Britain’s economic and reputational allure draws businesses from around the world to woo British investment, internal and consumer audiences. Emily Andrews investigates
Britain has always been a nation that relies on its imports. While the country’s modest size has limited farming and mining potential, its coastal borders have always been advantageous for trade. These days, Britain’s largest imports are international corporations. There is a strong repertoire of home-grown brands, but many of the country’s most popular products and services originate from overseas.
With its well-performing stock market and relative wealth, the UK is an attractive option for international expansion and Britain is already a melting pot of brands from all over the world. American brands such as Apple and The Coca-Cola Company consistently rate highly in UK brand rankings, as do Japanese brands Sony and Samsung. As more and more businesses grow and develop international aspirations, made achievable by modern technology and transport, the UK rates highly among regions to conquer.
“[We] Started by being very open and transparent, making sure people were updated regularly through a variety of mediums. We got them involved from an early stage and that was very important because it wasn’t really top-down”
Both reputational and economic incentives drive companies to expand in the UK, yet both of these rewards are hung up on the hook of an effective communications strategy. Weak communications can lead to a company losing the trust of its existing stakeholders as well as failing to win over new ones.Two brands who are currently making headlines for their rapid expansion in the UK are Aldi and Lidl. Amid deteriorating performance from the UK’s big four supermarkets – Tesco, Sainsbury’s, Asda and Morrison’s – the German discount chains seem to have slipped in through the back door, and are quietly winning customers over with their simple branding and cheap prices.
Last year, Lidl announced that it was planning to spend £20m on its brand image, its first ever marketing drive in the UK. It also plans to open 20 to 40 new UK stores each year. Although Lidl has been in the UK since 1994, its growth has increased rapidly in 2014, with sales expected to exceed £4bn.
Aldi’s current outlook is even rosier. At the end of 2014, Aldi reported an annual sales rise of 36%. Earlier in the year, the discount chain had announced plans to invest £600m in a major UK expansion drive; Aldi’s largest UK investment to date.
To sustain their growth, both Aldi and Lidl will have to back-up their expansion with strong communications strategies. As the UK emerges from recession, the need for cheap groceries will become less urgent, and it is vital that the brands are strong enough to keep customers engaged in the long term.
Lidl has shown its communications savvy over the past year with a large marketing budget, an openness about tax issues and a general transparency with British media.
Ronny Gottschlich, MD at Lidl UK, says, “The public are changing their mind about us. We believe too many people don’t know the truth about our quality and price offering. Most people think we are selling cheap food and are unaware of the great British quality. Price has always been a given. Quality is something that has surprised people.”
Aldi has been equally keen to speak with media. It has promised to maintain the price gap with other supermarkets even if that means cutting into profit. This, combined with a move towards more fresh and luxury food, suggests that the company is open to altering its brand to attract new customers, without losing sight of what made it appealing in the first place. Jonathan Tyler, managing director of investor relations at FTI Consulting, says, “Any consumer businesses need to be aware that there has recently been a heightened interest in ‘good global citizenship,’ especially around issues such as tax. As such, any company looking to expand a consumer business in the UK, should at least have an awareness of these issues. More broadly, using the media to raise a brand or product’s profile - is a key component to generating revenue as quickly as possible.”
As an organization prepares to increase its presence in the UK, public relations are of particular importance. Dave Hendricks, president at LiveIntent, an email marketing company that has recently launched its first international office in the UK, says, “Before establishing operations in the UK, we spent almost two years meeting people, learning about their businesses and establishing relationships. It would have been presumptuous and premature for us to enter the UK market in any other way.”
Understanding the local media and building a strong reputation in the area is crucial. Global PR agency, MWW, expanded into the UK through two acquisitions in 2014. “PR is critical during an expansion. During times of change, you can’t operate in a vacuum – silence can lead to irrelevance. Stakeholders invested in your business need to be aware of what’s going on, and through PR, you can control that message,” says Michael Kempner, president at MWW.
Henkel, the German consumer company behind Loctite, Persil and Schwarzkopf, is currently growing its influence in the UK with a new headquarters. While its subsidiary brands are already well-known in the UK, the company is looking to raise the profile of the Henkel parent brand in 2015. Sanjay Mistry, head of corporate communications at Henkel, says, “In 2015, we’re really looking at raising the profile of Henkel. 2014 was very much internal comms but 2015 will be external, raising the profile, making people understand who Henkel are.”
The company has operated in the UK for 40 years and it recently combined three of its offices into one headquarters in Hemel Hempstead. As a company experiences growth, it is necessary to make internal shifts and this change can leave employees disaffected and disengaged. Henkel combated this with a strategy that ensured its staff were involved at every level of the restructuring.
