Global Brands – Disrupted!

Twenty years ago, we saw the beginning of the internet revolution take hold in the financial markets with the listing of Amazon, an online retailer of (at the time) books. Thereafter, everything with a dot com behind its name saw their stocks rise sharply even though some of these businesses did not seem to have any business plan, let alone the ability to make money.

Twenty years later, we are again at a critical time in this technology era. The digital economy as we know it now is not just that shiny board highlighting a company’s name, but it is fully integrated in just about every aspect of businesses, like it or not. As digital technologies continue to break barriers, transform economies and shift organisational foundations, we are witnessing even seasoned business leaders struggle with this tectonic shift to set a successful digital strategy for their companies.

One of our top 5 criteria to determine if a company has a strong enough “moat” to enable them to raise prices over time, is whether they have a strong brand that resonates with consumers. Consumer product behemoths such as Unilever, Procter & Gamble, Colgate and Wrigley’s were once names that would make the top of our list in terms of investment desirability due to their array of strong brands and their consistent earnings growth certainty. These days, global brands such as those mentioned above are also seeing their businesses being disrupted in the digital era. Yet we have only just seen the beginning of this disruption. Everything from media, retail, insurance, financial services and healthcare (just to name a few) are industries that are being affected from this shift.

Our View

The Amazon onslaught is a typical example of what is coming and has made household brands vulnerable to disruption. At the start of this decade, global managers littered their portfolios with large multinational names for their consistent and reliable earnings pattern and it seemed so simple to build a global portfolio. These days, the digital era is turning things upside down. The way consumers now use the mobile phone has had a profound impact on changing consumer behaviour. We anticipate that the two biggest ticket items for most families – our cars and homes – are likely to be battle grounds for your wallet by the likes of Apple, Google, Amazon and Alibaba. It has already started and in the space of the next five to ten years, it is highly probable that we could be talking to Siri (Apple), Alexa (Amazon Echo) or Google Home to order our food and household goods rather than calling or travelling to the shops. The way these companies can influence and direct our habitual and impulse buying patterns could alter what, how and why consumers purchase or not purchase an item. Artificial Intelligence will simply speed and enhance that change.

More than ever, we must take the time to consider the implications of certain technological advancements to the future of certain products, services and even an entire sector. Examples such as the car industry through driverless cars and driverless fleets could render owning a car over the next decade almost obsolete. The technology is already here and will be here to stay. We all need to accept the possible reality of it all and manage this adjustment to our daily lives in the future.

Generation Fund Reporting

Our newly launched Generation Fund has had an excellent start and has been well received by our clients. We encourage investors of the fund to go to the website to access the monthly and quarterly reports that will be posted each month: www.generationfund.com.au/performance

Please feel free to discuss the above or any other financial matters you may have with your advisers.