THE
POINT
bridgepoint.eu
Intelligent investing in Europe
from Bridgepoint
Issue 31 | May 2017
Eating disorder
Addressing the world’s growing pains
The genuine article
Corporate authenticity
in demand
Global ambition
Success on the
international stage
Not just for gamers
Augmented reality
comes of age
Contents
2
5
INS & OUTS
Bridgepoint investments
and exits across Europe
MANAGEMENT
The extra mile
Motivating staff can be hard work and
money alone is rarely the answer
10
VIEWPOINT
Shrink the world
Rising obesity has prompted a surge
in health-related businesses. But will
they make people leaner?
16
22
Where next?
International expansion is a logical step for
many businesses but it’s important to know
how to go about it
MARKETS
Honest to goodness
Battered by false promises,
consumers yearn for authenticity. And
there are considerable rewards for
companies that can deliver it
GROWTH
26
THE INTERVIEW
Striving for excellence
Thomas Babacan was once a tennis coach.
Today he makes fridges for some of the
world’s best-known supermarkets
32
TECHNOLOGY
Reality bytes
Virtual reality has been the preserve of geeky
gamers. But forecasters estimate the market
could soon be worth around $80 billion
36
LAST WORD
Does self-help help?
Is the self-help phenomenon finally running
out of steam, 80 years after How to Win
Friends and Influence People was published?
FOREWORD
Growing pains
W
ith overeating now responsible for about 5 per cent of deaths worldwide, it
comes as no surprise that rising obesity is spawning a range of fast-growing
businesses keen to tap into this phenomenon. What’s more surprising perhaps is
that the rate of transformation applies not just to the food industry, as companies
vie to offer more wholesome alternatives, but to a new mobile app industry.
THE
POINT
May 2017
Issue 31
Published by
Bladonmore (Europe) Ltd
Editor
Joanne Hart
Design
Bagshawe Associates UK LLP
Reproduction, copying or
extracting by any means
of the whole or part of this
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undertaken without the
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the publishers.
The views expressed in
The Point are not necessarily
those of Bridgepoint.
www.bridgepoint.eu
The Point (page 10) analyses whether food that is natural and organic is, by definition, healthier and explores why consumers are hungry for such products when
technology may arguably have a bigger part to play in fighting obesity.
The quest for the right answer is also the subject of “Honest to goodness” (page
16) – not about food but about authenticity and how customers, battered by false
promises, yearn for true authenticity from the corporate world. Millennials – the
generation of 20 to 30-somethings – are especially sensitive to brand honesty. For
businesses that get it right, the rewards are huge, even in the B2B space, which has
been slow to learn from its consumer brothers and sisters.
As we have learned and encouraged in the businesses that Bridgepoint owns, in
almost every industry companies are considering driving sales growth through
internationalisation. The Point explains that, while the benefits are many, so too are
the pitfalls (page 22). And on a similar theme (page 26), we discover how AHT
Cooling Systems and its CEO, Thomas Babacan, have successfully responded to
consumer demand to build up an international presence and become the undisputed
market leader in their sector.
It all sounds good in theory, doesn’t it? Motivation is rightly a key component for
a business, especially in times of uncertainty, as a well-motivated workforce is
enthusiastic, productive and good to be around. But nowadays, as we show in ‘The
extra mile’ (page 5), traditional motivating factors such as remuneration are no longer
sufficient – feeling under-rewarded demotivates but it doesn’t necessarily work the
other way round.
In our regular ‘Ins & Outs’ (page 2), we outline news of acquisitions in the UK,
Portugal and Sweden, as well as the successful sale of Nordic Cinema Group to New
York-listed AMC Theatres for US$929 million and the £835 million sale of Oasis
Dental Care to private health group Bupa.
And finally, our guest columnist Paul Croughton, of the luxury magazine Robb
Report, writes, with his tongue firmly in his cheek, about the rise of self-help books,
and examines the growing backlash against their
advice (“Last Word”, page 36).
We always enjoy reading your feedback, so
please continue to let us know what you think
of The Point via [email protected].
Enjoy this edition n
William Jackson
is managing partner of Bridgepoint
1
INS &OUTS
Moving into top gear
Zenith, the UK’s leading
independent car leasing
group, has been acquired by
Bridgepoint in a transaction
totalling £750 million.
The UK fleet services market is
valued at around £14 billion annually
and is growing fast, thanks to
increased outsourcing and rising
employment.
Zenith is a leader in the field with a
proven business model and an
unbroken track record of growth
over many years. Focused on both
the corporate car and consumer
markets, the company provides a
range of services, such as funding
company cars or commercial
vehicles and delivering
fully outsourced fleet
management services.
“Zenith is already best-in-class
and benefits from an exceptional
management team. With them, we
believe that the business can
continue its impressive growth
trajectory through a continued focus
on customer service, technology
and targeted acquisition activity,”
says Emma Watford, partner at
Bridgepoint and head of its business
services sector team.
Established in 1989 and
headquartered in Leeds, Yorkshire,
Zenith also provides “white label”
back office fleet management
systems and services to vehicle
manufacturers and
financial services
businesses. The company
specialises in flexible employee
benefit schemes, too, including
salary sacrifice, where employees
lease cars for personal use. This
market has tripled in the last three
years and is expected to continue
expanding over the coming years.
Tim Buchan, chief executive
officer of Zenith, says: “Bridgepoint
share our ambitions to consolidate
and grow our position as the number
one corporate fleet provider in the
UK, transforming Zenith into a
broader-based business and
extending the value proposition in
both the UK and Europe.” n
Bridgepoint sells big-screen pioneer
Bridgepoint has exited
Nordic Cinema Group, the
largest cinema operator in
the Nordic region and the
Baltics. The sale, to
New York listed AMC
Theatres, is valued at
US$929 million.
Based in Stockholm,
Nordic Cinema Group
operates across Scandinavia, as well as Finland,
Estonia, Latvia and
Lithuania. The company
2
has a dominant position in
its markets and delivered
revenues of SEK 3.16 billion
in the 12 months to
September 2016.
Acquired by
Bridgepoint in 2015,
Nordic has grown
substantially over
the past two
years,
benefiting
from
widespread
investment, as Bridgepoint
director Mika Herold
explains: “Working with
Bridgepoint, Nordic opened
a new flagship
cinema in the
Stockholm region,
introduced new cinema
experiences to customers
such as the first Nordic
IMAX theatre, three Scape
premium large-format
screens and improved food
and beverage offerings
across its network. As the
undisputed cinema group
leader in the Nordic region
and the Baltics, the
business is well placed for
further growth.” n
UK’s leading dental
operator extraction
Vitamin
boost
Bridgepoint Development Capital
(BDC) has acquired a majority
shareholding in Stockholmbased Vitamin Well, a
market-leading business in the
functional drinks sector.
Established in 2006, the
company develops, markets and
sells high-quality products for
health-conscious and active
consumers under brands
including Vitamin Well, NOBE
aloe vera and NOCCO. Over the
past decade, Vitamin Well has
Bridgepoint has sold Oasis Dental
Care to private health group Bupa in
a transaction valuing the business at
£835 million.
Acquired by Bridgepoint in 2013,
Oasis is the UK’s leading private
dental services provider, with 380
practices and over 1,800 dentists.
Under Bridgepoint ownership,
Oasis has been transformed through
organic and acquisition-led growth.
EBITDA tripled, as the group
acquired 191 independent dental
practices, opened in
the Republic of
Ireland and made
considerable investments in marketing and clinical
infrastructure. Oasis also extended
opening hours, introduced
transparent pricing and ran the first
national dental chain TV campaign,
prompting a 12 per cent rise in
appointments
“Oasis’ performance has been
impressive. With its robust clinical
platform and a commitment to
quality and innovation, it has
become the leading branded dental
operator of scale in the UK. It will
continue to lead future consolidation
of the UK dentistry market as it
extends its brand in the market,”
says Bridgepoint partner and head of
healthcare investment Jamie Wyatt.
UK dentistry is a £7 billion market
with strong long-term growth drivers,
including favourable demographics,
government policy trends and
the growth in
cosmetic dentistry.
“Our growth is
accelerating and
enthusiasm is building among
dentists and customers. Bridgepoint
has been very good at asking us
what our world will look like and
how we can make sure we're winning
in five years’ time. It's been a
very motivating way to run a
business,” Justin Ash, Oasis chief
executive, explains n
expanded significantly in its
domestic market and moved into
28 countries across Europe.
BDC partner Johan Dahlfors
says: “Consumers increasingly
seek healthier alternatives to
carbonated soft drinks and
Vitamin Well’s products cater to
this growing demand. We look
forward to working with a strong
management team to drive
innovation, accelerate growth in
the Nordic region and broaden
the European footprint.” n
3
Sapec sows seeds of
long-term growth
BDC exits
TMF expert
The Agro Business interests of
Belgium-listed conglomerate
Sapec Group have been acquired
by Bridgepoint in a transaction
valued at €456 million.
