A ma­ture in­vest­ment: take a bite of the cheese mar­ket

The Daily Telegraph - Your Money - - MONEY -

In­side the vaults of a bank in the Emilia-Ro­magna re­gion of north­ern Italy is stored not bars of gold but an­other pre­cious yel­low ma­te­rial. It holds more than 300,000 wheels of Parmi­giano Reg­giano, with a to­tal value of around £140m. This bank re­alised that a good cheese, like a good in­vest­ment, gets bet­ter with age.

As well as be­ing a tra­di­tional bank, Cred­ito Emil­iano sup­ports the re­gion’s cheese pro­duc­ers by of­fer­ing them loans for new equip­ment and cows, ac­cept­ing wheels of parme­san as col­lat­eral. Th­ese cheeses need to age for two to three years, by which time each 88lb wheel is worth a few thou­sand pounds, en­sur­ing the bank a safe re­turn on its in­vest­ment.

Ap­petites for cheese are grow­ing, par­tic­u­larly in China, Brazil and Rus­sia, and Bri­tish cheese­mak­ers are reap­ing the re­wards. Be­tween 2015 and 2017 the amount of Bri­tish cheese ex­ported to China soared from 49 to 786 tonnes – and savvy pri­vate in­vestors are catch­ing on.

Lon­don-listed Dairy Crest is among the top 10 hold­ings of Fidelity’s £102m UK Op­por­tu­ni­ties fund. The dairy com­pany owns Cathe­dral City, the ched­dar voted one of Bri­tain’s top 10 brands by con­sumers in a YouGov sur­vey ear­lier this year.

Leigh Himsworth, the fund’s man­ager, said: “Dairy Crest is an ex­cit­ing op­por­tu­nity for in­vestors. The com­pany is grow­ing and in the process of spend­ing £85m to ex­pand its fac­tory in Corn­wall to meet in­creas­ing in­ter­na­tional de­mand. It is look­ing to ex­tend its dis­tri­bu­tion in coun­tries where there is a poor supply of qual­ity un­pro­cessed cheese, such as Amer­ica and China. The com­pany uses only milk from dairy farm­ers in the South West of Eng­land. Ev­ery­thing is sup­plied from Bri­tain, mean­ing that, un­like with a lot of its com­peti­tors, Brexit doesn’t pose a big con­cern.”

Fidelity UK Op­por­tu­ni­ties has re­turned 38.1pc over five years and charges an an­nual fee of 0.95pc. The div­i­dend yield of Dairy Crest, also held by the £2bn Royal Lon­don UK Eq­uity In­come fund, is 5.1pc.

For those in­ter­ested in smaller busi­nesses with po­ten­tial for growth, crowd­fund­ing web­sites are fer­tile ground. The Cheese Truck, a Bri­tish food start-up that sells grilled cheese sand­wiches from the back of a van, is look­ing for back­ers through in­vest­ment web­site Crowd­cube. De­scribed as pos­si­bly “the best street food truck ever” by the Metro news­pa­per, the com­pany set up a restau­rant in Cam­den, north Lon­don, fol­low­ing two crowd­fund­ing cam­paigns. The Cheese Truck hopes to use the third round of fundrais­ing to grow to five sites by 2022.

In­vestors get shares in the com­pany as well as var­i­ous re­wards, which have pre­vi­ously in­cluded a dis­count at the restau­rant, free cheese-and-wine evenings and events ca­ter­ing.

Mathew Carver, the com­pany’s founder, said: “Our crowd­fund­ing cam­paigns have been a huge suc­cess. In our first we raised £130,000 and hit our tar­get in just three days. When in­vest­ing it’s im­por­tant to put your money in some­thing you un­der­stand. Peo­ple love cheese, love the truck and get the idea straight away.”

The com­pany wants to show off small Bri­tish farm­ers who use tra­di­tional meth­ods. “We have an amaz­ing cheese in­dus­try here,” Mr Carver said. “Bri­tain makes more types of cheese than France and we want to cel­e­brate that.”

Mr Carver hopes to cre­ate re­turns for in­vestors by sell­ing the busi­ness when it hits its five-restau­rant tar­get. “If we don’t find a buyer ini­tially we’d start to pay div­i­dends at that point,” he said.

The shares are bought di­rectly from the com­pany and can be sold through it. One in­vestor who put in £1,000 two years ago sold his shares dur­ing the re­cent round of crowd­fund­ing at a slight dis­count to the mar­ket price and saw a 380pc re­turn on his money.

There are other ways to in­vest in this in­dus­try be­yond buy­ing into the cheese com­pa­nies them­selves. Den­mark-based Chr Hansen, a global bio­science firm, pro­duces the most ex­ten­sive range of cul­tures and en­zymes for cheese in the world, al­low­ing cheese­mak­ers to im­prove

tex­ture and flavour while re­duc­ing waste lev­els and salt.

So­eren Her­skind from the firm said the cheese mar­ket was grow­ing at 2pc a year in vol­ume terms, cre­at­ing a “hunger for new func­tion­al­i­ties and flavours”.

Chr Hansen is among the top 10 hold­ings of Bar­ings’ £1.9bn Europe Se­lect Trust, which has an an­nual charge of 1.55pc.

There’s even a way to in­vest in the cheese mar­ket with­out go­ing any­where near dairy. The num­ber of ve­g­ans in Bri­tain has in­creased more than three­fold over the past decade, ac­cord­ing to The Ve­gan So­ci­ety, spark­ing a spurt of new com­pa­nies of­fer­ing plant-based al­ter­na­tives.

One such firm is on­line su­per­mar­ket Ocado, which in Jan­uary added 90 ve­gan prod­ucts to its stock. The re­tailer of­fers more than 20 non-dairy cheese al­ter­na­tives, in­clud­ing moz­zarella, gouda and parme­san – made with cashew, tofu or al­mond.

The com­pany is ex­pand­ing

Ap­petites for Bri­tish brands are on the rise – and they can of­fer some tasty re­turns, finds Mar­i­anna Hunt ‘It’s im­por­tant to put money in some­thing you un­der­stand. Peo­ple love cheese’

glob­ally and in June se­cured a deal with Kroger, Amer­ica’s largest su­per­mar­ket chain by rev­enue. The United States is also ex­pe­ri­enc­ing a wave of in­ter­est in plant-based food and has seven times as many ve­g­ans as it did in 2014, ac­cord­ing to re­search firm Glob­alData. Henry Boucher man­ages the £212m Sarasin Food & Agri­cul­ture Op­por­tu­ni­ties fund, which holds Ocado shares. As well as the re­tailer’s ex­po­sure to the non-dairy cheese mar­ket, Mr Boucher said it was a strong hold­ing be­cause of its “worldlead­ing tech­nol­ogy”. He said: “Be­cause it stocks the food items in a hand­ful of cen­tral ware­houses rather than on shelves in thou­sands thou­san of su­per­mar­kets, it is pos­si­ble to hold a much wider va­ri­ety of i items at bet­ter value and in­cur les less waste.” Oca Ocado is also among the top five hold­ings of the £441m Edi Ed­in­burgh World­wide inv in­vest­ment trust and £394m Ba Bail­lie Gif­ford Global D Dis­cov­ery fund. With the value of Bri­tish c cheese ex­ports ris­ing by 2 23pc in 2017, gen­er­at­ing £615m, ac­cord­ing to data from HMRC, growth in the in­dus­try does not look likely to slow any t time soon. Is it time for in­vesto in­vestors to put their money where their th mouths are?

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