stranded deep twitter

2021-06-10

Consider the Jammie Dodger. The 60-year-old British brand of jam-sandwich shortcake biscuits is again changing hands. A company linked to the Ferrero chocolate conglomerate now has its sticky fingers on Dodger-maker Burton¨s Biscuit Company.

How long, though, before this classic biscuit and snacks like it are history?

An internal presentation, circulated to executives of rival Nestl└, has pointed out that only 37 per cent of the Swiss group¨s core food and beverage portfolio is ^healthy ̄, as measured by one recognised definition, and some products, however carefully reformulated, never will be.

The hypocrisy of Nestl└ ¨s dour positioning as a ^nutrition, health and wellness company ̄ that just happens to churn out KitKats presents an obvious image problem. Burton¨s chocolate-biscuit logo and slogan (^Making every day more of a treat ̄) at least makes clear it sells indulgence not part of your nutritious five-a-day.

The central dilemma here is, however, one of strategy not marketing. If customer demands and regulatory pressures are ^skyrocketing ̄, as the Nestl└ memo suggested, then some of its big brands, such as Nesquik and Toll House choc-chip cookies, risk becoming stranded assets.

Against that fear, Nestl└ can set the knowledge that its appeal to customers¨ and investors¨ gut instincts has served it well. Its shares have outperformed European indices.

When companies move too fast for their consumers, though, they can find themselves marooned ahead of the market. UK industrial bellwether General Electric Company (later Marconi) might still be around if it had not placed all its bets on an acquisition-led transformation to telecoms in the late 1990s, ending in ignominious break-up. On the other hand are the companies that did not change fast enough. Eastman Kodak foresaw the shift to digital imaging, but, partly for fear of offending Wall Street, clung to profitable analogue roll-film manufacture until it was too late.

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In their nightmares, Big Oil¨s leaders ! like Nestl└ ¨s ! shuttle between these two fates. In 2019, Ben van Beurden, Royal Dutch Shell¨s chief executive, told the FT his ^single biggest ̄ regret would be to abandon the group¨s oil and gas business prematurely. A recent series of victories for climate campaigners and activist investors seeking faster progress towards sustainable energy suggests he should think again.

Successful transformers manage to keep investors and customers sandwiched together in harmony. They exploit appetite for existing products, while inventing new ones, and sidestep or surf trends that threaten to knock them down. They are able to break out of what Scott Anthony of Innosight, a consultancy, calls ^the prison of the present ! the business model that they know and love ̄.

Still, deciding when and how far to change course is hard, says academic and strategy expert Rita Gunther McGrath. Adobe Systems had to endure customer protests and years of flat sales after it switched to selling cloud-based subscriptions for its software in 2011. Orsted, now hailed as a model of strategic transformation, had to navigate a deep financial crisis and political controversies to turn itself from a Danish state-controlled gas and utility business into a listed global leader in wind power. ^It wasn¨t a smooth leap, ̄ McGrath says.

My hunch is the Jammie Dodger and the KitKat will be with us for a while. As the Burton¨s deal suggests, there will almost always be a private owner ready to fill our biscuit tins.

Innosight, which is in the final stages of research into strategy shifts by makers and sellers of consumer staples, actually puts Nestl└ on its shortlist of successful strategic transformers. The very fact it has flagged the threat and potential opportunity ahead seems positive.

Confectioners have another embedded advantage. Over time, they have proved to be among the wiliest interpreters of consumers¨ wishes.

Take Burton¨s new benefactors. Michele Ferrero, the Italian company¨s reclusive founder, was a master of anticipating customers¨ needs while developing treats, such as Ferrero Rocher or Mon Ch└ri?chocolates, that they did not realise they yearned for.

He gave only one media interview, published by La Stampa after his death in 2015. In it, he described a fictional customer called Valeria, who ^decrees the success of an idea and a product and if, one day, she changes her mind and doesn¨t come to buy from you, you¨re ruined?.?.?.?Valeria is sacred. You have to study her in depth, with attention, and never improvise. You have to have a sense [for what she wants] but also do plenty of research into motivation. ̄ That sort of strategic thinking takes the biscuit.

andrew.hill@ft.com

Twitter: @andrewtghill

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