Headquartered in Portugal,
Sapec Agro Business (SAB) is the
number one crop-protection
specialist in Portugal and a global
leader in crop nutrition, with
revenues of more than €225 million
and sales in over 70 countries. It
develops, manufactures and
supplies crop-protection products,
such as herbicides, insecticides
and fungicides, and produces
speciality fertilisers, such as
micronutrients and biostimulants.
“Sapec Agro Business is now
ready to accelerate growth and
gain scale as the market consolidates. We believe there is an
opportunity to use the group’s
Bridgepoint Development
Capital (BDC) has exited
Phlexglobal, the specialist
provider of document management solutions and related
services to the global clinical
research market.
Renowned in its field,
Phlexglobal has expanded
significantly since partnering
with BDC in 2014, extending its
customer base, expanding its
operations and developing
new platforms.
“As the outsourced pharmaceutical industry has grown on
the back of increased R&D
spend and more complex regulation, so Phlexglobal has
expanded with new technology
and services. By extending its
reach to customers, the
company is now well placed to
accelerate development further,”
says BDC
partner
Alan Payne.
Headquartered in Amersham,
Buckinghamshire, Phlexglobal is
a world leader in the provision of
electronic Trial Master File
(eTMF) systems and services.
These systems facilitate the
evaluation of pharmaceutical
trials and the quality of the data
produced n
cutting-edge R&D and
expertise in the
complex regulatory agro environment to drive further revenue
growth, enter new territories and
launch new customised products.
We will also explore consolidation
opportunities,” says Bridgepoint
partner Héctor Pérez.
Crop protection and crop
nutrition are growing markets, as
farmers and growers seek to
address challenges, such as
population growth and dietary
shifts. SAB also benefits from
targeting high-value crops such as
fruit, vegetables and vines.
Sapec Agro Business chief
executive Eric van Innis says:
“These are exciting times for Sapec
Agro Business and its customers in
what remains an attractive longterm growth market.” n
1st Credit transfer
Award-winning ethical
debt purchaser 1st Credit
has been sold by Bridgepoint to European
credit management services
group Intrum Justitia, for
an enterprise value of
£130 million.
4
Headquartered in
Reigate, Kent, 1st Credit
has over 100,000
customers and
arrangements of
more than £300
million. The company
acquires debt portfolios
from banks, utility
suppliers and telecoms
companies and enters into
long-term repayment
agreements with
consumers.
Authorised by the
Financial Conduct
Authority, 1st Credit has
achieved a three-star
Investor in Customers
accreditation for three
years running for its high
levels of customer service.
In 2015 it increased collections revenue by 18 per
cent to £50.1 million, while
EBITDA rose 22 per cent
to £33.2 million n
MANAGEMENT
The
extra
mile
A well-motivated workforce is
enthusiastic, productive and
good to be around. Above all,
motivation is a key component
of business success. But
finding the right formula can be
difficult, especially today.
5
F
ew would disagree that the
past 12 months have been
full of surprises. For some,
these have been welcome; for
others, less so. Either way, events
of the past year have had a
profound effect on business, with
many long-held assumptions about
the economic and political
framework in which companies
operate now shrouded in murk.
Looking ahead, uncertainty is
expected to persist for several
years, creating a distinct, and
often frustrating, loss of visibility
for businesses of every shape and
size. Not only does this
unpredictability make investment
decisions difficult, it also presents
a significant challenge to anyone
who has a company to
build or a target to
hit, and a team that
needs motivating in
‘‘
6
In an age where
shop-floor workers,
senior managers
and almost
everyone in
between are glued
to games such as
Candy Crush, it
seems only logical
to use a bit of gameplaying to spice up
work performance”
order to get there. How do you
keep everyone pulling together
and concentrating on the task in
hand when you can barely see
past the next bend in the road?
The rise of the gig economy and
the surge in the number of
contractual or freelance workers
present further challenges. Their
relationship with employers tends
to be short term so they may be
less motivated to maximise their
output. And for managers, it may
be considerably harder to motivate
a team whose very composition is
constantly changing.
The power of empowerment
As a leader, says Katia Beauchamp,
co-founder and CEO of beauty box
business Birchbox, the place to
start is with yourself. “The best
way to motivate people is not with
options and incentives – although
everyone in this firm is an equity
holder – it’s to make them feel like
owners themselves. If you
empower your team, it really
makes all the difference: let them
know that they are trusted to
make decisions and to make
mistakes, and that if they do make
mistakes it doesn’t mean you will
stop trusting them. Because to
get real growth you have to
make mistakes.”
Most people have worked at
one time or another for the kind of
boss whose instinctive reaction
when things get tricky is to look
for a patsy on whom to offload the
blame. Don’t be that boss –
instead take a leaf from Microsoft
chief executive Satya Nadella’s
book. He recently revealed the
contents of an email he sent
to the team responsible for
last year’s disastrous artificial intelligence chatbot Tay,
which had to be hastily unplugged
after its tweets, initially harmless,
descended rapidly into racism and
foul language.
The company was forced to
make a public apology and endure
considerable humiliation. After
such an embarrassing episode,
many outsiders might have
expected Nadella to heap
opprobrium on hapless colleagues.
Not a bit of it: “Keep pushing and
keep learning,” went Nadella’s
uplifting message. “The key is to
keep learning and keep improving.”
Times of trouble or uncertainty
are opportunities to flex your
motivational leadership muscles,
agrees Harvard Business School
graduate Beauchamp. Birchbox
has 1 million subscribers across
the US, UK, France, Spain, Belgium
and Ireland and has been credited
with creating a brand-new
category, the so-called subscription box model. But it has also
struggled with explosive competition from deep-pocketed rivals,
including the biggest beast in the
e-commerce jungle, Amazon,
which started a rival service
within a year of Birchbox’s launch.
To cope with that kind of
challenge requires resilience and
agility, and the readiness to admit
that you don’t know everything.
“As a leader you are not some
anointed person with all the right
answers. There are always a
million answers. What the leader
does is choose a destination and
then execute. If it’s not panning
out then you choose another place
to go,” says Beauchamp.
Superchickens and eggs
There is also, of course, the vexed
question of productivity and the
ongoing debate over the link
between motivated employees and
increased output. One popular
approach in recent years has been
the ‘Superstars’ model, predicated
on selecting the most motivated
and productive individuals from
across the business and putting
them together into hyper-effective
‘dream teams’.
It sounds like common sense
but, as CEO turned business
author and speaker Margaret
Heffernan has noted, there are
problems with this approach,
illustrated by the unlikelysounding ‘superchickens’ experiment conducted by biologist
William Muir at Purdue University
back in the 1990s. Looking to
maximise egg-laying in the poultry
industry, Muir compared the
fortunes of a flock of average
egg producers with those of a
specially chosen group of
super-productive fowl over
the course of six generations.
At the end of the trial, the
average egg layers were plump
and healthy and their productivity
had increased. The superchickens,
however, had had a bad time of it
– only three were left alive, and
they were featherless and bleeding.
The rest had all been pecked to
death by their flockmates.
The take-home messages for
motivation, says Heffernan, are
that there is such a thing as
unhealthy rivalry, that outstanding
individual performances often
come at the expense of the whole
and that if you treat people like lab
rats (or chickens) then that’s how
they will behave.
“There’s lots of academic
research into team-building and
what matters is not so much the
intellectual stuff like IQ, but
social skills – how in tune they all
are with each other, whether they
listen and whether someone is
overly dominant in the group,”
she says.
‘‘
The ‘Superstars’ model is
predicated on selecting the most
motivated and productive individuals from across the business and
putting them together into hypereffective ‘dream teams’”
7
Workforce motivation in
uncertain times: a six-point plan
1. Don’t pretend to know what’s going to happen in
the future. Instead, paint a picture of what it might
be – a vision of the snow-capped mountain peaks
helps people when they are struggling through the
crocodile-infested swamp.
2. Understand organisational politics, but rise above
them. Politics come to the fore when the way
ahead is uncertain and it’s naive to say that you
should ignore them. But neither should you be
partisan – be aware but don’t take sides.
3. Stay focused on the task in hand – speed, service,
execution – whatever your core competency is.
This is really important. Don’t be distracted by big
external events that you can do nothing about.
4. Talk about “we” not “you”. Like an army officer
leading the troops, you have to foster a sense of
being in it together. Identify with your foot soldiers,
but not so much that you fail to tackle
performance issues.
5. Have a Plan B. When things go wrong, it’s vital not
to panic – having a back-up plan helps you to keep
your cool when all about you are losing theirs.
6. Tell the truth and don’t pretend to be perfect.
By definition, uncertain times mean that you won’t
always know what to do – you will gain respect by
admitting that, and lose it if you try to bluff or
cover up.
