Robert Sharpe is always eager to find his next challenge as a dealmaker.
“We’re in the food and beverage space and we only invest in opportunities where we believe we bring more than just capital,” says Sharpe, a founding partner at Birmingham-based TriPower Capital LLC.
He partnered with fellow Detroit entrepreneurs Jack Aronson and Dave Zilko to form TriPower, an investment firm focused largely on food and beverage companies.
“We’re looking for product categories that have dynamic growth prospects,” he says. “That could be around the product itself or a format of the product which better aligns with current consumer trends.”
Sharpe’s signature career achievement began back in 2006 with his acquisition of the European meats division of Sara Lee. He consolidated it with Smithfield Foods’ European operations, then spun that off as a joint venture to create Paris-based Groupe Smithfield S.L. He then merged that with Madrid-based Campofrio to form Campofrio Food Group.
“When I became president of international operations for Smithfield Foods, we had one French company with about $120 million in sales,” Sharpe says. “By 2014, we had a $3 billion publicly traded company that was the European leader in processed meats.”
Smart Business Dealmakers spoke with Sharpe about his eye for making deals in the food and beverage space and one of the most common problems with today’s business landscape.
Find the right opportunity
We like to see within a growth opportunity a market that we perceive to be underserved. Principally, this would be categories that are not mature yet and are relatively early in their development path. But it also could be something as distinct as an application of new technology to a mature category that brings new value to the consumer and margin to the production. There needs to be an analysis of the competitive landscape that suggests the opportunity we are looking at has a competitive advantage in a market that is currently underserved.
A lot of opportunities in business come about with a company that has a great product, but is not great at production. Or maybe they have great customer relationships, but their product portfolio is kind of tired and no longer excites their customers. It could be a great manufacturing entity, but a company that is just a contract manufacturer to others and is not creating any value either through brands or innovation itself. There is some type of transformation that is necessary to strengthen the position of the company in its market.
The idea is to hit on three key common components to a good investment opportunity. There needs to be relevant innovation that is appreciated by consumers and the customers that bring it to them, strong manufacturing capability to be a low-cost producer and a great commercial organization that knows how to build a brand and make relationships with customers work. If you’re missing one or two of those, or you’re poor at doing one or two of those, there is a transformation that needs to take place. You need to take it very seriously and do it methodically rather than just, ‘Hey, I know a guy.’
I’ve seen a lot of people have the right idea of what needs to be done, but not really know how to execute it. That can be the case with transformation. It can also be the case with scaling up a business or moving from the development of a new product range to the actual industrial and commercialization of that product development. You can fail on execution in multiple ways.
Avoid the pressure
The principal plague to the world as we know it is the immense pressure on short-term results, in particular from either public markets or private equity. When you run a business on a quarter-by-quarter basis, you can only iterate. You gain an inch here, gain an inch there because you can’t step function change. Because whenever you step function change, you have the potential to reduce earnings and that, oftentimes, is not embraced by the public markets or private equity owners.
That 10-year run from $120 million to $3 billion at Smithfield was a journey in which we used all available means to grow, whether it was through acquisition, through transformation or just through strong internal organic growth. I found opportunities where I believed we could create more value either by bringing our supply chain knowledge in sourcing, manufacturing and distribution to bear to strengthen, lean out and improve their cost position. Or I could bring new processes and innovation capabilities to their product line or to the way in which they approached their customers.
The challenge these days is to create value in a strategic way with a long-term focus, which to me, is three to five years. It’s more than quarter to quarter. If you can’t lay out a three- to five-year plan and execute against that plan in a straightforward way and accept an earnings stream that won’t be perfectly predictable during that transformation, if you don’t have the heart to do that, you’re not going to create any real strategic value.