When Legacy Group decided to make a modest entry into the Colombian Coffee business in 2017, they quickly discovered they were thinking too small.
“At first we were looking to pay cash flow,” Josh Ziegelbaum, Director of Investor Relations for the fast-growing alternative investment fund, told Michael Duncan of The Road to Financial Freedom Podcast, “so it was a cash flow oriented agricultural investment when we did the seed funding round back in 2018.”
Fast forward to today. The resulting US-based company, Green Coffee Company, has become the largest producer of Colombian coffee in the world, with over 1,000 employees in the US and Colombia.
“Our initial acquisitions were just 600 acres,” he said. “We’ve grown to be more than ten times that today with over 6,600. And, you know, it’s grown to be a massive growth investment opportunity.”
The End of the 60/40 Portfolio
It’s the kind of opportunity that have attracted more and more investors to Legacy Group, in search of geographic diversity and an alternative to the classic “60/40” portfolio that looks more and more like a dinosaur — especially in light of the recent punishing volatility of the stock market.
Self-directed IRAs, like those in the custody of CamaPlan, don’t make up a huge portion of their investor pie, but Ziegelbaum would like to change that. Retirement funds are perfect for the kind of explosive growth Legacy Group targets, due to their insulation from taxation.
“The projected return profile on a Series C investment in Green Coffee Company is 64% IRR,” Zielgelbaum said. “We’re an 11 net equity multiple. So what we’re telling our investors and modeling for them in our financial model is on a hundred thousand dollars minimum investment, we’re forecasting a seven-figure exit.”
That’s fantastic … but it’s even more fantastic if the tax bite isn’t too big.
“If you could do that in a tax-deferred manner or a tax-efficient manner, [it] makes a lot of sense.”
Legacy Group also has a much more hands-off ownership interest in Polygons, a Latin America-based 3D design company that creates characters for Netflix shows and video games. But Green Coffee Company remains the crown jewel in their portfolio — and they’re not even close to being done. The next step — monetizing every part of the coffee plant.
“80% of the coffee cherry is typically discarded,” Ziegelbaum said. “It’s waste. It’s the outside of the cherry and the bean that we know and drink is on the inside.”
The solution — do what you can do with any organic waste product. Ferment it into alcohol and distill it! Plans are in motion for Green Coffee Company to open up distilleries in Colombia to turn that “waste” into coffee-based vodka and coffee-based ethanol fuel additives.
You Sleep Better at Night
But it’s not just about money. Legacy Group is an “impact investment” fund, concerned not just with the bottom line but on doing the right thing — for employees and for the planet.
This includes implementing sustainable farming practices, including reduced water consumption, reduced waste, on-site solar power production, and elimination of plastic consumption.
It also includes what in the US we call “fair employment practices” — practices that are sadly rare across Latin America.
“We pay wages into bank accounts, which is not traditional in Colombian agriculture,” he said. “People are typically paid cash without benefits. We provide the majority of our employees with health insurance, which does not exist in the industry.”
“We provide the majority of our employees with pensions, which is historically very low in the industry. We [offer] paid time off if people get hurt … It sounds normal, but I could tell you that unfortunately, in Colombian coffee or agriculture, it’s just not the case. So we’re formalizing employment and really lifting up the communities where we operate.”
To Ziegelbaum, this is good karma, good business, and a good career move.
”As I’ve grown over the years professionally, I’ve done so by doing right by people,” he said.
As for business, “markets will look at how we do these things. How do we run the company? Is it being done in a sustainable manner? Are we taking care of the employees? Are we taking care of the environment? If the answer is no, I would argue that we would get a lower valuation as well.”
Personally? “You could sleep easier at night knowing that you run your business in a sustainable manner,” he said.