Monday 19 August 2019 ★ FINANCIAL TIMES 9CO M PA N I E S & M A R K E T S
E M I KO T E R A ZO N O
Chris Kerr spent nearly two decades
investing in vegan food without finding
a convincing plant-based alternative to
fish.
This year, investors have poured
money into plant-based meat, with
Beyond Meat now worth over $9bn after
its IPO in May and Impossible Foods val-
ued at $2bn after raising $300m in the
same month.
But “there was an absolute gap in fish”
said Mr Kerr, who co-founded New Crop
Capital in late 2015 to invest in food
start-ups that could disrupt industrial
animal farming.
So in early 2016 he launched a new
company, Good Catch, to create a plant-
based tuna from 16 different legumes,
including peas and soyabeans. Part of a
tight-knit band of vegan tastemakers,entrepreneurs and investors in the US,
he teamed up with vegan chefs Derek
Sarno and his brother Chad.
Earlier this year, Good Catch’s alter-
native product began to be stocked in
US supermarkets alongside cans of real
tuna and the company is now in talks to
enter the UK with Tesco, which has
hired Mr Sarno as “executive director of
plant-based innovation”.
It a nascent market. Annual sales of
fish substitutes in the US are only
around $10m compared with $800m for
plant-based meat, according to Good
Food Institute, an alternative protein
advisory and lobby group.
Consumers tend to eat less fish any-
way, at about 10kg a year in the US com-
pared to more than 40kg for chicken
and 25kg for beef.
But the gap that Mr Kerr identified
three years ago is closing fast. There are
now about 20 companies in the US
developing plant-based seafood, and
Impossible Foods recently said produc-
ing a fish substitute was a high priority.
Mr Kerr pointed out that the market
for fish elsewhere in the world is largerthan in the US and the total global sea-
food market is worth about $500bn a
year, making it an enticing target for dis-
ruption. “From wraps to chowders to
pastas, seafood makes its way into a lot
of things and just about every culture
has it. We have a lot of entry points
around the globe,” said Mr Kerr.
Alternative fish products can offer an
environmentally friendly solution to
overfishing, the negative impacts of fish
farming, such as sea lice and antibiotics,and problems such as mercury contami-
nation.
Good Catch has focused on tuna, one
of the most popular and overfished spe-
cies. “[Canned] tuna is pretty much sit-
ting in just about everybody’s cabinet at
home and it’s considered a staple,” said
Mr Kerr. Yet, he added, tuna is “one of
the few sources of food that we still
hunt. It’s diminishing.”
The start-up raised almost $9m last
year in a seed funding round led by NewCrop with a list of investors that
included German poultry producer
PHW. It is in the final stages of closing a
$30m funding round, which will help
expansion of production capacity.
Having eschewed meat, fish and dairy
since 2002, Mr Kerr says he has been a
“frustrated vegan”, with limited options
available at meal time, but that has
started to change in the past five years
or so. “We’re going from mediocre prod-
ucts to exceptional products. We’re
coming to a new world,” he said.
New Crop has about $70m under
management and a portfolio of about 30
food start-ups, includingBeyond Meat
and cell-grown meat start-up Memphis
Meats, which is also backed by Tyson
Foods, the biggest meat producer in the
US, and the agricultural traderCargill.
A third of its portfolio is made up of
companies making seafood substitutes.
Ocean Hugger transforms tomatoes
into raw tuna-like slices and aubergine
into faux eel, and New Wave Foods pro-
duces vegan shrimp substitutes from
seaweed and soya protein.
BlueNalu, which grows fish flesh fromfish cells in bioreactors, launched last
year after raising $4.5m in a seed fund-
ing round led by New Crop. It is
expected to announce another funding
round soon.
Lou Cooperhouse, chief executive,
said the company planned to begin test
marketing cell-grown mahi-mahi, also
known as dorado or dolphin fish,
around its home base in San Diego
within two to three years.
The smell of fish and its feel in the
mouth are even more important for
consumers than with meat, and at Good
Catch, the first few years were spent get-
ting those two factors right. “We’ve had
thousands of years being poisoned by
fish. A mealy apple won’t poison you but
a bad shrimp will,” said Mr Kerr.
Chad Sarno said that in the product
development phase, he would test it on
his cat Milo.
One day, after a tweak in the ingredi-
ents, he had his breakthrough. “I liter-
ally opened the bag, and [the cat] came
running,” he said.
“I remember sending Chris a video
and saying: ‘We’ve done it’.”Food & beverage.Change of diet
Vegan backer angles to hook fish lovers with plant-based alternatives
F T R E P O RT E R SWill Powell swerve at Jackson Hole?
At a time when weak data out of China
and Germany have raised questions
over the risks of recession, investors are
looking towards central bankers for
assurance. As such, the annual gather-
ing of policymakers at Jackson Hole,
Wyoming, which opens on August 22,
offers an ideal opportunity.
