How did local coffee chain Terarosa secure impact investment?

Published : Mar 20, 2019 - 16:10 Updated : Apr 22, 2020 - 15:45

Terarosa, a coffee chain based in Gangneung,a city in the province of Gangwon, on the east coast of South Korea, has secured investment from the country’s leading impact venture fund that invest in companies creating soical innovations.

The joint fund set up by Crevisse Partners and Lime Asset Management called Crevisse-Lime Impact Venture Fund decided to invest in the 15-year-old coffee chain that has 14 outlets around the country, an official at Crevisse told The Investor on March 20.

The amount is undisclosed but the official said the investment takes up the largest portion of its 20 billion-won ($17 million) fund. Some industry sources said the size of the investment is more than 3 billion won.

Interior of Terarosa store in Yangpyeong, Gyeonggi Province Terarosa

“Quite often, coffee represents labor exploitation in developing countries and human rights violations but Terarosa has been focusing on improving lives by paying three to 10 times more to coffee farmers and educating them so that they can maintain sustainable growth,” the official said.

Terarosa buys about 600 tons of coffee beans a year directly from coffee farms in 15 countries.

An impact fund seeks opportunities to invest in companies that chase double bottom lines -- financial performance and positive social impact such as job creation or environment protection.

“In addition, it is rare in the food and beverage industry for a local company to expand nationwide and have all full-time employees, contributing to quality job creation,” the official added.

The official noted that Terarosa had no need for any funds as it is financially sound, but decided to cooperate to make synergies as an impact fund and a coffee brand that leads fair trade job creation.

In 2018, the coffee brand’s sales reached 33 billion won with an operating profit of 7.1 billion won.

With the funds, the company, which is seeking a public listing as early as this year, will expand its product line and global presence, another industry source said. It will also gear up for heightened competition in the coffee market where customers are increasingly emphasizing on quality.

Korea’s coffee market stood at 11.7 trillion won in 2017, more than threefold from around the middle 3 trillion-won level a decade earlier. The country with about 51.7 million people consumed 26.5 billion cups of coffee in 2017 or 512 cups per person.

Backed by Koreans’ love for coffee, there were 78,846 coffee shops as of end-2018, according to data from Small Enterprise and Market Service.

Starbucks has 1,263 stores here as of February. Blue Bottle Coffee, an upscale US coffee chain operator, announced its plan to enter the market this year.

The joint impact fund has so far invested in Todo Works, which develops devices for marginalized people, and Aria Care Korea, a visiting elderly care service company.

By Park Ga-young (gypark@heraldcorp.com)