Gourmet Sisters and Their Portfolios

It's not often that one is treated to dinner at The Oriental Hotel and it is a double treat when the executive chef “personally” cooks for you. And the reason for the royal treatment? It is because I was in the companion of two rather lovely young ladies by the names of Khun Patcharin and Nuntiya Hame-ung-gul. The two sisters are the major Thai shareholders of Classic Fine Foods Angliss ( Thailand ) Co., Ltd., which is, by far, the biggest importer of high-end food from Europe and Australia . When I say “high-end” I mean lobster from Brittany , Fois gras (goose liver) and cheese from France , tomatoes from Italy , lamb from Tasmania , Australia and so on. Very high end and of course very expensive. Clienteles of Classic Fine Foods comprise of 5-stars hotels, the Oriental being one of them, gourmet restaurants, embassies and delicatessen supermarkets. As part of the job requirement, both sisters need to know leading chefs and restaurant owners very well indeed. In this issue of Money Make Over, the author will make over the investment portfolios of the two sisters, who are not twins but have almost identical portfolios.

Prior to establishing Classic Fine Foods, which is barely two years old, Khun Nuntiya, the elder sister, used to work in the airline business and Khun Patcharin, at a tender age of only 22, started a lost & found service company at Don Muang Airport. This is something most people, myself included, didn't know that when luggages are lost during transit in Bangkok , most airlines do not handle the process themselves, they “contract out” the job to people like Khun Patcharin whose company tracks down the lost items and forward them to their rightful owners. What started out as a small family business, later expanded into food export business when the two sisters decided to set up J & G International Co., Ltd., which exports food to cruise ship operators such as Star Cruise that docks their ships at Laem Chabang.

The other thing I did not know about the food export industry is that logistically, one has to be “spot on”. These ocean liners need to stock up somewhere between 6-8 tons worth of food per week! That's right, 8 tons (that's 8,000 kg.) and the most challenging aspect of it is not so much loading food on to ships but the quality of the food must pass a really stringent QC standard i.e. all bananas must be the same yellow colour. Not too green and not too ripe; it must be just right. The same standard also applies to other fresh produces and in a tropical climate like Thailand , it is by no means an easy task. As a result of the food export business, the two sisters came across Angliss Foods International, a London based conglomerate that specializes in exporting gourmet food from France and Australia to Asia . With Thailand fast becoming a major destination for well-to-do tourists as well as a growing upper-middle class Thai people with a penchant for foreign cusine, it did not take long to figure out a way to capitalize on this trend. Hence, a joint venture was formed to create Classic Fine Foods Angliss ( Thailand ) Co., Ltd.

Like most things in life, starting out is never easy. Both sisters had to put in long hours to get to where they are today. Khun Patcharin would look after the administration side of the business while Khun Nuntiya is the marketing/sale person. In order to win business from leading hotels, it is not uncommon to have meetings at 6 o'clock in the morning! Executive chefs are a busy bunch with full day schedules. Therefore, in order to set up meetings with these “masters of the universe”, they dictate the hours. In addition to 5-stars hotels, embassies are also major clients as they often throw lavish dinner parties for visiting dignitaries. Most embassies don't rely purely on hotel catering services, they often have in-house chefs and on really special occasion like national days or farewell parties, it is not uncommon to fly in chefs for the occasion.

Being an entrepreneur and self-employed, it is hardly surprising that private equity takes up a big part of the portfolios. Although, both sisters run separate portfolios but I've been told that they are almost identical because they like to copy cat each other.

Current portfolio is made up of the followings: 40% is in the equity of J & G International and Classic Fine Foods; 25% in government bonds and fixed income funds; 20% in property; 10% in stocks and 5% in cash.

Recommended portfolio: since both sisters are still relatively young, in their mid-30s, debt free (for now) with positive cash flow, for the first time ever, I would recommend that they keep their portfolios as they are for the following reasons: first of all, 40% of the portfolio is already tied up in an illiquid equity of privately owned companies and another 10% is in listed stocks. Although, Classic Fine Foods is a 70:30 joint venture with Angliss UK being the major partner, it is still a private company with very little liquidity and quite difficult to put a value on. Moreover, the JV is still in its infancy and Khun Patcharin told me that current cash flow is adequate for now but as the business grows, some sorts of bank borrowings may be necessary in order to expand the business. Therefore, I would recommend that both sisters should not, at this stage, have more than 50% in equity.

Since cash flow on a monthly basis is positive, 5% cash reserve should be enough and 25% in government bonds and fixed income funds should provide much needed cushion in the event of unforeseen crisis. Personally, I would have recommended a portfolio with much higher equity component, up to 80% for someone with similar age and financial profile but in this particular case, it is better to wait until Classic Fine Foods is fully matured with positive cash flow. The other reason being that 20% of the portfolio is invested in property with some rental income but nevertheless, much more illiquid than other debt instruments. Like most Thai people that I know, property makes up quite a sizable chunk of the overall portfolio but more often than not these properties are not fully diversified. Personally, I prefer to invest in property funds with a well-balanced asset mix but we may have to wait a couple more years before such funds are fully developed in Thailand .

The other factor both Khun Patcharin and Khun Nuntiya will have to take into consideration is their retirement savings. Since both are self-employed, therefore, they should make full use of the tax benefits under RMF and LTF schemes. The two sisters have already taken out life insurance protection but I must reiterate again that life insurance and investing are two separate activities and should not be mixed up. At this stage in life, personal accidents and health insurance policies will probably make more sense for the two sisters.

Lastly, I wish both Khun Patcharin and Khun Nuntiya the very best of luck with their venture in Classic Fine Foods and for those M&W readers who are aspiring entrepreneurs wonder how viable this business really is in the face of devastation in Phuket and another possible outbreak of birds flu that would drive away tourists. I give you one hint. It's wealthy Thai people who has been downing imported wine and dine on gourmet cuisines. Foreign tourists eat Thai food when they are in Thailand !