Devised by Gareth Jones, a fellow of the Centre for Management
Development at London Business School
8
Play the game
Gamification is another trendy
topic in the motivation debate. In
an age where shop-floor workers,
senior managers and almost
everyone in between are glued to
games such as Candy Crush, it
seems only logical to use a bit of
game-playing to spice up work
performance too. US IT giant
Cisco is one of many companies to
have used game-style challenges
to encourage the sharing of
knowledge and ideas between its
thousands of employees across the
globe. By setting goals and
awarding virtual prizes to users,
the company has boosted the
take-up of its intranet – helping to
break down inter-departmental
silos by rewarding employees who
answer each other’s questions
with a higher ranking.
“The best aspect of gamification
tools is that they are social,” says
Heffernan. “It’s a way to say thank
you that is easily visible to others.
And for low-risk activities
they can provide small, immediate
rewards.”
But in the long run the novelty
of work-orientated games can
wane, she warns. “It’s fun to get a
star the first few times. But after a
few weeks the effect wears off.”
Warren Jenchner, managing
director of south east
London-based specialist lift
business Apex Lifts, prefers
to use more traditional
techniques with his small but
mixed workforce of 120, which
includes factory workers, service
engineers, salespeople and
administrative staff. “You have to
listen to people, and really lead
rather than just shout. That’s
something that I’ve found comes
more naturally with age and
experience,” he says.
Money alone is not a good
motivator – while feeling underrewarded will demotivate, it
doesn’t work the other way round.
Generous pay does not produce a
proportional boost in productivity.
Instead, a few cheaper but more
creative methods can yield results.
“It’s important to look after
people’s wellbeing, because when
someone is off ill, it can have a
really big impact in a smaller
business like ours,” says Jenchner.
So at Apex there’s a gym with a
personal trainer and a proper
kitchen and lounge area where
people are encouraged to sit
together and chew over shared
issues while eating their meals.
Uncertainty over prospects can
breed anxiety and loss of focus, so
an important part of maintaining
levels of motivation is to make
your people feel valued and looked
after, agrees Sir Cary Cooper, 50th
anniversary professor of organisational psychology and health at
‘‘
Money alone is not
a good motivator –
while feeling underrewarded will
demotivate, it
doesn’t work the
other way round”
‘‘
Wellbeing has gone
from a nice-to-have
to a must-have.
Its impact can be
profound but you
can’t just have a
few bean bags and
pool tables and
some salads in
the canteen”
Alliance Manchester Business
School. “Wellbeing has gone from
a nice-to-have to a must-have. Its
impact can be profound but you
can’t just have a few bean bags
and pool tables and some salads in
the canteen; that won’t cut it.”
Cooper’s top tips for making
sustainable improvements in
motivation and engagement
involve no quick fixes. “It’s not
easy – it starts with culture, and
with managers who operate
through praise and reward rather
than criticism. So identify your
most socially adept line managers,
and train them,” he says.
Above all, as a leader you have
to grow and develop yourself, just
as you require others to. “I now
have a much more philosophical
definition of success,” says
Birchbox’s Beauchamp. “Your
job is not to get praise from your
team but to make sure that
they are coming to work happy
and motivated.”
It’s grown-up, effective and
much more sustainable, but she
admits to the odd pang of
nostalgia for the days when the
wins were simpler and more
clearly visible than they are today.
“Then it was all about ‘Wow! I just
closed this brand.’ Now I pat other
people on the back, but it’s much
rarer to get a pat on the back
yourself,” she says n
9
VIEWPOINT
Shrink
the world
10
Rising obesity
worldwide has spawned
a range of fast-growing
businesses in industries
ranging from food
manufacturing to app
development. Many
benefit from mistaken
perceptions about
health and nutrition.
A
mong the more ghoulish
symbols of the obesity
epidemic, Goliath Casket
stands out – a firm that crafts
coffins for the heaviest corpses.
The US manufacturer has been
doing a roaring trade since the
mid-1980s in super-sized burial
receptacles, which can contain a
body weighing up to 72 stone
(more than 450kg.)
While the US is seen as the
heartland of the bulging waistline,
obesity is an increasingly global
problem. More than 2.1 billion
people – approaching a third of
the world’s population – are
overweight or obese, based on the
World Health Organization
figures. That is equivalent to
about four times the European
Union’s 500 million population.
Overeating is now responsible
for around 5 per cent of all global
deaths, imposing an economic
cost of around $2 trillion a year,
similar to the impact of smoking,
armed violence or terrorism,
according to an analysis by the
McKinsey Global Institute. Nor is
this any longer just a rich-world
problem. Clothing sizes are rising
along with household incomes in
the likes of China and Mexico too.
“This is a major challenge for
the food industry. Big food firms
risk being vilified rather like
tobacco companies were in past
decades,” says Dr Alan Russell,
director of the Disruptive Health
Technology Institute at Carnegie
Mellon University.
Consumer fightback
Consumers are already fighting
back. Many display a growing
preference for what they perceive
as healthier foods, driving a
11
transformation in the food
industry, as companies battle to
offer more wholesome alternatives
to traditional treats. And with
consumer tastes changing fast,
international giants face a rising
insurgency from smaller rivals,
many of which are growing at a
rapid rate.
“There is a race to find the top
emerging brands in healthy
natural foods,” says Erin Lash, a
food industry expert at US
research firm Morningstar. “Aside
from the possibility of strong sales
growth, early investors in such
companies can expect heavy
bidding from large food companies
that want to revive revenue
growth, which in many cases has
been stagnant for years.”
The giants of the industry have
even been setting up internal
venture capital funds to sniff out
the next big brands. In June last
year, Kellogg joined this search
with a fund called eighteen94
capital. A similar vehicle by
General Mills, called 301 INC, has
focused heavily on increasing
exposure to healthy food-makers,
taking stakes in cottage cheese
maker Good Culture, plant-based
food-maker Beyond Meat and kale
chips brand Rhythm Superfoods.
But while the fastest-growing
upstarts have usually been
focused on producing food with
natural and healthy ingredients,
they have rarely promoted weight
‘‘
12
Despite the
growing
prevalence of
obesity, diet has
become a dirty
word in the food
industry”
loss. One of the fastest-growing
food firms in the UK, for example,
is Heck Food, a sausage and
burger maker that has achieved
sales growth of around 170 per
cent over the past three years.
The gourmet range promotes its
use of natural ingredients but,
while these are leaner than
traditional alternatives, the firm
has not focused its marketing on
calorie restriction. Similarly, Bulk
Powders, with sales growth of 78
per cent over the past three years,
produces the whey protein
powders beloved of weight lifters,
along with nut butters. Its allnatural peanut butter may be
healthy in moderation but, at
around 46 per cent fat, would not
be recommended for those aiming
to slim down.
Diet: a dirty word
And despite the growing
prevalence of obesity, diet has
become a dirty word in the food
industry. Most diet or light
products have been having a
tough time. Lean Cuisine, owned
by the Swiss titan Nestlé, the
world’s largest food and
drink company by
revenue, has only
recently pulled out of
a multi-year sales
slump, with revenue declining in
double digits annually. Jeff
Hamilton, president of Nestlé
foods division, appears to have
helped reinvigorate the line by
shifting the focus away from low
fat and low calorie, to stress
products that are high-protein,
gluten-free and free from
genetically modified organisms.
A new comfort selection even
includes such staples as meatloaf
and mashed potatoes.
Meanwhile, General Mills faces
fast-declining sales of Yoplait
Light, the low-fat yogurt once
beloved of dieters.
“The focus is no longer on
weight loss,” says Lash. “Calorie
counting is out of vogue. There is
a perception that calorierestricted diets don’t work.”
Instead, consumers are hungry for
products that are natural, organic
and perceived to be healthy in a
broader sense.
The svelte and muscular Tom
‘‘
Some evidence suggests that diet or
healthy foods delude people into thinking
they are eating less and they make up for
the deficit and then some. All food
companies want people to eat more of
their products, not less”
Bilyeu, the young co-founder of
protein bar manufacturer Quest
Nutrition, grew up in a morbidly
obese family. Quest has achieved
sales growth of 57,000 per cent in
just three years and Bilyeu says
that one of his missions was to
create a product that would help
people trim their waistlines.
But while protein bars can help
gym rats put on muscle as part of a
balanced diet, no nutritionist
would argue that they will
promote weight loss for those
whose health club memberships
go unused. And many do, with the
US National Public radio reporting
that gyms typically lose around
half their members every year,
while even among members,
non-attendance rates are often
high. Adding extra protein to the
diets of such gym shirkers will lead
to further bulking up in all the
wrong ways.
Among consumers, however,
natural ingredients trump weight
loss, it seems.
“People are gravitating towards
products where they recognise
and understand the ingredients on
the labels, even if that means
higher calories,” says Lash. US
chocolate titan Hershey, for
example, has been moving away
from the use of the intimidatingly
polysyllabic emulsifier polyglycerol
polyricinoleate, or PGPR, which
helps chocolate flow into moulds.
But the transition required extra
cocoa butter, which boosted the
calorie count of its bars.
