Krish's General Learning Journal (Q2 2023)

The purpose of the ‘Learning Journal’ section is to create a space for ‘thinking out loud’ and ‘thinking together’ regarding frontier markets. Here are a three key framings to consider:

  • Writing enables more creative and critical thinking on topics. It helps you organise your thoughts, unlock new ideas, and align intentions with others. The business of frontier markets tends to be opaque and fragmented. This makes it harder for collective learning, or for great ideas to come to reality as often one may like. My hope here is to lay the foundations for a Stripe-esque writing culture, where ideas and skills don’t just exist within the brains of a few people, but are freely shared and actively engaged with by others in the ecosystem.

  • My deepest desire for this forum is for others to engage with a spirit of curiosity, nosiness, expansiveness, productive criticality, agency, and open-ness. What does that really mean? If you want to get an idea of the spirit of exploration I’m talking about, read (a) 'On Being Nosey’ by Mike Dariano (b) ‘How to Find the Frontiers of Knowledge’ by Samo Burja (c) this Twitter thread I wrote a while back on ‘learning in public’. Tl;dr - Remove your inhibitions. Get curious. Dig deeper. Let’s explore ideas and come together to create iconic companies, great investments, and accelerate meaningful development in these markets that represent the exciting frontiers of human adventure.

  • Why Frontier Markets? → I’ve already addressed this in the introduction to the Frontier Markets Institute, (read here). The summary? Potential. The potential for excess returns and value creation, as you unlock nascent markets; potential for adventure as you’re interacting with regions and contexts that have a completely different landscape of constraints, freedoms, and opportunities; potential for impact to shape the next generation of development. I’ll share more examples that aim to exhibit this in later threads, but my hope is (a) you’ll take my word for now and (b) you’ll join me as I plan on digging deeper.

With that in mind, I’ll be sharing regular reflections, excerpts, resources, and prompts in this thread as I learn more about these frontier markets. I hope you make a thread for yourself to the same. I am excited to go on this journey together.

Rabbithole - Tanzania, Wine, and Beverage Billionaires

I was reading Tanzania’s Investor Bulletin Report from March 2023 the other day and came across an interesting winery project in the country:

When I think of wine production, I think of the girls I know who study history of art and want to spend their gap year at a vineyard. I don’t tend to think of an industrial looking apparatus like this:

This led to a rabbthole down beverages industry. I’ll share more on that shortly. First, I’ve reached out to the founder of this project for more details, and I’ll share the current framing I’m using for thinking about this, which is…

a) $1.5m is required to take the production from ~250k litres to 2.1m litres of ‘raw wine’. Under what investment parameters can this generate a ‘venture’ like return of 10x? What’s the initial valuation? What’s the % equity/convertible that you buy? What’s the value-add work you can do to (a) ensure sales (b) travel up the value chain and capture more margin? What is a more integrated strategy that combines with other assets or capabilities in the supply chain?

(b) Thinking about wine, more generally: What does a winning regional play here look like? I’m quite inspired by stories of recent beverage entrepreneurship:

  • Liquid Death → What if we branded water like an extreme energy drink? Answer: $120m run-rate in 4 years. $700m valuation on an insider round.
  • Free Water → What if we gave water bottles away for free, and used them as a space for advertisements and philanthropy instead? Answer: Watch this TikTok.
  • Mo Dewji’s Mo Cola, which sold 1B bottles in 2022 and aims to sell 4B by 2025. He’s making big investments in Tanzania, Mozambique, Zambia, Rwanda, to make this happen.

Furthermore, I am fascinated by the broader observation that some of the wealthiest families across many emerging markets have been those with soft drink bottling businesses. For example, the revenues of almost every single coke bottling business listed here are in excess of $1B+.Or, just look at Coca Cola FEMSA, which is publicly traded and worth $17.4B USD as of writing this.

Taking this thought further: Who are the executives you want to hire to incubate a regional play like this? What are the new marketing and production levers that can be deployed here? How many more %B+ beverage businesses can be built, and how can industry structure or business model design be applied to making these companies more significant as developmental forces in a region?

Some of the ideas and resources I’m currently pondering in this vein are:

  • How does one create a wine-region? Here’s a short piece on Tanzania’s ‘nascent’ wine industry as compared to South Africa. I wonder what investments can ‘increase region level competitiveness’ in the global wine market. China, for example, is investing in creating a new ‘Wine SEZ’ of sorts in the Gobi Desert. The Champagne Wine Region is like an SEZ but with branding and vibes at the core of its value proposition. The French are great at this intangible ‘value expansion by claiming luxury’ playbook. This implies more than just a one-off investment in a wine project. Georgia’s Industrial Zone for wine is also an interesting one to consider, here.

  • What are the ways to build a top tier distribution network and marketing function? It strikes me that the most underrated part of building industries is marketing and distribution. The highest ‘value’ wines in terms of branding are worth 10-100x what cheaper wines are sold for. That entire margin comes from the marketing and experience design component; targeting the right, large-wallet consumer is key here.

  • I found this brief summary on some high level market dynamics in the wine industry quite interesting. Particularly the note on the most valuable markets to enter as it relates to wine sales:

The most established wine markets are in Europe: Portugal, Italy, and France have the highest per capita consumption at over 35 liters per person per year, compared with 23.9 for Australia, 9.9 for the US, and just 3.5 for China. Europe remains the world’s consumption center, at 58% of volume and 50% of total value. The largest aggregate wine markets are the USA, China, and France, due to their larger populations, while the biggest importers of wine are Germany, the USA, and the United Kingdom, where production is much lower than consumption.

While volume and value advances in Europe are moderate, the US continues to inch forward as the world’s most valuable wine market, worth $34.8 billion in 2017. France is the second most valuable market at $16.7 billion, followed closely by China at $16.5 billion. As with many other products, China is expected to increase its consumption of wine going forward and overtake France.

  • Surely this implies that a worthy intangible investment is subsidising cross-cultural connections, business trips, and more regarding the best markets to sell to?

  • I’d love to see a strategic fund that buys mid-market firms from other countries and reshores parts of the company to the country that their fund represents. One interesting play here is strategic investments in companies that don’t make massive cash-flow, but are at the centre of an industry’s activities and can serve as a wedge for accelerating future incubations in the market they’re trying to develop. i.e what if Tanzania SWF bought a stake in ProWein?

  • Cool link that I don’t have access to, on 90+ newcos in the beverage market, from CB Insights: The Beverage Market Map: 90+ Companies Changing What (And How) We Drink - CB Insights Research

  • Castel Group is a fascinating company, which is the biggest wine producer in France, number four for beers/soft drinks in Africa, and claims to have 25%+ share of profits from the African Beer Market. They are a fully private, family owned company.

  • My final point will be a Tyler Cowen styled Straussian suggestion: Read the following links, on (a) ‘Vampire Attacks in Crypto’ (b) Loyalty Tokens by Tascha (c) Mr Beast’s Burger Company

Oh, and a few more links worth checking out:

I look forward to getting back to this log with notes from the Tanzanian Wine Entrepreneurs.