It is always a fair bet that a company with “United” in its name is going to be anything but, either in terms of its operations or management. At various times in recent years, you have only to think of United Airlines, United Utilities or Manchester United to see that the title is something of a hostage to fortune.
So it is with United Biscuits (UB), the tuck-box combine which last week announced it has had enough of struggling, is up for sale, and in discussions with several possible purchasers. The impression given is that it is for sale either in its entirety, or in parts, with any serious offers considered.
The conventional wisdom has it that this is very sad; that UB is a victim of its own appetite for expansion and a mighty empire has fallen. A reading of UB’s history supports this view. Post-War consolidation saw UB born out of the union of McVitie & Price and MacFarlane Lang. The new combine then went on a consolidation spree, popping the likes of Carr’s, Crawfords and Kemps into its shopping basket. With more than half the UK market by volume under its control by the mid-Seventies, UB was obliged to turn its acquisitive eye to the US.
Chairman Hector Laing was part of the old dynasty, and very much half man, half biscuit. He took an enormous gamble by making a play for Keebler – a biscuit manufacturer of similar size to UB – in the belief that US anti-inflationary price controls would be lifted and with them the yoke that burdened its earnings growth.
This was buccaneering stuff – the kind of mega-deal typical of a bygone era. The bet paid off. Price controls were lifted and Keebler became a growth stock once more, only this time UB owned it.
Acquisitions were pursued on this side of the Atlantic, too. Filled with the hubris of growth, UB embarked on a process of diversification, with cash directed towards opportunities outside its core areas of business. These days, there would perhaps have been a greater imperative to return some value to the shareholders, but the late-Seventies was a time when diversification was what you did after consolidation.
So it was that UB went into chocolates (Terry’s of York), other confectionery (Callard & Bowser and Trebor), fast-food (Pizzaland and Wimpy) and frozen fish (Ross Young).
Then, under the increasingly statesman-like Laing, UB launched a bid too far. Tobacco giants had been taken over by foods combines – Nabisco by RJ Reynolds, General Foods by Philip Morris – and UB looked to capitalise on a cash opportunity by entering into a bidding war with Hanson for the Imperial Group.
UB lost and the perception of its ever-increasing power began to wane. Laing quit for the House of Lords at the start of the Nineties and the share price began a protracted slide, culminating in a reduced dividend in 1995.
Something had to be done and Keebler was sold – an act symbolic of the company having come full circle.
Nearly five years on, news that the rest of UB is for sale is seen by the City as a case of nature taking its course. What goes around, comes around, and, having set the agenda in its industry for so many years, UB today finds itself in the UK market at the mercy of leaner and fitter rivals such as AB Foods and Northern Foods.
UB was victim of hubris, then, which lost touch with its core. It’s not much of a monument to Lord Laing and his former colleagues, but that’s life.
Another great UK industrial institution is to bite the dust. But that is only part of the story. To my mind, there is another way to address the history of UB during the second half of this century. It is very much a history of how they do things differently in the US.
I have touched on how UB reflects the glory days of British mega-deals. The trouble is that this part of our corporate island story also reflects a period in which the expansion of British business was driven by accountants rather than by marketers. This is not just the case with UB. Laing’s erstwhile empire is symptomatic of the issue.
In the US, marketing is a science that the brightest stars leave Harvard (or wherever) to explore. In the UK, we spent far too many years allowing industrial strategy to be driven almost exclusively by finance directors. The result is that we do not have the same sense of brand equity values as US companies. UB, with some fantastic brands under its stewardship, reflects that paucity of talent.
In the post-War period, we have not developed the super-brand in the same way as Coca-Cola and McDonald’s. Laing and his generation were past-masters of the big deal, but rather less concerned with exploiting brand values.
If there is one thing that we should learn from the passing of UB, it is that we should re-address the debate regarding accountancy’s precedence over marketing. Balance-sheet decisions can be made in a minute, brand equities take decades to mature, as most Americans know.
George Pitcher is a partner of issue management consultancy Luther Pendragon