Target Company Overview

Avallon MBO Fund, specializing in management buyout transactions, has invested PLN 9.3 million in Organic Farma Zdrowia S.A., a company listed on NewConnect. This investment represents yet another step by the Fund into the "healthy food" sector. Organic Farma Zdrowia S.A. is recognized as the largest self-service delicatessen chain in Poland, offering a variety of organic and healthy foods, cosmetics, and cleaning products. Moving forward, the Fund may further inject an additional PLN 4 million into the company over the coming years.

Sławomir Chłoń, the President and co-owner of Organic Farma Zdrowia, stated that they sought an investment partner that would consider their needs appropriately. With Avallon, they found a suitable match, as the Fund is not overly aggressive in enforcing its concepts but remains an engaged collaborator. This approach aligns well with Organic's vision for growth.

Industry Overview in Poland

The demand for healthy food in Poland has seen significant growth, although consumption levels still lag behind those of Western European countries. Currently, the average spending on organic food per person in Poland is only EUR 1.3 compared to EUR 29 in old EU member states, indicating a potential for market expansion.

Despite this, the gap in conventional food sales is much smaller, demonstrating a shift in consumer behaviors. In Poland, there is currently approximately one organic food store for every 8 million residents, a stark contrast compared to Germany and the Czech Republic, where the respective ratios are much higher. There are roughly 300 specialized BIO and EKO stores in Poland, with expectations to reach up to 500 by the end of 2011.

The market is forecasted to evolve, with local networks, logistics centers, and larger wholesalers projected to be established. In the next ten years, the market value of organic food in Poland could increase to between PLN 4.5 and 6 billion, or about 1.5% to 2% of the total food market value, signifying a promising sector for investors.

Rationale Behind the Deal

The investment by Avallon MBO Fund aligns closely with its strategy of seeking opportunities in rapidly growing markets. The strategic positioning of Organic Farma Zdrowia as a market leader makes this venture particularly attractive. Furthermore, the management team are also shareholders, ensuring that their interests align with those of the investors, which is a critical factor for the Fund's investment approach.

Organic Farma is focused on its growth strategy, including increasing its sales network and transforming its online platform, Ekosfera.pl. This investment is expected to facilitate store openings and acquisitions, targeting 6-8 new locations each year, as well as establishing Poland's first organic supermarket in Warsaw.

Investor Information

Avallon MBO Fund specializes in management buyouts and is actively pursuing investments in industries exhibiting strong growth potential. The Fund's decision to invest in Organic Farma Zdrowia was motivated by its expansion plans, the company’s established brand reputation, and robust management team that holds significant stakes in the business. According to Robert Więcławski, Partner at Avallon MBO Fund, the numbers clearly indicate the positive prospects in the organic food market in Poland, making this a particularly aligned investment.

With a sales level currently at PLN 20 million in a market worth around PLN 400 million, Organic’s aspirations for increased market share are ambitious yet grounded in achievable growth metrics. The investment from Avallon is seen as a catalyst to significantly accelerate Organic's market presence.

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This investment by Avallon MBO Fund into Organic Farma Zdrowia is strategically sound and could yield significant returns. Given the current market dynamics, the organic food sector in Poland is poised for expansion, driven by changing consumer preferences. As the largest chain in its category, Organic has a first-mover advantage that it can leverage with the right financial backing.

The integration of Avallon’s capital could enable Organic to execute its growth plans faster than its competitors, thereby solidifying its market position. The anticipated market growth also translates to a considerable potential upside for Avallon in the long term.

Furthermore, this partnership allows Organic to maintain its operational autonomy while benefiting from key strategic guidance, which is crucial for its sustained growth. The expected entry onto the main GPW market within the next three years further enhances the investment’s attractiveness, opening up additional avenues for financing and growth opportunities.

Overall, Avallon MBO Fund's investment is not only a strategic move but also a necessary one given the potential for substantial growth in Poland's organic food industry. If executed correctly, this could position Organic Farma as a leader in not just sales but also market innovation within the sector.

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