“We had a really big challenge this year in making our employees understand the ethos behind the move, really engaging and exciting them in that move and getting them to be part of the process,” says Mistry.
Whether opening a new head office to accommodate international growth, or taking on large quantities of new staff after an acquisition, engaging employees is essential when moving into a new location. It is crucial to remember that transparency and openness are key to engaging UK employees, particularly if a company originates from a region where a more hierarchical approach to the workplace is favoured. Paying attention to cultural nuances like this will be advantageous for the success of an internal communications strategy in a new region.
Mistry explains how Henkel, “Started by being very open and transparent, making sure people were updated regularly through a variety of mediums. We got them involved from an early stage and that was very important because it wasn’t really top-down.”
Managing investor relations may be the most challenging aspect of expanding business in the UK. Tyler offers advice for companies looking to float on the London Stock Exchange, “Particularly in light of the turmoil in many areas of the world at the moment, any company looking to attract investors centred on the UK market should have a strong governance framework and policies. Investors also look for many of the longstanding traits of attractive investments, including healthy levels of underlying growth, higher and defensible levels of profitability and cash generation, and often dividend growth.”
If a company chooses not to list itself, the success of its overarching communications strategy will be equally critical as a good reputation and trustworthiness are key attributes for attracting investment.
In mid-2014, Pfizer, an American multinational pharmaceutical corporation headquartered in New York City, failed in its bid to take over AstraZeneca, a British-Swedish pharmaceutical company headquartered in London.
Pfizer’s communications shortcomings extended beyond those with its own shareholders. At the time, AstraZeneca’s chairman, Leif Johansson, said, “Pfizer’s approach throughout its pursuit of AstraZeneca appears to have been fundamentally driven by the corporate financial benefits to its shareholders of cost savings and tax minimisation.” While admittedly the opinion of one man, the lack of outcry among AstraZeneca’s shareholders when the deal fell through indicated that they were equally disillusioned with Pfizer’s intentions, despite the potential financial benefits of such an acquisition.
AstraZeneca and the British media were concerned that valuable research projects would be dropped if the acquisition went ahead. Pfizer made some crucial PR errors by not addressing this concern. The general feeling in British media was of an American conglomerate muscling its way in and disregarding the medical work already underway.
Ruth Stallwood, marketing and communications manager at Eden Futures, a supported living business that is currently expanding in the UK through multiple acquisitions, says, “Internally to the acquired organisation, reassurance around continuity of service provision is key, along with assurance around job security.”
Since the failed takeover there have been rumours that Pfizer has approached Actavis, a pharma company with headquarters in Ireland that is listed on the New York Stock Exchange. Pfizer continues its attempt to shift its tax domicile from the US. New Jersey-based Activis shifted its tax base to Ireland by acquiring Warner Chilcott Plc in 2013.
The Pfizer and AstraZeneca incident, although, admittedly, a blip in Pfizer’s steamroller progression, is a good example of how poor investor relations can disrupt the expansion of even the most powerful international companies, particularly where an acquisition is involved.
In contrast, a strong communications strategy can successfully launch a company into the UK market in even the most challenging of situations. In quarter one of 2014, Lenta Ltd., one of the largest retail chains in Russia, planned to IPO on both the London and Moscow stock exchanges. Lenta was faced with numerous challenges, both internally – a result of a historic stakeholder conflict – and externally, due to weakening consumer trends and the broader economic and political issues surrounding Russia.
Working with the Instinctif Partners communications consultancy, Lenta came up with a strategy that would differentiate itself by focusing its investment case on the company’s growth and by drawing attention to the impressive track record of the senior management team. This, along with a corporate video and extensive media training for Lenta’s CEO, resulted in a $925m launch and a business value of $4.3bn. Lenta received positive media coverage across many major British publications despite its share trade coinciding with Russian troops entering the Crimea and the rouble reaching historic lows.
Once a company has launched itself in the UK, maintaining a consistent international brand and a strong company culture are key communications objectives. Kempner says, “It was extremely important for us to ensure that our new, expanded team was on the same page about our agency culture and the future of our brand.” If a company is able to spark a strong company culture internally, it will trickle out through all their communications and the brand is likely to enjoy the success that led to its expansion in the first place, provided that there’s a market for the product or service and that the communications strategy takes cultural nuances into account.
As the UK emerges from recession, a growing number of businesses are expanding into the UK. For companies who get their communications right, opportunities for growth are as limitless as the British population’s hunger for the best ideas, products and services. Britain is still a major player in the global economy, and its penchant for imports remains as strong as ever.