping Investment Potential in the Halal Sector © DinarStandard 2010 3

Focusing on developing SME Investments Halal Sector SME’s/ private companies offer the greatest opportunities Because, SME’s are… • engines of economic growth; a Halal market consumer reach 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 OIC* major players • Innovative and creativity Small and Multi-Nationals Mid-Sized Industry Orgs businesses Government Halal market $ size realizedDeveloping Investment Potential in the Halal Sector © DinarStandard 2010 4

Levels of Investment Opportunity SME’s are not on the public markets; private financing means will help migrate CAPITAL MARKETS OR RETAIL INVESTMENTS Migrate For-- Institutional and SME’s to individual investors – Capital markets SME Focus Approx. 90% of base projected Halal market not on the Public markets (Rushdi Siddiqui, Thomson Reuters– MERGERS/ Islamic Finance Global Head, ACQUISITIONS, AND estimates $99 bill in market capitalization from OIC food companies . Compared to the global CORPORATE Halal food est. potential of $640 INVESTMENTS billion annually) ANGEL/VC For--Halal Sector Where’s the rest?.. companies (OIC and multi- For--or other such nationals) for growth & investments in individual MNC’s and within the SME’s entities (specially in Western markets) expansion and Private Equity firmsDeveloping Investment Potential in the Halal Sector © DinarStandard 2010 5

Halal Lifestyle Sector - SME Investment Examples A few transactions are taking place – but still very much rare 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 2010Developing Investment Potential in the Halal Sector © DinarStandard 2010 6

Saffron Road: Halal Lifestyle Sector SME Case Study A rough road to investment for an early hit in the Halal Sector • 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.” • Mr. Adnan Durrani , built: • Crystal Rock (2nd largest bottled water co. in NE - US), • Built Stonyfield Farms, Inc from $25 mill to $75 mill and 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. Investment: Challenges: Opportunities: • 2009 – targeted $5 million • First went for Islamic • Two key food segments: raise; was oversubscribed Capital – very disappointed High-end premium brands and closed at above target. • Islamic capital investors building and Logistics and • Investors: 60% Swiss/ 40% US were seeking quick return, management. • More capital raise no investment in brand, • Food industry is very anticipated 2012 ($10-20 apathy toward Ummah. attractive. mill) Ended up with success with • Current quality is low. Eg in non-Muslim traditional UK. Focus on shelf-life and food industry investors. freshness neededDeveloping Investment Potential in the Halal Sector © DinarStandard 2010 7

The 99: Halal Lifestyle Sector SME Case Study A successful investment pitch of an offering with global positioning • 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: Challenges: Opportunities: • Vision round: $1 million from • Local market acceptance / • To make and market classmates from Columbia religious rulings products that apply to and University • Had to see it as a global have a global appeal and not • Total of $40 million raised product, one that has just limited to Muslims. thus far. ‘Muslims’ as one of its • Expecting in a few week audience. No overt Islamic closing of 3rd round of mention of identity. double-digit million dollar 3rd round.Developing Investment Potential in the Halal Sector © DinarStandard 2010 8

Investors to-do: A few key lessons 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. DinarStandard consultancy is to launch a Emerging Muslim markets corporate database for investment community & marketers - God willing - May 2011Developing Investment Potential in the Halal Sector © DinarStandard 2010 9

SME’s to-do: A few key lessons Strong management, sustainable branding focus and quality are key • 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 worldDeveloping Investment Potential in the Halal Sector © DinarStandard 2010 10

Values driven global business opportunities for SME’s Expanding the perspective - variety of profitable sectors exist with social impact Financial Hunger Climate Ignorance Health ManagementCRISIS • Collapse of major Wall • Increased food prices in • Global carbon emissions • One in five children in • 14 million people in • Inaccurate financial Street institutions leading 2007/ 2008 has increased rose 3 percent last year. developing countries does developing countries die reporting; executive pay to a worldwide recession. malnourished people Could result in large-scale not complete five years of from infectious diseases. excesses; bribery; labor/ worldwide by 119 million. melting of glaciers. With a basic education; one Mostly due to expensive employee abuse. Enron, Total to nearly one billion dangerous rise in sea billion illiterate adults. medicines. No Insurance. Tyco, WorldCom, people . – Oxfam level. - NowPublic – PBS, Wide Angle - Oxfam Satyam scandals. Islamic Finance • Sector investment focus • Sector investment focus • Sector investment focus • Sector investment focus • Management practices • Unprecedented Sustainable Tech. Education sector Healthcare sector Management OPPORTUNITY Opportunity to take Agriculture global leadership sector Leadership Leadership Leadership Leadership • A new guide to the Leadership • Renewable energy • World-class education/ • Healthcare management • Lead by example with Global Finance initiatives – solar; wind research institutes development ethically conscious industry • Egypt, Bangladesh, power, other. • Thought leadership • Medical research management practices Pakistan, Sudan, leadership • Take ownership of Nigeria - are some of real-economy sectors the most agriculturally with biggest human endowed in the world development impact. however with dismally low productivity. *Based on DinarStandard analysis © DinarStandard 2010 11

How Industry bodies can nurture Investment Potential Collective industry initiative on a broader concept of Halal brand development 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?Developing Investment Potential in the Halal Sector © DinarStandard 2010 12

Conclusion: Developing Investment Potential Envisioned Future: Investors 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 Industry SME’s our collective reputation and divine accountabilityDeveloping Investment Potential in the Halal Sector © DinarStandard 2010 13

Growth Strategies for Emerging Muslim Markets Reproduction of this presentation or any part of it should be accompanied with proper credit to DinarStandard and without any manipulation. All third party images and logos are sole properties of respective organizations. CONTACT: Rafi-uddin Shikoh Managing Director DinarStandard 80 Broad Street, 5th Floor, New York City, NY 10004, USA T: 1-347-624-7454 F: 1-201-526-8404 E: rafishikoh@dinarstandard.com W: advisory.dinarstandard.com © DinarStandard 2010 14

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Investment Potential in the 'Halal' Sector

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Investment Potential in the ’Halal’ Sector Presentation Transcript