A system by Katjes Greenfood shows how small investors can currently earn significantly more interest than with overnight money and fixed-term deposits: the company has issued a bond with an interest rate of eight percent, which small investors can also subscribe to. We show how investors check whether this is worthwhile for them.
While investors often have to invest at least five-digit amounts for bonds from other companies, Katjes Greenfood now sells promissory notes in denominations starting at 1000 euros. This also makes them affordable for normal savers. At the same time, the company pays more than twice as much interest as many other companies.
Are bonds like those from Katjes Greenfood worthwhile as an alternative to low interest rates on call money and fixed-term deposits? Or do they harbor hidden risks? In order to help savers with this decision, FOCUS spoke online with Katjes Greenfood CFO Marius Rodert about the company and its expectations for the coming years.
The conversation also shows which questions investors should answer in general when investing before they entrust their money to companies.
FOCUS online: Mr. Rodert, the Katjes Greenfood bond raises eight percent more than twice as much interest as the bonds of most other companies. We check for our readers whether an investment like this is worthwhile. To get started, please explain what exactly your company does.
Marius Rodert: Gladly. We are the youngest sister in the Katjes group. These include Katjes Fassin GmbH Co.KG, which produces the well-known vegetarian fruit gums and Katjes liquorice, among other things, Katjes International, which focuses on holdings in confectionery brands in Western Europe, and we.
We came about because Katjes started omitting an ingredient in its fruit gums in 2012 that makes you wonder why it was ever in it: Animal gelatine, which is made from pork bellies. From this it has developed that one also looks at what is available left and right in the market. Katjes Greenfood was founded in 2016 to invest in sustainable, vegan growth brands.
We now have total assets of 80 million euros and hold shares in twelve companies, including the market leader for porridge from the oat takeaway chain Haferkater, the vegan animal feed manufacturer Vegdog and the manufacturer of socially responsible superfood from the rainforest, The Rainforest Company. We also own 100 percent of the British company Genius. It is the market leader for gluten-free baked goods in the UK. There are other holdings. But those mentioned make up 80 percent of the whole.
You are now issuing a bond for the first time. What are you going to do with the money?
Rodert: We want to continue to grow and currently see many opportunities on the market. So far we have financed ourselves through the group of shareholders and did a small amount of crowd financing. We have now proven our concept and want to show that we can also finance ourselves on the free market.
Our core portfolio should grow organically. However, we can also imagine expanding our holdings to up to 20 companies within the next five years. I think it will be more like 15 or 16. We work together with the companies and want to transfer know-how between the Katjes Group and the individual companies. Of course, you can’t do that with any number of companies.
Investors should always consider the risks that threaten a company when subscribing for bonds. High interest rates usually indicate high risks. Why do you have to pay such high interest? Do investors take a risk when they lend you their money?
Rodert: We have 33 million equity and an equity ratio of 41 percent. Our result in the interim financial statements is ten million euros. We are financially well positioned and profitable. Why are we doing eight percent? We want to offer an attractive offer and diversify our financing structure.
The other terms of our bond are also investor-friendly: it has a term of five years, there is a negative pledge on all liabilities and a minimum equity ratio of 20 percent. If we violate them, the interest rate will rise by 75 basis points (i.e. to 8.75 percent, editor’s note). If we violate it a second time, the investor has a right of termination.
The question remains: why not five or six percent?
Of course, to be fair, it has to be said that it is our first loan. Our sister company, Katjes International, which has already refinanced itself twice, also started with a similar amount. It is now at 4.25 percent. That’s where we want to go too. But for that we have to think long-term. Above all, the high interest rates make it clear that Katjes Greenfood is a young company.
Does your industry matter? Do sustainable companies currently have to pay a premium because consumers eat less sustainably during inflation and investors attribute higher risks to companies?
Rodert: The companies in our portfolio are growing, not only due to inflation, but also adjusted for inflation. The customer saves; but he does not skimp on food. He eats less in restaurants, but when he eats at home, he wants to make his time more pleasant and allows himself the luxury of small things. Our products fall under these small luxury items.
That’s why we invest in market leaders with strong brands. We need that in order to be noticed, to offer the value that the customer is willing to pay, and to pass on the price increases that we have in the raw materials sector to retailers. We are good at both.
So, based on your experience, do customers continue to buy sustainably despite inflation?
Rodert: Customers have clearly understood that food consumption decisions have a massive effect on the carbon footprint. This gives sustainable companies momentum. The challenge as a company is to clearly communicate the added value of its products. Not everyone can do that. Here we are again with the strong brands.
What are the political risks for vegan food startups? Do some laws make life difficult for you?
Rodert: Laws are conventions cast in text form. Conventions are changing. Unfortunately, the legal texts are not. The Novel Food Regulation makes it extremely difficult to introduce new innovative ideas to the EU market. Even if food has been consumed as food on a larger scale at the other end of the world for thousands of years, you still have to go through the approval process in the EU. Seven percent VAT is due on dairy products and 19 percent on milk alternatives – and you can’t even call them milk. These are points that make it difficult for us on the part of politics.
On the other hand, it’s incredibly nice to see so many entrepreneurs finding solutions for this as well. We don’t want to point fingers at others. But I think the trend is towards flexitarians who, like in the past, don’t eat meat every day, but only for the Sunday roast, for example. This trend will remain. And he works for us.
Is this trend profitable enough? If you’re paying 8 percent interest on new debt, you need to earn at least an 8 percent return on your new investments to make it worthwhile. Can you do it?
Rodert: Absolutely. Some of our minority holdings have growth rates of well over 100 percent. Of course, sales and profits do not grow evenly every year. In the long term, however, our goal remains at least double-digit annual growth.
If vegan startups are so profitable, why did Katjes spin them out into their own company? This could appear to investors as if the company wanted to pass on the risk of bankruptcy.
Rodert: We have the same shareholdings and the same managing partners in all three sister companies. We think it is more efficient and innovative to avoid long decision-making chains in an organization and prefer to set up several lean companies side by side.
Let’s stay with the risks that investors should check before investing: Are financiers scared off by the fact that with sales of three million euros in 2021 you now want to raise 25 million euros in financing?
Rodert: This value is deceptive. So far we have only had minority holdings where we were not the main owner of a company. These are not recorded as sales on our balance sheet, but of course have value. In December 2021 we acquired Genius and made three million sales in one month. This is the total on the balance sheet. Extrapolated over a year, that would be around 41 million.
Ultimately, of course, every investor has to decide for themselves whether they are subscribing to our investment for eight percent or that of a large company for less interest.