Kindly rethink
Snack bar maker KIND, which
uses real ingredients, has come
under fire from the US Food and
Drug Administration (FDA) for
using the term healthy on its
packaging, despite the high fat
content of the nuts used in its
products. KIND has petitioned the
FDA to update its guidelines,
contending that the healthy fats
used in almonds shouldn’t count
against it. (The FDA has said it is
re-evaluating its standards.)
“KIND bars are not about
dieting; they are about incorporating whole foods, such as nuts
and grains, with some sugar and
chocolate thrown in,” says Marion
Nestle, a professor of nutrition,
food studies and public health at
New York University. “Are they
really healthy? Well, that depends
on everything else you eat.”
Companies are thus responding
to consumer preferences. Natural
or organic ingredients won’t lead
to weight loss, all other things
being equal. They will, however,
fatten corporate revenue growth.
Within the cereal market, for
example, granola has come to be
seen as a healthy alternative for
breakfast, spawning numerous
fast-growing start-ups. In fact,
granola can be a nutritional
false friend, with some containing
more sugar than regular fizzy
drinks and more fat than a serving
of fries.
The bottom line is that smart
food companies may be able to
13
‘‘
14
There are now more than
150,000 health-related
applications in the Apple
store, with forecasts
suggesting the mobile
health industry will be worth
$21.5 billion by 2018”
generate revenue growth by
chiming with the zeitgeist but
they are highly unlikely to offer a
solution to the rising obesity
epidemic.
“Obesity is about calorie
balance and particular foods don’t
help unless they encourage people
to eat less in general,” says Nestle.
“Some evidence suggests that diet
or healthy foods delude people
into thinking they are eating less
and they make up for the deficit
and then some. All food companies
want people to eat more of their
products, not less.”
Whatever the impact on
waistlines, innovative food
companies are blossoming, with
the ‘health-conscious’ market
expected to continue growing at
a rapid rate, as operators benefit
from mistaken public assumptions
about healthy food and
weight loss.
“Ultimately, the evidence
suggests that while consumers say
they want healthier alternatives,
they are unwilling to sacrifice
taste,” says Lash. “The health-food
market looks set to continue to
grow fast even if it doesn’t always
help people to get slimmer.”
‘‘
Tech to the rescue
expected to soar by around 40 per
Russell believes that consumer
cent in the western Pacific,
technology may have a bigger part
including China. As a result,
to play in fighting the rising tide of
companies that produce insulin
obesity. “Companies producing
used to control diabetes are
apps that promote healthy
expected to deliver robust
decisions don’t have a vested
revenue gains over the coming
interest in you eating more,” he
decades. Firms involved in kidney
observes. “Instead, they try to help
dialysis also offer potential for
people stay on track with their
strong growth, along with
broader health goals.”
companies that produce special
There are now more than
equipment for overweight hospital
150,000 health-related applications patients, such as beds and trolleys
in the Apple store,
many of which are
Businesses involved in treatment
focused on
rather
than prevention are likely to
nutrition. And a
remain
among the biggest
study by BCC
Research forecasts
beneficiaries from obesity”
that the mobile
health industry will be worth
able to handle the morbidly obese.
$21.5 billion by 2018.
Other common side-effects of
Inevitably perhaps, businesses
obesity include high cholesterol,
involved in treatment rather than
obstructive sleep apnoea, cancer
prevention are likely to remain
and musculoskeletal disorders
among the biggest beneficiaries
such as osteoarthritis. Such health
from obesity. Type 2 diabetes, for
problems could prove magnets for
example, is linked to weight gain
enterprising businesses.
and is on track to surge by 19 per
Meanwhile, back in Indiana,
cent in Europe between 2015 and
Goliath Casket will almost
2040, according to the Intercertainly continue to flourish as it
national Diabetes Federation. Over caters to the needs of the US’
the same period, the disease is
larger citizens n
‘‘
Overeating is now
responsible for
around 5 per cent
of all global deaths,
imposing an
economic cost of
around $2 trillion
a year”
15
MARKETS
16
Honest
to goodness
In a world where marketing-speak is both uniform and pervasive,
there is an increasing suspicion of the artificial, overly-crafted messages
beloved of many large companies. Instead, customers are drawn
towards businesses that appear to offer an authentic approach.
A
recent study, by communications agency Cohn &
Wolfe, revealed that four
out of five consumers across the
world do not believe brands are
honest. Western Europeans were
found to be the most cynical of all
surveyed consumers, with only 7
per cent in the UK, France and
Germany agreeing with the
statement that most brands are
“open and honest”. Americans
were more trusting at 23 per cent,
while 36 per cent of Chinese
respondents still expressed faith
in brands.
‘‘
Growing consumer scepticism
is pushing all types of businesses
to enter what some thought
leaders, such as Harvard Business
School senior fellow Bill George,
describe as an “age of authenticity”. It’s a time in which
consumer savviness, combined
with an immunity to boilerplate
marketing-speak, drives a growing
demand for corporate
transparency. In this new environment, authenticity – rather than
popularity, or utility – is the new
gold standard for attracting and
retaining customers. Businesses
that hope to thrive are increasingly being advised to conduct an
‘authenticity audit’ – a large-scale
evaluation of their messaging,
products and services, to ensure
they are not hiding behind a wellcrafted image, but are interacting
with clients and customers from a
place of authenticity.
Transparency first
But what is authenticity anyway?
The Oxford English Dictionary
defines it as “the quality of being
genuine or true”. In the context of
a brand-consumer relationship,
Authentic companies
target their message
and their products
towards a smaller
set of consumers
who share their
perspective and
are likely to
develop a longlasting loyalty”
17
however, authenticity often comes
down to transparency. In 2017,
consumers no longer believe that
companies are perfect or infallible.
Brands that attempt to project a
picture-perfect image can risk
coming across as false. Recently,
communications company Bonfire
Media invited 12,000 respondents
across 12 industries around the
world to offer their own definitions of corporate authenticity.
The most common responses
included: not sweeping problems
under the rug, and being honest
about the processes that go into
producing products and services
and the environmental impact of
consumer products.
Speaking on the survey results,
Bonfire’s then leader of corporate
affairs, Geoff Beattie, said he was
“astonished” by how clearly
customers seemed able to articulate exactly what corporate
authenticity is. Over and over
again, respondents said they
would be drawn towards “a brand
that has values and morals and
stands by them no matter what,
while honestly divulging its
practices – flaws and all”.
While authenticity would be
easy to write off as the latest
corporate buzzword, the study
also revealed that a company’s
perceived authenticity is closely
related to profits and return on
investments. A full 91 per cent of
customers – including those of
B2B businesses – were more likely
to stay loyal to companies they
perceived as authentic. Nearly half
‘‘
18
(47 per cent) of those surveyed
said they were more likely to seek
employment from an authentic
company, while 23 per cent were
more likely to back it financially.
Millennials – the generation of
20 to young 30-somethings born
from 1982–92 – are especially
sensitive to brand authenticity.
They grew up witnessing the
raw and immediate social media
platforms, and they expect and feel
entitled to an open dialogue with
the brands they use. Of all
consumers surveyed, millennials
were most likely to make strong
associations between spending
and social responsibility, with
nearly 50 per cent saying they
were more likely to use the
collapse of Enron and the 2008
crash. They also entered their
prime spending years amid global
destabilising events and declining
faith in the government and
media. This age group tends to be
particularly sceptical of corporations that try to appeal to them
with slick advertising. They are
accustomed to interacting with
brands (and celebrities) through
products or services of a brand
that shares their values and point
of view.
In 2012, its first year of selling
products, The Honest Company hit
$10 million in revenue. Just a few
years later, it is bringing in over $250
million and valued at $1.7 billion”
Point of view
“Point of view” is one of the
common qualities to emerge from
discussions of corporate authenticity. In an article for Harvard
Business Review, Amy Jen Su and
Muriel Maignan Wilkins argue
that companies that are happy to
share a specific world view
“demonstrate both strength and
flexibility”. These companies don’t
bother to cultivate a generic
identity intended to appeal to
everyone. Instead, authentic
companies target their messages
‘‘
B2B businesses communicate in a way
that is direct and data-driven, giving
clients a full and honest picture of what
their services can – and cannot – do”
and their products towards a
smaller set of consumers who share
their perspective and are likely to
develop a long-lasting loyalty.
In recent years, companies such
as The Honest Company – which
sells products targeted at environmentally conscious mothers –
have benefited from turning a
specific point of view into a
corporate ideal. Honest’s mission,
to “reduce the ubiquitous
presence of toxic chemicals in our
natural environment, man-made
environments, and our personal
environments” is clearly stated on
all messaging and products, while
the company itself invites an open
conversation with customers about
the processes behind its products
and the ingredients it uses.
The impact of selling honesty –
both in the company’s name and
as a key component of the
company’s products and business
mode – has paid off hugely. In
2012, its first year of selling
products, the company hit $10
million in revenue. Just a few years
later, it is bringing in over $250
million and is valued at $1.7 billion.
