I was recently reading an internal Unilever newsletter about the development of their Prestige brand portfolio. The CEO, Vasiliki Petrou, talked about the types of acquisitions they were looking for to build their €1 billion brand portfolio. She is quoted as saying “I always look for strong brands with authentic, differentiated stories. A strong brand, for me, is one that has its own unique concept and is globally relevant in a high-growth space”. It got me thinking about what sort of entrepreneurial brands will be relevant in the future as times change not least because of austerity, AI and sustainability.
I have a wealth of experience working with consumer brands so from that perspective it seems the M&A market has gone through some interesting phases. Just look at Unilever. Sustainable brands were all the rage when Seventh Generation was bought. Then Dollar Shave Club was snapped up for a cool $1Billion when DTC brands were on trend. Prestige brands, with their higher margin, are now in favour, but what will be next?
A common thread for all these examples is their buyer appeal and that tends to be what the buyers can’t do themselves or rather, perhaps, what they don’t have the courage to do themselves. For all of you successful entrepreneurs out there, there are many more that have failed, so they’d rather you took the risk for them. Entrepreneurial, sustainable brands had a tough ride crossing over from early adopters to the early majority. DTC required a completely different consumer mindset and an entirely new supply chain, which takes time to establish and prestige requires the credibility of authenticity which also takes an immense amount of investment and effort to build.
The other selection criteria has always been ‘scalability’, which is what large corporations bring to the party and so they will look for brands that have broad appeal. In scaling they will also look for cost reductions. However, this can backfire when production and supply-chain rationalisation strip the brand of its uniqueness.
There has been a great deal of ingredient and formulation-based development with so many SMEs emerging from domestic kitchens in both the food and health/wellbeing categories. I’m sure the drive for this will continue as founders turn their passions into products encouraged by the relatively low entry point to market, but we must be meeting saturation point and buyers will question if they will ever achieve the scale required to make their return.
So, if you are looking to cash in on all your hard work here’s my three predictions of what will be hot:
Margin led
Premium brands with a high margin will continue to be the holy grail for corporations hoping to counter ever increasing commoditisation. The owner’s story, as mentioned, is key to this and, looked after well, it can remain true as Unilever managed with Ben and Jerry’s.
Trend led
Whilst many corporations are divesting their local brands to focus on the core, they are also looking to stay relevant by responding to consumer trends. Nestlé has bought several vegan food brands for example. This is likely to be followed by new solutions for the environment, including precision-fermented food and alternatives to cocoa. The difference is vegan food answered a niche consumer need and grew from there. R&D driven products will need to establish a consumer need to be attractive to buyers.
Technology led
Analytics and AI data driven services like Zoe will be very attractive to buyers as they not only establish new technology platforms, which are outside the consumer giants’ technical knowhow, but also evolve consumer relationships into more fruitful DTC models that eluded the big players the first time around.
This was a consumer brand perspective. What would be hot in your sector?
