RICH rewards for delivering innovative products with therapeutic and digestive health benefits in demand by Asian consumers are what’s driving the cherry picking of popular and scalable agribusiness targets such as Capilano Honey.

Prior to the China-Australia Free Trade Agreement, Australian honey faced a 15 per cent tariff on entry into China. Under ChAFTA, the tariff has reduced to 3 per cent, with total tariff elimination expected by January 2019.

Australia’s biggest honey producer Capilano is this week looking favourably on a $200 million takeover deal by a private equity group specialising in China-focused agricultural exports.

But some analysts say honey’s potential to capitalise on booming Chinese middle-class demand is so attractive that a rival bid could soon emerge.

The China-focussed consortium after Capilano is private equity fund Wattle Hill and investment manager Roc Partners.

Wattle Hill was co-founded by Albert Tse, the husband of Jessica Rudd, daughter of former Australian prime minister and Sinophile Kevin Rudd.

“The focus will be on delivering innovative products with therapeutic and digestive health benefits in demand by Asian and Chinese consumers,” Mr Tse said.

Roc Partners was formed from a buyout of a Macquarie Group private markets business and has involvement in the Australian Wagyu beef and oyster industries.

Michael Lukin, managing partner at Roc Partners, said his firm would raise funds from local super funds to bankroll its section of the bid.

“What we’re seeing is appetite for investment in high quality, high growth potential Australian agribusiness from our Australian superannuation fund clients. And in particular the opportunity to create export channels for these businesses and really leveraging our long-term capital from these sources to help businesses like Capilano grow and develop their own markets and sales capability in places like China, the Middle East and the US,” he said.

 

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Capilano managing director Ben McKee said the business had decent market share in parts of Asia but it was yet to have “significant sales” in China.

“Getting our brand known and our history and our company and the quality of our products, and the therapeutic credentials of some of our products known in China, is going to take some investment. And I think China is a long-term market for us and needs to develop over time,” he said.

The move comes not long after Capilano faced backlash from consumers and local beekeepers over its use of Chinese and Argentinian honey in its Allowrie product.

In July, Coles stopped stocking Capilano Honey’s controversial Allowrie product.

At the time, Dr McKee confirmed the decision but said the company was working with Coles on a replacement.

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The takeover proposal offers Capilano shareholders either $20.06 a share in cash or a one-for-one share swap in the new owner.

Shares in Capilano had jumped more than 25 per cent to $19.72, a two-year high, in the wake of the proposed deal which is expected to be voted on by shareholders in November.

At the same time elsewhere in the industry there’s upside generally for honey as honey-hungry markets like China, Singapore, Malaysia and Japan are attracted to Australia’s healthy bees and the pristine environments they inhabit.

Training is improving to ensure the ageing industry, where the majority of apiarists are nearing retirement, doesn’t collapse on itself because of a lack of workers.

Recruitment is leveraging off a major resurgence in amateur beekeeping interest, while farm gate prices for premium honey such as Western Australia’s jarrah – with proven antibacterial and antimicrobial qualities – is fetching $30/kg at the farm gate, when it’s been as low as $3/kg in the past decade.

Honey’s export growth has also given rise to Australian DNA technology capable of establishing provenance – important to Asian consumers where food substitution rorts abound.

New technology is also helping develop “intelligent hive” concepts allowing apiarists to monitor the weight, temperature, security and health of a hive from their mobile phone, saving them time-consuming hive visits.

The federal government meantime has provided $7 million to set up a honey bee products cooperative research centre at the University of WA, and over the next five years the centre will receive an additional $20 million from industry and other universities.

Honey tourism is also emerging as earner as tourists from places like China want to see where and how the produce is made.