Authenticity can always come
into play when a company deals
with a setback, such as Honest did
in 2016. That year, the firm faced a
class action lawsuit alleging that
its baby formula contained unsafe
synthetic preservatives. Instead of
settling the suit behind closed
doors, Honest’s executives
decided to address the issue
directly. They released a statement
denying the claims, and listing the
various levels of testing products
undergo to meet safety standards.
They also discussed how Honest’s
executives use the baby formula
for their own infants, and admitted
how unsettling these accusations
had been to them on a personal
degree. This degree of
transparency helped the company
bounce back and continue to grow
with its brand intact, as customers
seemed reassured by the direct
and authentic response.
Khalil Grell, a branding
19
strategist with Siegel+Gale, who
speaks regularly on authenticity,
says companies’ fear of alienating
customers by taking a point of
view is often misplaced. “In fact,
consumers become much more
loyal when brands connect with
their values,” he says. US company
General Mills, for example,
recently ran a major advertising
campaign for Cheerios, including
both interracial and same-sex
families. The advertising campaign
not only succeeded in starting a
conversation, it showed a new side
of Cheerios and suggested that
the company itself is progressive
and willing to take risks in order to
share that viewpoint.
Taking a stand
In 2016, Apple took a stand on a
particularly divisive issue. After a
terrorist attack in San Bernardino,
California, the FBI requested that
Apple write software to create a
back door that would allow it to
crack open the suspect’s locked
iPhone. Apple refused to comply
with the request. In an open letter
to consumers, Apple CEO Tim
Cook presented an authentic and
impassioned reason for the
company’s refusal, saying: “The
United States government has
demanded that Apple take an
unprecedented step which
threatens the security of our
‘‘
20
Apple established
itself as a company
that puts
customers first
and holds their
security and
privacy as
sacrosanct, even
in difficult times”
customers. We oppose this order,
which has implications far beyond
the legal case at hand. This
moment calls for public discussion,
and we want our customers and
people around the country to
understand what is at stake.”
Apple went even further than
just making a statement. The next
generation of its operating system,
iOS 8, features new encryption
tools that would make it nearly
impossible for anyone to hack into
a locked phone – including the
government – thus integrating its
philosophy and perspective into
the product itself.
Cook and Apple’s stance was
controversial, with 50 per cent of
Americans in opposition to the
company’s decision. However, in
its refusal, Apple established itself
as a company that puts customers
first and holds their security and
privacy as sacrosanct, even in
difficult times.
‘‘
Among the list of top global
brands perceived as authentic, one
towards the top of the list may
come as a surprise: McDonald’s.
But McDonald’s is another
company that, like Apple in 2016,
dealt with adversity by facing it
head-on, and choosing to be
transparent with customers.
In 2010, a viral video alleged
that McDonald’s hamburgers were
not made of entirely real meat but,
rather, ‘pink slime’ – beef
trimmings treated with ammonia.
The company surprised many by
addressing the pink slime issue
head-on. It launched a new
advertising campaign where it
invited an outside investigator to
come into its food preparation
facilities and report for himself
whether he found any pink slime.
The company spoke openly about
the myths surrounding what goes
on in McDonald’s kitchens and
invited customers to see for
A full 91 per cent of customers were
more likely to stay loyal to companies
they perceived as authentic”
themselves. The result was that
consumers – whether or not they
enjoy eating at McDonald’s –
began to view the company as
more authentic, and essentially
honest in its mission and relationship with customers.
The B2B perspective
Cultivating authenticity isn’t just
important to consumer-facing
businesses. B2B businesses can
also benefit from making it the
cornerstone of every interaction
and service. Alan Cohen, chief
commercial officer of security
start-up Illumio, is a firm advocate
of authentic communication and
realistic expectation-setting,
suggesting that B2B firms can
adopt these values to great
advantage. Empathy is
fundamental to authenticity in the
B2B world, he says. “Empathy can
take the form of not just
performing a service – such as
financial services or consulting –
in a vacuum, but by clearly taking
the time to find out each
individual client’s needs and
adjusting your business
accordingly,” he says.
He notes that the best B2B
businesses communicate in a way
that is direct and data-driven,
giving clients a full and honest
picture of what their services can
– and cannot – do. In many cases,
clients don’t want to be told that
you are a fix-all for every problem,
but they do respond well to being
presented with reasonable and
reliable performance metrics.
When interacting between
businesses, as when interacting
with consumers, an authentic
business strives for candour,
openness and transparency.
In this new era of authenticity,
it may be the greatest sustainable
advantage n
21
GROWTH
Where
next?
International expansion can
deliver turbocharged growth,
when it works. But corporate
history books are littered with
examples of expensive failures.
Ensuring success involves
thought, preparation, cultural
awareness and resources.
22
F
or many companies, the
initial failure is a salutary lesson
prospect of international
for any company seeking to
expansion is the holy grail of
expand abroad, particularly at a
business. It is a promised land of
time when more businesses than
increased sales and profits and a
ever across the world are looking
route to global brand recognition
for growth in new markets.
and market dominance.
Eye on expansion
But like any worthwhile quest,
According to the Centre for
it is not easy and the road is
Economics and Business Research
littered with more failures than
(CEBR), nearly a fifth of Britain’s
success stories. Everything from
small firms intend to expand
inadequate market research
overseas by 2025. This footloose
to cultural insensitivity and
expansionist approach is expected
poor timing can derail a
to become even more pronounced
company’s expansion beyond its
after Brexit, when the UK
domestic borders.
government and business will
No one knows this better than
be heavily focused on fostering
Cath Kidston, the British retailer,
enhanced international trade deals
famed for its floral and vintage
and relationships.
designs. In 2003, 10 years after
A similar story can be heard
the business was founded,
across the EU. Around 74 per cent
Kidston attempted to expand
of European businesses are
into the US, only to withdraw
looking to expand abroad to
shortly afterwards.
access new markets for their
“Fools rush in may be the best
products and services, according
way to describe it. When we went
to the Economist Intelligence Unit
into the US we only had seven
and international expansion
stores in the UK within the
confines of the
M25. We were
You get to a certain point where you
trying to run
need a national to run the business.
before we
You
can only get so far with expats
could walk and as a
parachuted
in and you then need
small organisation
someone
with
local understanding
we were not
equipped to deal
of the market”
with that. Even just
consultancy TMF Group. And
figuring out US customs regulanearly half of those businesses cite
tions was very difficult and being
two principal reasons behind their
so far away made it hard to
ambition: increasing competition
oversee the business. We were
at home and a bid to offer more
just too young a brand,” says Cath
value to customers.
Kidston’s director of marketing
Of course, there are many
Sue Chidler.
benefits to expanding abroad,
Cath Kidston has since
particularly into large, wellregrouped and now has more than
established markets such as
180 stores outside its UK home
the US. Leading digital dictation
market. It has successfully
company BigHand, for example,
expanded into Europe and Asia
has experienced significant
and is even considering growth in
growth since expanding into
Latin America. However, Kidston’s
‘‘
North America, Australia and New
Zealand.
Founded just over 20 years ago,
the company’s technology is used
to improve the productivity of
legal, healthcare and professional
organisations and it was acquired
by Bridgepoint Development
Capital in 2012. At the time, the
US accounted for about 12 per
cent of BigHand’s revenues and
chief executive Ian Churchill was
keen to boost the company’s
international firepower. Now the
US accounts for 25 per cent of
group sales.
Transatlantic expansion has
helped deliver stellar sales, healthy
margins and strong cash conversion rates and it has been fuelled
by strategic acquisitions of several
US companies.
“About 1,000 firms are using
BigHand’s services in the UK and
1,600 overseas. Initially we
expanded into Australia and then
New Zealand, each time putting
one of our UK staff members on
the ground. We did the same when
we went into the US. The
professional services market in
the US is massive, so it has been
hugely important in helping us
gain a larger customer footprint
and we continue to evaluate
accretive add-on acquisitions,”
says Churchill.
Polish online payment service
platform PayLane is another
business that has made a real
success from international
expansion. Having started out in
Gydnia, a small town on Poland’s
Baltic coast, PayLane is now used
by merchants in 26 countries,
including the US. The payments
industry is highly regulated so
overseas expansion is complex but
PayLane had global ambitions
from the start. And its internationalisation has been achieved, amid
23
‘‘
Around 74 per cent of European
businesses are looking to expand
abroad to access new markets for
their products and services”
heavy competition from Worldpay
and US-backed Braintree, which
has been targeting expansion in
Europe.
There are many other examples
of European and US companies
looking to expand abroad.
Deliveroo, the food delivery
service, secured $275 million in
equity backing last August to fund
further domestic and international
expansion. AO, Britain’s fastgrowing white goods online
retailer, has moved into Germany
and the Netherlands, and Joules, a
rival to Cath Kidston, has been
making inroads into the US and
German markets.
Zalando was founded nine years
1
ago in a Berlin flat and is now
Europe’s largest online-only
fashion retailer shipping fashion to
more than 19 million customers.
