Małgorzata Bobrowska discusses the GP's investment in Polish dog treats manufacturer Maced, which was named CEE Deal of the Year at the 2023 Private Equity Awards.

Can you introduce Resource Partners and your investment strategy?

Resource Partners was founded in 2009 by former members of the Carlyle Group’s Central and Eastern Europe (CEE) team. Since then, we have raised more than €400m and have already invested the majority of that across 20 portfolio companies. In 2022, we held the first close on our third-generation fund.

We are the only firm in the region to specialise in consumer goods and services. We target companies that we can expand geographically or in terms of product range. We often invest in regional leaders with the aim of making them global champions.

What attracted you to the pet food sector in general, and to Maced in particular?

We invest in consumer trends, and one of the trends that we have identified is people spending more money on their pets. Consumers are both spending more by overall value and choosing more expensive products, such as high-quality treats for their dog companions.

In terms of Maced in particular, we were struck by the fact that sales of its meat-based snacks, one of its key product areas, were growing by over 25% a year. We also noted that there were a lot of operational improvements that could be made, as well as investments that could make the company more competitive internationally.

Your investment in Maced produced a return of close to 3x and an 80% IRR at exit – how did you achieve these results?

First, we built a more professional management structure for what was then a family business. We brought in some new managers, with experience from some of our previous investments, to take the company to the next level.

We also made important hires in the operations area because we saw potential to increase both production capacity and product quality. We also invested in the professionalisation of the finance function, bringing in an experienced financial controller who was subsequently promoted to finance manager. She has worked on areas including steering demand, identifying products that could be achieving a higher margin, and growing the revenues of the business overall.

This type of transition towards more professional management is part of our strategy with most of our portfolio companies. We aim to do this in a very non-intrusive way, through cooperation with the founders.

We also changed the product mix, from a focus on simple meat snacks to more advanced meat-based products, reflecting the trend towards the premiumisation of the pet care market. When we invested, the company already had ideas and recipes for new products in this area, of a range of types and including various healthy supplements.

Finally, the acquisition of Atlantic Products, another Polish business operating in the same area as Maced, allowed us to consolidate a fragmented market. Atlantic Products has a state-of-the-art production facility and very strong export sales, which meant there was huge potential for a tie-up between the two companies.

We evaluate consolidation potential for each of our portfolio companies, but it is always just one out of many levers that we can use – and sometimes we prefer to invest more in the core business instead.

How did ESG contribute to value creation?

We strongly believe that ESG initiatives, done right, add value to companies. In the case of Maced, we implemented many tangible initiatives of this type. These include reducing energy and water consumption, lessening absenteeism, getting employee accidents down to zero by improving the production process, and improving leadership gender diversity. The company also supports dog shelters and dog adoption programmes.

At the Resource Partners level, we have an ESG officer who works with all the companies in our portfolio on analysing ESG initiatives. We are particularly proud that we have a female board representation rate of about 34% across our portfolio.

What challenges did you encounter and how did you overcome them?

The pandemic was the greatest challenge, which started for us before it reached the rest of Europe because Maced was reliant on imports from China. But over time, Maced benefited from the European nearshoring that happened as the pandemic continued. In addition, lockdowns led to consumers acquiring pets faster or, if they already had a pet, adopting a second one, all of which had a positive impact on the business.

What is next for Resource Partners?

We are nearing the final close of our third fund. Given the current turbulence in the fundraising scene, this is a very good indicator that our strategy meets investors’ needs. So we are looking at new platform investments, finding that the consumer trends we have identified in recent years are still holding true. We are also continuing to see success with our strategy of investing in local champions in one market and transitioning them to being Europe-wide players.

How do you see prospects for the consumer goods sector in the CEE region?

The circular economy and impact investing trends are very important for consumers today. We are looking to make one or two investments in these areas this year.

We are seeing an economic slowdown globally, but economists think that the CEE region will be one of the few markets in Europe to see growth in Q3 and Q4 2023. Disposable income is still growing here, the area has benefitted from the pandemic-related European near-shoring trend, and there is high availability of technical talent.