The big question: whether the Federal
Reserve is willing to cut interest rates
further.
Jay Powell, the Fed chair, said in July,
when he delivered a quarter-point cut,
that the “mid-cycle adjustment in pol-
icy” did not signal the start of a full-
blown easing cycle. And it is unclear if
he will deviate from that message, even
after recent market ructions.
The symposium, hosted by the Kan-
sas Fed, has made markets move in the
past, as in 2010, when Ben Bernanke,
then chair, used his opening remarks at
the conference to signal a fresh round of
stimulus. Moreover, interviews on the
sidelines of the event tend to make it a
must watch.
This year’s theme, Challenges for
Monetary Policy, is a fitting one, as cen-
tral banks keep cutting rates in an effort
to stir activity but as a mounting pile of
negative-yielding debt — almost $17tn —
indicates profound gloom over the state
of the world economy.
Some analysts expect no firm com-
mitments from Mr Powell and for mar-
kets, currently pricing in an additional
65 basis points of cuts this year, to be dis-
appointed. Others argue we could see
another pivot from a Fed that has
recently wrongfooted investors with its
messaging.
“We would expect to see Powell and
others use the venue as a platform to
attempt to ‘out-dove the doves’ and
provide sufficient monetary accommo-
dation via the forward guidance channel
and stabilise... risk assets,” said Ian
Lyngen, strategist at BMO Capital
Markets.Mamta BadkarWill Japan edge any closer to its
inflation target?
Economists are braced for inflation data
out of Japan which they expect to
remain stuck at a two-year low of 0.6 per
cent — no closer to the central bank’s
long-elusive target of 2 per cent.
Many expect that the rate of price
rises will not move higher any timesoon. The devaluation of China’s ren-
minbi at the start of this month has
raised fears over prolonged trade ten-
sions with the US and a beggar-thy-
neighbour currency war. Japan’s yen,
often seen as a haven by investors,
strengthened to a 17-month high versus
the dollar, while the benchmark Topix
has erased its gains for 2019 amid fears
that a stronger currency will inflict pain
on the country’s exporters.
Years of ultra-loose monetary policy
by the Bank of Japan have done little to
push inflation closer to target. An
unwanted bout of yen strength will not
help in that context. The pressures fac-
ing the Japanese central bank to ease are
multiplying.
Economists think the bank could act
as soon as September, but just how bold
will it be? Lowering the deposit rate —
already in negative territory — could
pose a risk to the stability of the finan-
cial system, where banks already strug-
gle to eke out a profit. Any effort to hob-
ble the yen could also draw the ire of theTrump administration, with which
Tokyo is still in trade talks.Daniel ShaneWill Argentina’s crisis weigh on
other emerging markets?
Turmoil swept Argentine assets last
week following the shock defeat of Mau-ricio Macri in the primary elections,
raising fears that the crisis could spread
to other emerging markets.
In the days after Alberto Fernández,
Mr Macri’s Peronist rival, saw his presi-
dential aspirations all but realised
ahead of the October general election,
Argentina’s peso plummeted 21 per cent
versus the dollar.
Investors aggressively dumped the
country’s government bonds, with the
yield on shorter-dated debt maturing in
2021 spiralling to above 40 per cent.
Yields move inversely to price.
Argentina’s Latin American neigh-
bours saw their assets come under pres-
sure amid the sharp sell-off, as did those
of other countries with large financial
imbalances and substantial short-term
debt loads.
South Africa and Colombia experi-
enced noticeable aftershocks, with
the rand weakening 1 per cent against
the dollar at one point, and the Colom-
bian peso losing nearly 2 per cent.Colby
SmithMarket Questions.Global economy
All eyes on Powell at Jackson Hole, Japan’s elusive
inflation target, and fears Argentine ills will spread
Policy summit:
central bankers
will be keeping a
close watch on
the Fed chair
during the
annual
gathering at
Jackson Hole
David Paul Morris/BloombergL E O L E W I S A N D K A N A I N AG A K I— TOKYOAn investment arm ofSoftBankhas
launched a “white knight” offer for a
Japanese hotel chain amid a rare spate
of hostile takeovers and other manoeu-
vres once deemed taboo in Japan.The friendly buyout offer of up to $1.3bn
fromFortress Investment Groupfor
Unizo Holdingscame afterHIS, a travel
agency, launched a hostile takeover
attempt of the hotel group last month.
Fortress, which has invested in more
than 100 hotels in Japan, has offered
¥4,000 ($38) a share for all of Unizo’s
shares. This represented a premium of
11 per cent on Thursday’s closing price
and 101 per cent compared with the
level a day before HIS announced its
offer for ¥3,100 a share on July 10.
The tussle for Unizo comes as Japan’s
real estate investment trust sector
awaits the finale this month of a hostile
bid — unprecedented for the sector — by
Star Asia, which has a Tokyo-listed Reit,
of its smaller rivalSakura Sogo.