Extraordinarily, Uber, the San
Francisco-based car service app,
only launched in 2010. Its platform
is now used in more than 580
cities worldwide. In fact, Uber’s
expansion and market disruption
have been so rapid, it has led to
riots and bans in some markets.
Heading stateside
Even the conservative German
family-owned business Lidl, the
discount grocery chain, is
targeting growth in the US. Lidl is
expected to open its first 150 US
Do your research.
Find markets with
relevant demographics
and think carefully
where to expand first.
Establish an
experienced team
of internal and external
advisers, including local
staff, who can help navigate
complex legal, political
and regulatory hurdles
in different
jurisdictions.
5
3
Do your
research.
Find markets
with relevant
demographics
and think
carefully where
to expand first.
2
TOP TIPS
FOR EXPANDING
ABROAD
5
Invest ahead of the
growth, building capacity
and readiness, in order to
capitalise quickly on a
successful overseas debut.
24
Be conscious
of cultural
sensitivities but
maintain a
company’s core
culture when
expanding.
4
stores next year in a larger debut
than was originally planned. It has
secured stores in dozens of US
cities, established a headquarters
in Arlington, Virginia and is
building warehouses in key
locations. But Lidl will have some
way to go to catch up with rival
Aldi, which already has more than
1,300 stores in the US. Market
experts believe both Aldi and Lidl’s
expansion in the US is fuelled by
the need to find new markets to
counteract slowing demand in
Europe, where both supermarket
groups dominate the discount
grocery sector.
There is almost no industry
where businesses are not considering driving sales growth through
internationalisation, as Mark
Barnes, KPMG’s leader of International Corridors, explains: “When
it comes to manufacturing, pretty
much every manufacturer in the
world is hoping to achieve global
growth by entering into new
markets.”
Avoid the pitfalls
While the benefits of expansion
are obvious – more customers,
more markets, more sales and
more profits – there are potential
pitfalls too. Expanding abroad can
go horribly wrong if it is not
properly executed. No matter how
good a product or service is in a
domestic market, for example,
expansion could be doomed if
there is fierce competition or
weak consumer demand in the
target market.
Gap, the US household retailer,
announced last year that it was
closing all its Banana Republic
stores in the UK after weak
demand led to a string of
disappointing sales results. The
ailing San Francisco-based chain
found it was unable to cope with
better European rivals such as
Inditex’s Zara and H&M. And
Tesco, once a byword for
supermarket success, failed
abysmally with Fresh & Easy, its
ill-timed and poorly executed
entry into the US.
Many companies that have lost
out when expanding abroad have
neglected to follow some simple
but essential rules, such as
carrying out detailed
research and market
testing before
launching a
full-
‘‘
No matter how
good a product or
service is in a
domestic market,
expansion could be
doomed if there is fierce
competition or weak
consumer
demand in the
target
market”
scale business. Bridgepointbacked Pret A Manger, for
example, has succeeded in the US
because it spent more than five
years testing market demand and
refining its offer through a single
store in New York before
expanding further.
Joules spent a significant
amount of time mapping the size
of various markets, as well as the
ease of doing business,
before deciding where to
expand. As chief
executive Colin
Porter
explains:
“From that
exercise, we
decided we were
going to focus on the
US and Germany as our
prime markets. We don’t
need to be everywhere. Our
strategy was let’s try and go
deeper into a couple of
markets rather than being
small in lots of markets.”
Joules also calculated
that the best way to expand
was to partner with large
department store operators such
as Nordstrom, Dillard’s and Von
Maur in the US and Peek &
Cloppenburg in Germany. “We find
the right partner and start small.
Then we build it up over time,”
says Porter.
Local expertise
BigHand’s Churchill believes one
of the most important elements of
any expansion plan is to enlist
local staff support as soon as
possible. “We found that you get
to a certain point where you need
a national to run the business. You
can only get so far with expats
parachuted in and you then need
someone with local understanding
of the market.”
Most companies agree that
local knowledge is paramount. UK
hygiene and workwear provider
Rentokil has acquired more than
100 companies since 2014 and now
generates more than 70 per cent
of its revenue from overseas.
Throughout this expansion spree,
a small and experienced central
mergers and acquisition team
worked closely with local country
and regional divisions to identify
target acquisitions that could help
fuel the company’s overall growth
and profitability.
Sometimes, however, success
might simply hinge on cultural
awareness. When Cath Kidston
was expanding in Japan, the group
soon realised that folding bank
notes was considered bad luck in
the country. Its best-selling wallets
were quickly adapted so they were
large enough to accommodate yen
notes.
“You can’t push the same
product onto every market,” says
Chidler. “You have to be open to
cultural differences which
sometimes might be staring you
right in the face.” n
25
THE INTERVIEW
Striving for
excellence
26
Thomas Babacan is chief executive of
Bridgepoint-backed AHT Cooling
Systems, a global leader in the
manufacture of fridges and freezers
for food retailers. His overriding
philosophy is simple: as long as better
is possible, good is not good enough.
W
hen Thomas Babacan was
16 years old and still at
school in Frankfurt, he
was already earning money – as a
tennis coach. A keen sportsman,
he played tennis whenever he
could and competed in tournaments across Germany. “I was a
reasonably good tennis player so I
earned money from coaching right
through until my twenties,” he says.
Babacan’s interest in sport was
not just spurred by a desire to play
but also by a desire to win. “I hate
to lose. I am fiercely competitive
and I really want to win. Even
when I was practising tennis, I
loved competing against
someone else, rather than just
against myself. Some people – and
some companies – are afraid of
comp-etition. I love it because it
stretches you and encourages you
to think of different solutions,” he
explains.
That spirit has carried Babacan
through an 18-year career in
industry, starting in 1999, when,
aged 30, he joined the treasury
department of Balzers & Leybold,
an industrial vacuum business,
which was part of the Swiss
Exchange-listed conglomerate
Oerlikon Group.
“I was approached while I was
still finishing my master’s at
Goethe University. I was at a
tennis camp when my girlfriend
called me to say the HR department had rung, asking if I would
like to join the treasury division. I
said: ‘That sounds very interesting
but what’s treasury?’ They took
me on anyway,” he says.
Babacan rose through the ranks
at speed, becoming CEO of
Oerlikon Leybold Vacuum at the
age of 35. “I was the youngest ever
‘‘
When you are dealing
with thousands of
employees, you can’t
really be close to the
people; you can’t get
your arms around the
company. But with a
smaller business, you
know the people, you
know the customers
and when you make
a decision, you see
the impact”
27
CEO of that business and the
first person to lead it who was
neither a PhD nor an engineer,”
says Babacan.
Despite his relative youth and
lack of specialist knowledge,
Babacan did well, ultimately
becoming COO of Oerlikon Group,
a company with thousands of
employees worldwide. He was also
CEO of Oerlikon Textile, Oerlikon’s
largest subsidiary at the time and
the biggest textile manufacturing
business in the world. “I ran
Oerlikon Textile for nearly three
years. It was a global business with
30 manufacturing sites worldwide
and 120 locations,” he explains.
Oerlikon Textile’s revenues
almost doubled under Babacan’s
leadership to nearly SFr2 billion
but the parent company
underwent many changes in the
years following the financial
crisis, and in 2011 he left to take up
new challenges.
Itchy feet
The following year, he joined
a family office, where he
was tasked with
building up its international presence. The
idea appealed, not least
because Babacan was
brought up in many
different places
around the world, a
background that left him
with a passion for travel
and an ease with
different cultures.
“My father was an
engineer and we travelled
extensively. When I was a
schoolboy, we spent holidays
in countries across the world,
such as South Africa, Singapore,
Saudi Arabia, Botswana and India.
It was both a pleasure and a
privilege, and when I was older I
28
‘‘
AHT is a B2B business but we are
heavily influenced by the consumer –
their buying habits have a direct impact
on us. I really enjoy that aspect of the
business. It’s very dynamic”
would sometimes work in plants
overseas while visiting my father.
To this day, I love working with
international businesses,”
he says.
Babacan found his new life
interesting, but after around 18
months he began to hanker for the
industrial world once more. In 2014,
he became CEO of valve manufacturer VAG Group, part of US-listed
Rexnord. “I had two job offers,
VAG and another one, which was a
much bigger company. I could not
decide between them but I was
talking to my wife, who is much
smarter than I am, and it became
clear that I much preferred
running a smaller business than a
larger one.
“When you are dealing with
thousands of employees, you can’t
really be close to the people; you
can’t get your arms around the
company. But with a smaller
business, you know the people,
you know the customers and
when you make a decision, you
see the impact,” he says.
Passion over ego
“At that point, I realised my indecision was all about ego. So I
decided to ignore the ego and go
with what I really wanted to do,”
he adds.
