Thread by @unseenvalue

There are only 2 sources of sustainable profits - a) sector attractiveness and b) durable moats!
Horizontal Integration (related, NOT mindless diversification) must therefore be directed towards deep-value creation. Michael Porter has refined these into "3 essential tests"
[1/n]

1. The Attractiveness Test: which warrants that the sectors selected for related diversification must be "structurally attractive" or if not currently attractive, must have the capability to be made attractive over time (not every sector can be made attractive!)

[2/n]

2. The Cost-of-Entry Test: This is where innovation, economies-of-learnings & prudent corporate governance (scarce resorce as we know now!!) comes into play!

The cost-of-entry must not capitalise all the future profits. Otherwise the game is over even before it starts 😉

[3/n]

3. The Better-off Test: Either the new venture must gain competitive advantage from its association with the Group or vice versa (e.g. a speciality consumption play expanding into related areas; beverages company adding solid foods or vice-versa; animal+human generics etc)

[4/n]

Just like the ConAgra Foods, I do see Godrej Agrovet transforming into a farm-to-fork integrated behemoth from Indian subcontinent over the next 10-20 years.
Given my super long horizon, I have to have the "capacity to suffer" in the short to medium term.

Conviction | Patience

Slowly but surely developing distinctive, integrated & system-wide capabilities in each of the above businesses. Economies of scale in sourcing of raw materials and distribution; invested since IPO and sipping periodically. Don't expect a quick turnaround 🤟 #GodrejAgrovet #GAVL