Deal focus: VIG's food supply chain upgrade

WinPlus aspires to become the Korean equivalent of European giant Metro Cash & Carry. A division of Germany-headquartered retail player Metro, the company operates 760 wholesale stores in 25 countries, supplying a range of registered customers that include hotels, restaurants, and caterers. 

Metro Cash & Carry, which generated EUR58.4 billion ($72 billion) in revenue for the 2016 financial year, bolstered its presence in Asia in 2015 through the acquisition of Classic Fine Foods from EQT Partners. The company's regional footprint comprises 137 stores across China, India, Pakistan, Vietnam, and Japan. It has yet to enter Korea, perhaps due to the challenging nature of the market.

The large-scale segment is dominated by chaebol groups that started out supplying their own restaurant chains and then expanded into wholesale. The rest of the market, including the ubiquitous mom-and-pop restaurant chains, is served by an array of local players. 

WinPlus is the segment leader, with estimated revenue of KRW183 billion for the 2017 financial year, but market share is no more than 2%. VIG Partners has agreed to buy an 83.1% stake in the company for KRW74 billion ($69 million) in the hopes that this end of the supplier spectrum will consolidate in the medium term, even if restaurant customers do not.

"While the wholesale market itself is very big already – we are talking close to $50 billion, so I can't really say it's at an early stage – the wholesale suppliers to mom-and-pop restaurants are at an early stage of being institutionalized," says Jason Shin, a managing partner at VIG. "Eventually, the percentage of institutionalized restaurants will increase, but even 20 years down the road, the majority will still be mom-and-pop players. But we want to create the first nationwide supplier."

VIG had tracked the wholesale food market for several years but the chances of a carve-out from the chaebol-owned suppliers seemed slim. WinPlus needed expansion capital and was close to being acquired by a large domestic food and beverage group when the chief strategy officer decided to look at other options. VIG moved quickly, agreeing to work with the management team and put up KRW45 billion in new equity. 

The appeal of WinPlus was not limited to its two large-scale distribution centers and seven directly-owned stores in the Seoul area. The company also has own-brand food products, sales of which account for around 30% of revenue. WinPlus products are not only sold by 150 grocery retailers, but also by wholesalers in other parts of Korea.

VIG will not only focus on opening more stores and expanding distribution channels, but also improving these proprietary brand lines. "We are going to use this vehicle to capture a large slice of the market," says Chulmin Lee, also a managing partner at VIG. "Right now, they have about 600 categories of product under their name. We could easily expand that to 2,000-3,000."   

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• Topics
• North Asia
• Buyouts
• Consumer
• South Korea
• VIG Partners