GAI Networking Session - China: Threat or Opportunity? August 25, 2020 - Peritia
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GAI Networking Session
China: Threat or Opportunity?
August 25, 2020
© Peritiā Capital Management PAGE 1
China: Agriculture in Focus Again This Year
Domestically Internationally
• COVID-19 negatively impacts crop • Trade war with U.S. on soybean, sorghum,
planting and other farm products
• Historical flood impacted summer crop • Trade disputes with Australia on beef and
harvesting and domestic supply chain barley
• Recent “Clean Plate” campaign raises • Trade disputes with Canada on beef and
food security concerns? pork
Flood in Wuhan Say “No” to Food Waste
© Peritiā Capital Management PAGE 2
What Does China Import?
China Agriculture Imports by Category in 2018
Source: USDA
© Peritiā Capital Management PAGE 3
China Agriculture Imports (2019): Top 10 Countries
Top 10 Agriculture Exporting Countries to China (in 2019)
US$ Billion
30.0
25.0
20.0
15.0 29.0
10.0
13.9
5.0 10.9
8.7
7.1 6.9 6.4 5.7
4.4 3.5
-
Brazil US Australia New Zealand Canada Thailand Argentina Indonesia France Russia
Source: Statistica
© Peritiā Capital Management PAGE 4
The Impact of Trade War
China Soybean Imports: Share Supplied by US and Brazil
Source: USDA
© Peritiā Capital Management PAGE 5
China: Structural Constraints and Potential Opportunities
• Arable land (ha) per capita
• China: 0.08; U.S.: 0.50; Global average: 0.20
• Renewable Internal freshwater resource m3 per capita
• China: 2,072; U.S.: 8,904
• China’s GDP was US$14.3 Trillion in 2019, second to U.S.’s GDP
of US$21.4 Trillion
• China GDP has had an 11% CAGR for the past 10 years
• In 2019, China imports US$2.08 Trillion while exports US$2.50
Trillion
• US$147 Billion in imports of agriculture products during 2019,
7.1% of total imports
Source: World Bank; Statistica; Economist Intelligence Unit
© Peritiā Capital Management PAGE 6
China Spends ~4x U.S. on Food as a % of Total Household Expenditure © Peritiā Capital Management PAGE 7
Chinese Consumer Craving for Exotic and New Experiences
• Accepted foreign brands command a premium price in China
• People are willing to pay more for the unique experience and good quality food
• As people travel more internationally, they develop a better appreciation of
foreign foods
• Many examples of foreign food and dining ventures do very well in China
Starbucks Stores In China China Overseas Travel Spending
4,500
(Billion Yuan)
4,000 80
3,500 70
3,000 60
2,500 50
2,000 40
1,500 30
1,000 20
500 10
0 0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2012 2013 2014 2015 2016 2017 2018
Licensed Stores Company-Operated Stores
Source: Statistica; China Internet Watch
© Peritiā Capital Management PAGE 8
Success Story: Yum! Brands in China (5,000+ Stores)
Source: Company Website
© Peritiā Capital Management PAGE 9
Success Story: Häagen-Dazs
• 200+ stores in 40+ Chinese cities
• In Shanghai, the Company has 45 stores!!
Source: Company Website
© Peritiā Capital Management PAGE 10Significant Growth in Imports in Certain Categories
China Import of Avocado (US$) China Import of Blueberriess (US$)
160 140
CAGR 228% CAGR 112%
Millions
Millions
140 120
120
100
100
80
80
60
60
40
40
20 20
- 0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
China Import of Almond (US$) China Import of Beef (US$)
250 5,000
CAGR 27%
Millions
CAGR 68%
Millions
200 4,000
150 3,000
100 2,000
50 1,000
- -
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Source: UN COMTRADE
© Peritiā Capital Management PAGE 11Team Experienced in Building Businesses, Managing Large Scale
Institutional Portfolios, and Delivering Strong Returns
Avtar Vasu
• Initiated direct natural resource strategy, built de novo business, hired team, and invested $500MM+ within 15 months at Liberty Mutual Investments.
• Built real asset portfolio for UAW Retirement Medical Benefits Trust investing $5BB+ and delivering 6%+ annualized outperformance against
benchmark; served as the Interim Chief Investment Officer overseeing ca. $60 billion.
• Co-founded Wood Creek Capital Management LLC in 2005. Firm now manages over $3BB.
• Managed $3BB+ Natural Resources portfolio of direct investments across five continents as a senior member of Harvard Management Company team
• MBA University of Chicago, MS University of Buffalo (MS Civil Engineering)
Danielle Jankowich
• Fifteen years experience direct investing in natural resources at GMO Renewable Resources and Liberty Mutual Investments.
• Successfully raised $2BB in capital; involved in fund structuring, investor negotiations and fund documentation.
• Led/participated in over 100 acquisitions, totaling $2BB and spanning 850,000 hectares in eight countries. Completed disposition of
~$900MM. Managed global teams of foresters, agronomists, tax and legal advisors. Negotiated and drafted key deal and operational documents.
• JD University of Pennsylvania Law School, BA University of Pennsylvania (English Literature)
Qinhai Xia
• Twelve years experience direct investing in natural resources at Liberty Mutual Investments, Harvard Management Company and Four Winds Capital
Management.
• Led/participated in over 15 transactions totaling over $1BB; managed $3BB+ Natural Resources portfolio of direct investments across five continents
• Reviewed over 500 deals and developed a keen understanding of value creation drivers and relative value across the globe; researched over 100
public companies with agriculture and timberland assets for acquisition and divestiture purposes
• MBA Yale University, MSE University of Pennsylvania (Computer Information Science), BS Gordon College (Computer Science)
© Peritiā Capital Management PAGE 12www.PeritiaCM.com
Contact Information: info@PeritiaCM.com
Avtar Vasu Avtar@PeritiaCM.com 917.204.6393
Danielle Jankowich Danielle@PeritiaCM.com 617.872.5233
Qinhai Xia Qinhai@PeritiaCM.com 203.215.7321
© Peritiā Capital Management PAGE 13Notes
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prospective investors should conduct their own investigation and analysis of the data and descriptions set forth in this presentation and must rely on their own examination of the investment
opportunity, including the merits and risks involved.
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