Leading VAG – and joining
Reynord’s executive board – was
fulfilling but, following some
strategic changes at the parent
company, Babacan decided to
move on. In June 2016, he became
CEO of AHT Cooling Systems.
interesting and it really is. Of
course, AHT is a B2B business but
we are heavily influenced by the
consumer – their buying habits
have a direct impact on us,” says
Babacan. “I really enjoy that aspect
of the business. It’s very dynamic,
it means you have to be flexible
and change becomes part of your
routine – which really means that
there is no routine,” he adds.
AHT traces its history back to
1442, when an ironworks was
established in Rottenmann. But its
modern incarnation dates to the
beginning of this century, when
AHT became increasingly well
known as an industrial fridge and
freezer specialist.
“I talked to Bridgepoint and the
team was very compelling. I also
did some external due diligence on
AHT and the references were very
favourable. People said it was a
good company with a strong
brand. The growth story is impressive too,” he says.
Based in Rottenmann, a small
town in Austria, AHT is a leading
manufacturer of chilled and frozen
cabinets for supermarkets and
Environmental leader
discount chains, making almost
In the vanguard of ecologically
300,000 units a year. With annual
sound technology, AHT pioneered
turnover of around €400 million,
the introduction of environmentthe group supplies major
ally friendly cooler units, using
household names across the food
propane as a refrigerant rather
retail sector, owns production
than harmful greenhouse gases.
sites in China and Brazil and
Some of its chilled cabinets
works with sales affiliates
channel the energy created by the
worldwide.
cooling process to produce heat
Well known for its supermarket
for retail sites as well, further
freezers and chilling cabinets,
reducing energy consumption.
refrigerated shelves and bottle
“From the start, I was drawn to
coolers, AHT is also the number
AHT’s focus on green technology,
one manufacturer of ice-cream
freshness and innovation. The
chests, counting the world’s
amount of energy that the
largest producers among its
company’s environmentally sound
customers. These food manufacsolutions have saved over the
turers install branded ice-cream
past decade could power a
chests in a multitude of
medium-sized town for a year,”
independent retailers, and AHT is
says Babacan.
a key supplier. “I have been
AHT is highly innovative in
involved in many different
other spheres too, specialising in
industries during my career but I
have never had
dealings with
the retail
Great people are the most important
industry and
asset of any business so we need to
this was a big
make sure that we have the right
attraction for
people on board in the right positions
me. I thought it
would be
and then empower them”
‘‘
29
Profile
Name
abacan
Thomas B
Education
Goethe University
Home
Frankfurt
with a
base in
Rottenma
nn
Age
47
Born
Frankfurt
Family
Married w
it
children b h no
ut a very
playful do
g
Car
An old black
Mercedes
First job
Coachin
g
tennis
gret
Biggest re
ort for
sh
o
to
is
Life
regrets
Interests
Travellin
g with
my wife
Greate
That m st achievem
yw
en
to me, ife is still ma t
r
e
work h ven though ried
my
as
spent meant we ha
mu
ve
togeth ch less time
er than
couple most
s
so-called “plug-in” fridges and
freezers, which are easy to install,
highly flexible and particularly
in keeping with current food
retailing trends.
“Traditionally, fridges and
freezers were built-in, particularly
in hypermarkets. But today’s
consumer increasingly prefers
smaller, local shops and this is
where plug-in systems come into
their own. Retailers can just plug
30
them in and get started and
they can be moved around easily
so they are much more flexible,”
says Babacan.
Having been at AHT for less
than a year, Babacan is impressed
with the business but ambitious
to deliver further growth. “This is
an excellent company with really
good people. It’s one of the biggest
employers in the region and many
people have been here for years –
some are even second generation.
That breeds both loyalty and
expertise. Also, it may sound
slightly sentimental but being here
in the middle of the mountains
does, I believe, encourage our
people to think about green
technology and ecological
solutions,” he says.
Combating complacency
“However, given that my motto is
‘As long as better is possible, good
is not good enough,’ I believe there
is real room for improvement and
expansion at AHT. I truly believe
that great people are the most
important asset of any business so
we need to make sure that we
have the right people on board in
the right positions and then
empower them. Some of these
people are already here but it is
also good to bring in external
appointments to encourage
business development,” he adds.
To that end Babacan has made
several new appointments - a
group COO, a head of procurement, a head of product
management and a head of
customer service. New general
managers have been appointed in
Brazil and China, the US management team has been upgraded and
an office has been been opened in
Charleston, South Carolina. “The
US is our number one priority
There are huge opportunities
across the States, especially as
consumer tastes veer from
hypermarkets to smaller, local
supermarkets,” says Babacan.
Reassuringly, AHT’s initial
expansion into the US will take
place in partnership with one of its
largest customers, a European
discounter with strong transatlantic ambitions. “Our market
share is reasonably high in Europe
but it’s still very low in the US and
‘‘
their physical
networks, while
some of the biggest
food retailers are
migrating from
hypermarkets to
smaller supermarkets and those
are our sweet spot,” says Babacan.
It has been many years since
Babacan last held a racket, but the
attitude that helped him win
games as a youth remains an
integral part of his personality and
approach to business.
“Our market is highly competitive but that’s a good thing.
Nothing is more damaging than
staying at the top of your game for
too long. That encourages laziness
I hate to lose. I am fiercely
competitive and I really
want to win”
our ‘plug-in’ solutions are pretty
rare so we are already seeing
interest from potential new
customers over there,” Babacan
explains.
The company is not seeing any
great impact from online retailing
either. “Everyone talks about
online shopping, but at the end of
the day retailers need cooling
systems and that’s what we make.
Also, discounters are our biggest
customers and they’re expanding
and complacency. So far, we are
the number one provider of plugin solutions but others are
following us so we have to stay
ahead of the pack. That comes
from investment in innovation and
in people. And that’s what we
intend to do,” he says.
Babacan is particularly
motivated to deliver results at
AHT, as he has personally invested
in the business. “I’ve always felt
like an entrepreneur and tried to
act like one in the past, behaving
as if the company’s money is my
money. Now it is – and other
colleagues are invested too – and
that creates a different spirit and
drive,” he adds n
31
TECHNOLOGY
Reality bytes
32
Virtual reality is most commonly associated with hard-core game
enthusiasts but the technology is expected to transform industries from
healthcare to engineering. And fast-acting businesses can benefit.
A
cancer patient sits in
a hospital in Sydney,
enduring yet another
gruelling, all-day chemotherapy
session.
But she’s relaxed and smiling
broadly – thanks to the magic of
virtual reality (VR), she’s escaped
the chemo ward and is instead
fulfilling her lifelong ambition to
walk the Great Wall of China.
In another ward, a frightened
youngster soon to undergo
surgery puts on a headset and
is instantly soothed as he’s
transported to the zoo to pet
the koalas.
The traditional image of VR
is that of goggle-wearing
teenage gamers, tethered to
their computers around the
clock, enthusiastically mowing
down the zombie hordes,
waging intergalactic war or
battling fantastical beasts on
mystical islands.
But there’s much more to VR
than playing games, as patients at
the pioneering Chris O’Brien
Lifehouse cancer hospital in
‘‘
Sydney have found, or children
with autism in the UK, where the
NHS is using an immersive VR
room to help them overcome
their phobias.
Beyond gaming
While gaming remains by far the
largest market for VR and
augmented reality (AR), the
technology is increasingly being
used in other areas, from healthcare, training and education to
retail, real estate, architecture,
urban planning and engineering.
With its opaque headsets, VR
isolates users from the outside
world, immersing them in an
imaginary environment – or an
exact digital replica of their real
world. AR, by contrast, allows
users to remain connected to the
outside world via clear goggles or
their smartphones, on which
digital images are overlaid,
typified by Nintendo’s hugely
popular Pokémon Go game
launched last year.
According to consultancy
Deloitte, recent advances in AR
This technology has the potential to
transform how we interact with almost
every industry today and we think it will
be equally transformative from a
consumer and enterprise perspective”
and VR will completely change
the way both consumers and
businesses interact with
technology.
In its Tech Trends 2017 report,
Deloitte notes that the potential
for businesses to harness this
mixed reality technology is a real
cause for excitement, even
though the consumer buzz
remains focused on games and
entertainment.
“Though it may be several years
before mixed reality’s endgame
materialises, the time to begin
exploring this dynamic new world
– and the digital assets it
comprises – is now,” say Deloitte
analysts Nelson Kunkel and
Steve Soechtig.
In their vision of the factory
floor of the future, they see smart
goggles providing maintenance
workers with metrics, instructions
and remote support. Some
colleagues will have goggles with
cameras and motion sensors, on
which assembly instructions will
be overlaid and training given;
others will be guided through the
warehouse by their smart goggles.
All devices will be connected to
a sophisticated data management
system and, as a result, the
effectiveness and engagement of
workers will be dramatically
enhanced, Deloitte says.
33
Transformative solutions
Analysts at Goldman Sachs also
believe that business and public
sector demand will play an
increasingly important role in the
VR world, as managing director
Heather Bellini explains.