The two hostile takeover battles fol-
low examples in recent months in which
big shareholders applied unusually
aggressive tactics to the management of
a stationery supplier, a funeral director
and sportswear manufacturer.
The battles follow an upsurge in the
presence and boldness of activist inves-tors not seen for years in Japan.
The tussle for Unizo, which revived
foreign investor interest in the Japanese
property market, could intensify with
Elliott, the activist fund, revealing that it
has built a stake of 9.9 per cent in Unizo.
Elliott’s interest has triggered a surge
in Unizo’s share price, which rose 16 per
cent to ¥4,165 on Friday. HIS said it was
studying Fortress’s offer and declined to
say what steps it could take next.
Japan’s Reit sector has been rocked by
Star Asia’s attempt to take over the
Sakura Sogo Reit by calling on unit hold-
ers to switch asset managers. Sakura’s
response has been to negotiate with the
managers of the largerMiraiReit to
enter as a white knight with a separate
proposal.
Hostile takeover activity has been in
effect absent from Japan for more than a
decade after a spate of attempts in the
late 2000s ended with the conviction of
the investors leading the bids.
“Although Japanese companies are
willing to engage in hostile takeover bids
overseas, they tend to really hate being
acquired themselves. This led to an
increasingly defensive reaction from
Japanese companies in the face of activ-
ist investor activity,” said Masatoshi
Kikuchi, Mizuho’s chief strategist,
describing the climate a decade ago.
Prominent among the hostile takeo-
ver proponents at the time was Yoshiaki
Murakami, a critic of complacent man-
agements who still wields huge influ-
ence as an investor.
Former colleagues of his, via Effis-
simo Capital, a large fund, have become
powerful in Japanese equities and are
closely scrutinised by other investors
for signals that they may be poised to
engage in unsolicited bids or hostile
moves against management.Financials
SoftBank unit
vies for Unizo
with $1.3bn
friendly offer
Yen strength tests BoJ
Source: BloombergAgainst the dollar ( per ) Investor sees potential in
nascent market for start-ups
making seafood substitutes
The tussle for Unizo could
intensify withElliott, theactivist fund, revealing it
has a 9.9 per cent stakeR I C H A R D H E N D E R S O N— NEW YORKUS companies are watering down their
spending plans as the threat of slowing
global growth and the spectre of height-
ened tariffs sap business confidence.
Capital expenditure is set to grow
3.5 per cent this year compared with the
4.2 per cent anticipated four months
ago, say Citi analysts. The revisions
reflect the spending plans of 714 listed
companies excluding financial groupsand echo the drumbeat of dire senti-
ment data that began late last year.
The revisions come at a pivotal time
for markets as the Sino-US trade war
and a string of poor economic data have
triggered a surge in market volatility
and sent investors rushing into safe
assets such as US government bonds.
“Capex has been one of the biggest
concerns about the... economy,” said
Max Gokhman, head of asset allocation
for Pacific Life Fund Advisors. “This
year we’re seeing uncertainty hurt
capex — it has continued to dwindle.”
Capex, often used as a rough gauge of
profits, surged 11 per cent last year as
companies tapped fresh pools of capitalunlocked by the Trump administra-
tion’s corporate tax cuts that clipped the
rate from 35 per cent to 21 per cent.
Spending is set to expand, but the
lower growth levels and downward revi-
sions are beginning to spook investors
that businesses will be too cautious fear-
ing an economic downturn.
Technology hardware companies
appear particularly vulnerable to a
slowing growth outlook and tariffs with
China. While most sectors are poised to
moderately increase spending, tech
firms will cut capex 8.7 per cent, a figure
Citi pegged at 3.1 per cent in May.
Cisco, the tech group, last week
revealed a drop in orders for its net-working equipment as companies begin
to shy away from upgrading their sys-
tems fearing slower growth.
“Cisco is a great example — they got
hit on China sales but also companies
are not upgrading their networks,” said
Mr Gokhman. “That is all contributing
to the dearth of investment.”
Industrial companies will grow capex3.7 per cent, from 8.4 per cent in May,
while materials will spend 14 per cent
more, down from an estimated 26.2 per
cent four months ago, according to Citi.
Anticipated capex spending has slid
since the start of the year, according to
polls of chief executives by the Business
Roundtable, while small business
spending survey data from the NFIB
small firms lobby also shows softening.
“Business confidence tends to impact
corporate investment activity and
hence the various factors affecting
C-suite concerns like trade issues and
overseas weakness appears to be influ-
encing behaviour,” said Tobias Levkov-
ich, Citi’s chief US equity strategist.Industrials
US companies cut back on spending plans
Prospect of slowing global
growth and higher tariffs
weigh on confidence‘Cisco is a great example —
they got hit on China sales
but also companies are notupgrading their networks’
Chris Kerr was frustrated by limited vegan options at meal times— Charlie Bibby/FTFastFT
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