Dr. Jaume Llopis
Jaume Llopis, Emeritus Professor at IESE Business School and full member and Vice-President of the Board of Governors of the Royal European Academy of Doctors (READ), shares with the academic community the article “Why Investment Funds Fail in the Agri-Food Sector.” Along these same lines, the READ Vice-President also took part last June in the tenth anniversary of the Navarre Agri-Food Cluster–Nagrifood with the lecture “Seven Goals of Hyperconnected and Post-Pandemic Executives,” in which he highlighted the importance of companies having a purpose that goes beyond financial results and stressed the need to build a solid corporate identity, foster close and empathetic leadership, maintain a constant focus on stakeholders and commit to continuous learning in the face of the unstoppable advance of artificial intelligence.
Llopis has built a long and successful career in business management in companies such as Moulinex, Nestlé, La Unión y el Fénix Español and Borges International Group. Alongside his extensive academic career, his teaching at IESE is complemented by his courses as a visiting professor at the business schools IPADE (Mexico), AESE (Portugal), IDE (Ecuador), INCAE (Nicaragua), IEEM (Uruguay), MDE (Ivory Coast), the San Telmo Institute in Seville, and EADA in Barcelona. He is the author of leading reference books in the field of business management.
Why Investment Funds Fail in the Agri-Food Sector
Investment funds have shown growing interest in the agri-food sector, drawn by its essential nature and stable demand. However, a significant share of these investments has not achieved the expected results. I can think of many examples of failure over recent decades. The causes are structural and offer relevant lessons for both investors and entrepreneurs.
First, many funds apply management models drawn from the technology or service industry to the agri-food sectors, where growth can be accelerated relatively easily. In food, by contrast, margins are lower, competition is intense and organic growth is slow. Second, there is an underestimation of operational complexity. Profitability depends on factors that are difficult to control: raw material costs, weather conditions, health regulations, logistics, distribution and changes in consumer habits. So-called “glocalisation,” thinking globally but adapting to local tastes and habits, is crucial.
Another frequent mistake has been excessive financial leverage. Some funds acquired companies through high levels of debt, trusting in rapid increases in EBITDA. When inflation, rising interest rates, and slower consumer demand set in, many companies struggled to generate enough cash. The value of synergies arising from acquisitions has also been overestimated. Integrating family-owned businesses with diverse cultures, local brands, and distinct production systems usually takes far more time than expected.
In addition, many funds operate with time horizons of four to seven years. However, building a strong food brand, developing new products or expanding internationally often requires a long-term vision, which is incompatible with the pressure to divest quickly. By contrast, many well-managed family businesses have shown a remarkable capacity to create value. Their knowledge of the market, closeness to the customer, financial prudence, and a strategy based on continuity have enabled them to overcome crises that, by contrast, have strained companies controlled by financial investors.
This does not mean that all funds fail. There are success stories when they bring professionalisation, internationalisation, digitalisation and sound governance, while respecting the accumulated knowledge of management teams and avoiding the imposition of unrealistic financial targets. The main lesson is that the agri-food sector does not admit universal formulas. Value creation depends more on operational excellence, constant innovation and strategic patience than on financial engineering.
