Simon Walton, Head of the Consumer Practice at Berwick Partners, examines how up and coming brands can retain their uniqueness and continue to thrive under the auspices of larger corporations.
The consumer/FMCG market is awash with investment deals, as international firms look to retain their position, respond to changing consumer behaviours and capitalise on the emergence of fast-growing ‘challenger’ brands. Just look to OC&C’s 2018 Annual Global 50 report to see that major players are increasingly reliant on M&A to fuel growth.
At the same time, rapid expansion can be difficult to manage within fast-growing brands and the right M&A deal can boost capabilities and take them to new heights. Take this month’s Unilever £150m takeover of healthy snack brand Graze. While Unilever has the chance to benefit from Graze’s healthy snacking, positive purpose and subscription-led success, Graze can access Unilever’s substantial distribution network and financial clout to pursue an exciting new growth chapter.
Yet what makes disruptive businesses special can be easily lost in large corporate buyouts, and leadership must tread carefully to avoid a scenario where a brand can be seen to be losing its beating heart.
Budgets, buyouts and brand
Sizable marketing budgets capable of securing widespread household recognition once allowed global brands to dominate. But the shift in consumer focus towards health and sustainability, quality and convenience, and the rise of social media, means disruptors have been able to engage customers with niche brands and responsive products, relatively cheaply.
Halo Top, with a simple but compelling proposition for low-calorie ice creams, paired with social-media sleight of hand, has achieved impressive domestic and international growth since launching in 2011. While Unilever launched its own healthy ice creams including Ben & Jerry’s “light” Moo-phoria as a counter move, little damage has been done to Halo Top’s growth. Since 2011, it has become one of the top three best-selling ice creams in the US.
When exploring M&A, big players can gain the product innovations, talented management teams and workforces of brands overnight. But, to benefit in the long-term, the deal must look to preserve and protect their distinct nature, preventing losing the hearts and minds of savvy consumers. All too easy can consumer confidence dive when a smaller firm appears to be ‘selling themselves out’.
Those that have done well include Molson Coors. The US brewing giant bought 300-year-old heritage-driven brand Aspall Cider in January 2018, ensuring success by delivering a subtle, brand-led takeover. Through limited publicity of the deal and a light-touch ownership stance – seeing Aspall retain its original leadership team – the buyout was understated and allowed the family-run, quintessentially English ethos of Aspall continue. By safeguarding the autonomy of the original leadership team, Molson Coors has since helped Aspall boost sales and distribution, while preserving the culture and well-loved brand, so successful that it’s just announced a £10m expansion plan at its Suffolk factory site.
But, when it comes to M&A, leadership needs to take an active role in maintaining the all-important brand. While most businesses will be able to find the same quality product in numerous places or make it themselves, real value should be placed on the people, culture and the environment that have delivered success.
As a result, big business leadership must ensure they can buy out a fast growing independent in a way that maintains their appeal. Needing to balance a degree of control and ownership with the risk of losing talented individuals within brands, those handling the relationship must be able to assuage nervousness and promise a degree of equality, freedom, autonomy and trust, as seen with Molson Coors and Aspall. In addition, those with a focus on people and supporting the continuation of values, ethos, agility and culture of an organisation will help retain the people behind these brands.
This level of collaboration and respect should be reciprocated from challenger brand leaders. Recognising that their focus should be on maintaining nature, culture, drive and operations within the business, while welcoming change and the expertise of their new owner.
Large-scale buyouts between major players and fast-growing
independents in the consumer/FMCG sector are likely to continue. By taking a
softer approach, led by leadership, a business’
sellability, credibility and success will endure, keeping the beating heart of
a brand pumping.