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Enterprising Value Investor

A Frozen Ice Cold Drink In Blistering Hot sub-Saharan Africa

Emerging Markets Risks: Transparency, Rule-of-law, Currency Stability

The real old-fashioned-style bike horn with long trumpet and rubber bulb sounding outside means that the Fan Milk ice-cream bicycle is close by. For the past fifty years and in the heat of sub-Saharan Africa, the Pavlovian association between the horn and the quenching ice cold ice cream has been building millions of loyal customers.

How do you build a business that can provide ice cold products in a hot sub-Saharan climate?

Erik Emborg, a Danish entrepreneur, came with the idea of a frozen treat during his several visits in the 1950s to the Gold Coast then. His dairy skills and ability to source milk powder from Denmark were the foundation of what became a 7-nation (Ghana, Nigeria, Togo, Cote d’Ivoire, Liberia, Benin, and Burkina Faso) operation with more than 25,000 employees, agents and vendors today.

Abraaj Capital, a Dubai-based investment company, in 2013 paid over $350m according to the FT “making it the largest-ever private equity transaction for a fast-moving consumer goods company in Sub-Saharan Africa, outside South Africa.”

The Investment Fund for Developing Countries (IFU) takes pride in showcasing the success of Fan Milk. Prior to Abraaj’s takeover, some reports say company turn over three quarters of 2013 were a billion DKK¬† (108m USD) a year and made 90 million DKK (13m USD) in profit in 2011.

 

Professor John Sutton and the Enterprise Map Series

Enterprise Map Series – An Excellent Primer

Elmina

View from Elmina Castle

In my opinion, one of the current challenges facing analysts researching businesses in sub-Saharan Africa is finding written business and financial coverage – like FT, WSJ, SEC Filings (10K, 10Q, S1), Investigative Reporting, etc… It was refreshing to come across the Enterprise Map Series by Professor John Sutton at LSE. Professor Sutton faced the same challenges and ran into the same wall. Rather than whine about it, he got on a plane and tried to find the answers.

Not only has Professor Sutton published a detailed Enterprise Map of a few African countries, but also has translated them into other languages (Chinese and Portuguese). Continue reading