“We think this technology has
the potential to transform how we
interact with almost every
industry today and we think it will
be equally transformative from a
consumer and enterprise perspective,” she says.
In a major report on the sector
last year – Virtual and Augmented
Reality: Understanding the race
for the next computing platform –
Goldman Sachs suggests that VR
and AR have the potential to
become the next big computing
platform after the smartphone, “as
transformative as when we used to
see people walking around the
streets… holding a big brick to
their ear and talking to someone
ever headset – dubbed The Sword
that we could not see on the
of Damocles – was created in the
other end”.
late 1960s but weighed so much it
Goldman estimates that the
had to be suspended from the
mixed reality market will grow to
laboratory ceiling by a cable.
around $80 billion by 2025. But,
There was a surge of interest in
despite the huge hype that has
VR in the 1990s, when Nintendo
surrounded VR – and the many
launched its 3D video game
billions of dollars poured into its
console, Virtual Boy. But the
development – it has consistently
technology failed to live up to the
failed to fulfil expectations.
hype and consumers, disappointed
The headsets
Goldman estimates that the
are expensive and
often unwieldy,
mixed reality market will grow to
and prolonged use
around $80 billion by 2025 and if
can cause a form of seasickness, as the brain and body developers are able to
struggle to keep up with the overcome current technical
360-degree action of the
challenges, that figure could
virtual world in which the surge to more than $180 billion”
wearer is immersed. But a
wave of technological
with the poor graphics and
advances could mean that VR is
low-quality games, eventually
finally about to make the major
lost interest.
breakthrough that has been
Looking ahead, there is still a
promised for so long.
chance that VR will once again fail
VR has been around in various
to live up to its promise, remaining
forms since the 1950s. The firstlargely the preserve of gamers. But
even in this delayed uptake
scenario, Goldman Sachs believes
the market will be worth around
$23 billion by 2025. And if
developers can overcome some of
the current technical challenges
that are preventing widespread
adoption of the technology,
such as poor battery life
and limited mobility for
users, that figure
could surge to more
than $180 billion.
‘‘
Enter
Facebook
A defining moment
came in 2014, when
social media giant
Facebook bought the US
start-up Oculus Rift for $2 billion.
Oculus Rift – oculus is Latin for
34
‘‘
eye and rift refers to the gap
between the real and the virtual
world – was one of the pioneers of
VR although when Facebook
bought it, the company had only a
single prototype headset.
Unveiling his big bet on the
technology, Facebook’s Mark
Zuckerberg predicted: “One day…
this kind of immersive, augmented
reality will become a part of daily
life for billions of people.
“Virtual reality was once the
dream of science fiction. But the
internet was also once a dream
and so were computers and
smartphones. The future
is coming.”
That future has yet to arrive,
however, and even the mighty
Facebook has found the going
tougher than it expected. In
March this year, it was forced to
slash the price of the Rift headset
and Touch wireless controllers by
25 per cent, to $600, after
disappointing sales.
Europe VR landscape
Historically, the US has led the
way on technological development
but Europe now has a burgeoning
VR ecosystem, with a growing
international impact. According to
a survey by the Silicon Valleybased venture firm, The Venture
Reality Fund, which tracks the AR
and VR markets, there are some
300 start-ups in Europe
developing the technology.
They include Swiss company
MindMaze, whose mix of AR and
VR technology is used to aid the
recovery of stroke victims. The
Lausanne-based company last
year raised $100 million, the
largest amount in one round by
any European VR company.
Spain-based behavioural health
technology company Psious is
another European firm leading
development in VR. Its platform is
used by health professionals to
treat anxiety disorders, fears and
phobias and it is growing fast.
More than half of the 300
companies tracked by The
Venture Reality Fund are based in
the UK, France, Germany and
Sweden, with France taking the
lead in Continental Europe.
Pioneering names include CCP
Games of Iceland, nDreams of the
UK, Resolution Games of Sweden
and VideoStitch and Giroptic
of France.
As industries outside the core
gaming market increasingly adopt
the technology, so public
awareness of VR is growing. And
on the commercial front, the real
estate and healthcare markets are
expected to lead the way, along
with retail.
Many would say that the
internet has already transformed
the retail sector. Now according to
Deloitte, VR is poised to
Consider, for
example, ‘walking’
through a virtual
cruise-ship cabin
or hotel suite
before booking”
“revolutionise” the industry.
“Consider, for example, ‘walking’
through a virtual cruise-ship cabin
or hotel suite before booking it or
immersing yourself in a virtual
jewellery store where you try on
necklaces that catch your eye,” the
firm says.
Retailers are already offering
shoppers VR fitting rooms while
furniture giant IKEA has been
using AR technology for several
years – customers download the
app on their smartphones, take
pictures of their rooms and then
select items from the catalogue to
see how they would look.
The streaming of live sporting
events or concerts is also a
potentially huge market for VR.
Users will feel as though they are
physically there and will even be
able to choose a particular player
or band member to follow, thus
seeing the proceedings from
their perspective.
In real estate, high-end
companies such as Sotheby’s are
already offering their cash-rich,
time-poor clients virtual tours of
luxury properties.
As they don their headsets and
the real world fades away, the
billionaire property buyers may
feel a little uncomfortable. But the
bricks they used to hold to their
ears in the 1980s weren’t that
comfortable either – and just look
how they turned out n
35
LAST WORD
Does self-help help?
Self-help books promise eager readers everything from everlasting love to the perfect body
to riches beyond the dreams of avarice. But evidence suggests they simply don’t work and
now the fight back has begun, as Paul Croughton, editor of the UK edition of luxury
magazine, Robb Report, explains.
I
magine you’re on a plane. There you are, settling into
position, hoping the flight won’t drag and looking
forward to arriving at your destination. Another
traveller sinks into the seat next to yours. You offer a
brief nod and watch idly as they proceed to get comfy,
removing phones and keys from their pockets and
positioning their reading material nearby. You look at
the cover of the book: The 7 Habits of Highly Successful
People. What do you think?
a) Good for them – another of life’s seekers, continuing on their journey to reach their highest potential. I
must recommend Feel The Fear And Do It Anyway to
them before I watch Eat Pray Love.
b) Please don’t talk to me.
It was b, wasn’t it?
Where did the self-help explosion come
from, and who’s buying these books? You
might think, as I did, that they emerged from
the greed-addled carcase of the 1980s,
providing a lifeline for those left shell-shocked
by a decade of inflation, John Lennon’s assassination and
Freddie Kruger. But no: How to Win Friends and Influence
People was published in 1936. And the genre takes its
name from a book called Self-Help, which the unusually
named Samuel Smiles unleashed upon an unsuspecting
world in 1859.
Since then, millions of people have bought millions of
books that claim to be able to help them on almost any
quest: drinking less, becoming richer, stopping smoking,
losing weight, gaining confidence. And yet, look around.
With alcohol consumption still going strong, increasing
numbers of people feeling strapped for cash and
cigarette firms not exactly going out of business, it is
hard to conclude that self-help books do the trick.
No matter. Self-help’s invidious reach now extends to
everything from food to fitness. The rise of clean eating
is just self-help in fetishised form. We’re invited to drink
the kale Kool-Aid, and we go back for more – fitness star
Joe Wick’s Lean in 15 book was the third-best-selling
book last year, and the best-selling diet book of all time.
But the industry may finally be running out of steam.
Right now in self-help land, two of the most exciting
36
new concepts seem to be verbosity and profanity.
Combine the two and you’ve got yourself a six-figure
advance quicker than you can say “Seriously?”
Three of the latest manuals seem genuinely to relish
peppering their titles with swear words so explicit that
the front covers are littered with asterisks. Professing
to help you focus on your needs and wants without
worrying about obligations, responsibilities or other
people’s opinions, these books seem to be encouraging
an almost teenage attitude to life, replete with unnecessary expletives. They could easily be mistaken for
parodies of the self-help genre.
‘‘
In self-help land, two of the most
exciting new concepts seem to be
verbosity and profanity. Combine
the two and you’ve got yourself a
six-figure advance quicker than you
can say ‘Seriously?’”
But real help may be on the way. Now that we’ve just
about recovered from a winter littered with books
proclaiming how much we all needed a little more
‘hygge’ in our lives, there comes a new title from Scandinavia, called Stand Firm, by Danish professor Svend
Brinkmann. In it, he insists we need no more self-help.
No more finding ourselves. We have done enough. We
live in a “culture of social acceleration”, he says. “Where
God used to be at the centre of the universe, now it is
the Self.”
Brinkmann suggests reading novels, not self-help
books, and goes so far as to take issue with the king of
self-help, Anthony Robbins, and his famous quote:
“Success is doing what you want, when you want, where
you want, with whom you want, as much as you want.”
Potentially, argues Brinkmann, “this way of thinking
resembles psychopathy or antisocial personality
disorder.”
As Robbins’ client list reads like a who’s who of the
great and the good in global politics and Hollywood, I
couldn’t possibly comment further. I’ll just leave it with
you… n
bridgepoint.eu