The Value Engineers chairman Paul Walton is not alone in believing that there is no such thing as a mature market, only mature marketers.
Taken literally, that’s a little unfair on the marketers in question. After all, maturity is also a material condition affecting an increasing number of sectors in developed market economies. It cannot simply be dismissed as a variant of the ‘glass half empty’ mentality. Packaged goods companies, in particular, have long since recognised the problem of saturation. There is a natural limit to what consumers are prepared to buy by way of kitchen rolls, colas, air fresheners, processed soups and the like, governed by such factors as need, growing affluence and efficient distribution. And it’s not just the fmcg sector that is vulnerable: technology-driven products show the same tendency. PC manufacturers face a real problem having pared prices to a minimum and achieved high household penetration. Car manufacturers are increasingly struggling to differentiate themselves now that there is ‘no such thing as a bad car’.
Companies can respond in various ways to these pressures. The radical strategic review has been a popular measure – which found particular favour with a number of blue-chip names such as Procter & Gamble, Unilever, Gillette, Kellogg and Coca-Cola in the late Nineties. Only partly is this a euphemism for cost-cutting. The cloaking rhetoric about ‘delivering increased shareholder value’ may equally imply a redistribution of existing resources, such as promotional spend, behind a tighter but stronger group of core brands. This is clearly the case with, for instance, Unilever’s ‘Path to Growth’ strategy and Reckitt & Benckiser’s radical re-examination of its brands.
There may also be considerable mileage in diversifying into higher margin, or less mature, markets and sectors. A small example of this can be seen in Dell, the market-leading direct sales PC manufacturer, branching out into own-brand printers. A more significant one in the supermarkets boosting non-food product ranges, such as fashion and toiletries.
But while these measures are useful – helping to rejuvenate companies and their brands – they are unlikely to offer long-term solutions. Those must surely depend, as much as anything, on the ability to innovate effectively in the light of changing consumer behaviour. And herein lies a major potential problem for multinational companies. For how can you be truly innovative at a local level when your corporate culture is bent towards ever greater consolidation and globalisation?
This subject has clearly been a hot topic in the Unilever boardroom. The upshot of recent discussions has been a decision to invest £100m in several ventures that outsource some of the responsibility for coming up with new product ideas. The bulk of the investment has gone into Langholm Capital Partners, a fund which backs promising European consumer-leaning companies. One of the other projects will look at ‘wellbeing’ products and innovations that free time in the home.
In Unilever terms, £100m is not a great deal of money. But it is certainly an interesting investment decision, the results of which deserve to be carefully scrutinised outside of as well as within the organisation.