KV driven by more than a sweet tooth

Aalst Chocolate sees opportunity in Asia's growing sweet tooth. Founded in 2003, the company is the first in Singapore to produce both standard compound chocolate and the more expensive couverture chocolate. More than 98% of its goods are exported to over 40 countries in Asia, the Middle East, and North America, to be used in high-quality creations by chefs and bakers.

This luxury cache made Aalst an irresistible target for KV Asia Capital, which last week announced an investment in the company. But Vibhav Panandiker, the firm's CEO, says he was more impressed by Aalst's ability to take advantage of the high international regard for Singapore-made produce.

"One of the sectors we focus on is food processing, and while Aalst Chocolate is a high quality company, it also benefits at a macro level by leveraging Singapore's reputation for trust," Panandiker says. He puts this down to strong policies on food safety. "Given the food scares we've had in other countries, Singapore just stands out as a trusted source for food processing," he adds.

Aalst was actively looking for financing when it met KV Asia. The PE firm was impressed by the chocolate maker's financial performance as much as its products. In 2013, revenue came to $35 million with EBITDA and net profit of $4.5 million and $3 million, respectively. The company has also seen compound annual sales growth of 15% over the past three years.

Details of the investment have not been disclosed, but it falls within KV Asia's standard equity check range of $25-75 million. The PE firm will help fill out the management team with people who can contribute to product line improvements and expanding Aalst's presence in existing markets.

Panandiker also sees the Aalst as a good fit with the firm's other portfolio companies. KV Asia's has bought two other Singapore-based businesses - skincare brand Derma-Rx International Aesthetics and nursing home operator Orange Valley Healthcare. Food production represents a new direction, but it is still regarded as a consumer service.

Panandiker adds that the projected rise in chocolate prices was not actually a major factor in the investment decision. "The way that this whole market works is that you get a processing spread, irrespective of the price of the inputs, which have a large cocoa content," he says. "So the variation in commodity prices doesn't really matter to the profitability. But yes, there is this speculation by analysts that the price of chocolate is going to go up."

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• Topics
• Expansion
• Southeast Asia
• Consumer
• Growth capital
• Consumer
• KV Asia
• Southeast Asia
• Singapore