Sonoo Singh explores the challenges and opportunities of these family-controlled businesses
It is said that John Cadbury’s legacy, before Kraft Foods swooped in and swallowed it, was kept alive because the family made sure they were producing enough children so that there was a “suitable stream” of heirs to grow the business. Probably an urban myth, but it gives a clue to the sense of duty and responsibility many family businesses hold dear.
One thing that characterises many family-owned companies is that, when they first started, it wasn’t because someone wanted to “do business”. Instead, their establishment was triggered by the notion of creating something new, in their own way.
It takes a certain kind of person to be drawn to that life, Charles Vallance, founder and chairman of VCCP and co-author of The Branded Gentry, says.
Therefore it stands to reason that, when blood ties bind a business, subsequent generations take up the baton out of a strong sense of responsibility. Vallance’s book explores the entrepreneurs who created new brands and businesses – including Warburtons, Boden, Hiscox and Paul Smith – and their models of wealth creation.
Vallance argues that family-run businesses start as a disruptive force, defying conventional wisdom and taking on the establishment. But it can be difficult to remain entrepreneurial across the generations.
For most family companies, there is a real commitment to do things right, which reflects their family values, Elizabeth Bagger, executive director at The Institute for Family Business, says. She adds that, as these businesses expand, they face unique challenges. Less than 20% survive into the third generation of family ownership, but those that do are often the ones driven by strong values.
For instance, Freddy Heineken, grandson of Gerard, founder of the eponymous brewery, would consider a “bad bottle of Heineken as a personal insult”, Vallance says.
“There is no myth creation that we have to indulge in to make our brands stand out”
Gary Keogh, marketing director, William Grant & Sons
Trust and legacy
The same is true at William Grant & Sons, marketing director Gary Keogh, who has been with the family-owned distillery since 2009, explains.
The Speyside-based group – which produces Glenfiddich, Hendrick’s Gin and Tullamore Dew – was established in 1887 and continues to hold the quality of its products as “most dear to the company”.
William Grant worked in another distillery for 20 years before setting up on his own, because he had a dream to make the best dram in the valley, Keogh says. Today, Grant’s great-great-grandson Glenn Gordon runs the company as chairman.
“Its history and heritage have defined the way the business looks today,” Keogh continues. “And, as a marketer, I have the opportunity to directly speak to the business owners, hear their own motivations rather than the motivations of shareholders you are never going to meet.”
Does this also mean that, in an era when consumers want not just branding but also care about provenance, principles and the quality of ingredients, family businesses trump non-family brands? The three family business owners interviewed here obviously think so.
Jim Prior, chief executive of WPP’s The Partners and Lambie-Nairn, once worked at family-owned Levi Strauss & Co. He thinks the history of such companies give them a human face, making their values and beliefs feel more alive and tangible.
Keogh agrees: “We don’t have to make up stories about the brand and its heritage or our business values. There is no myth creation that we have to indulge in to make our brands stand out. Our brand stories are true stories.”
The sustainability advantage
Without exposure to and the pressure of external shareholders, family businesses are able to prioritise long-term strategies. One is amplifying a company’s legacy through philanthropy and social entrepreneurship. For instance, when cider brand Thatchers set up its charitable foundation, one of the first things it did was to donate money for the local church roof.
Mars, considered one of the world’s most secretive family-run companies, has demonstrated that it cares about the long-term future of the world in which it inhabits.
“It has always been ahead of its time – from promoting gender parity to encouraging entrepreneurship,” a source close to the company says. “It’s one of the reasons why it has remained so successful.”