Good Times Bad Times: Recession beaters

The downturn may as well not exist for three very distinctive British companies, which boast strong growth, healthy profits and an expanding international presence.

by Alexander Garrett
Last Updated: 09 Oct 2013

We've just about avoided slipping back into recession, but austerity is still with us and may be set to get worse. It's an extremely difficult climate: consumer spending is depressed, export markets - particularly in the troubled eurozone - are in the doldrums and bank lending remains as tight as an Italian tenor's trousers. Not surprisingly, the result has been a continuing stream of casualties this year, including such high-profile names as retailers Game and Peacocks, along with Glasgow Rangers football club.

Yet there are some companies that have managed to brave the chill winds of adversity and continue growing, while others around them are falling by the wayside. What's the secret? How can you continue to succeed when it seems as if the fundamentals are against you?

In practice, there are a number of strategies by which companies can steer a steady course through a difficult economy. A classic gambit is to focus on offering value at a time when customers are looking to get more for less. Identify what it is that consumers really want, particularly when they are having to adapt their spending behaviour, and you will profit accordingly. Seeking out growth markets is another obvious step. If customers aren't spending in the UK, look for countries where they are - BRIC nations might be a good example.

If you can, it's a good time to invest - in acquisitions, in marketing, in new production facilities - because you get more for your money than in boom times, and all of these can be ways to achieve growth. And it can help if you are starting out in a market that has high growth characteristics to begin with - notably internet-related and digital businesses.

There has been much research over the years on how individual businesses manage to buck the trend during a recession. A review of 10 such studies, undertaken by Cranfield School of Management in 2009, identified three dominant characteristics of companies that had improved their performance during a recession. Cranfield looked at some 650 companies in the UK and US. The three factors that emerged were: focusing on the core business; establishing good cost controls in line with the competitive strategy; and having a positive and committed management approach.

MT spoke to three organisations, each of which has demonstrated solid growth in the past year in spite of the economic circumstances. And each has its own lessons to offer about how it has achieved that.

STAGE SET FOR EXPANSION

NEIL CONSTABLE, CEO, SHAKESPEARE'S GLOBE THEATRE 

Many arts organisations had their public funding cut or axed altogether in the past few years and others have seen takings fall. Shakespeare's Globe Theatre in London is one organisation that has shown itself to be extremely resilient. Last year, revenues rose by 11%, visitors and audiences were up, and the organisation was able to boast that 40% of its tickets (standing) were still available for a bargain £5.

In 2012 the theatre company is set to be at the heart of cultural celebrations for the Olympics, and it is also pressing ahead with expansion in the form of a new £7m Jacobean indoor theatre, on which construction will begin in October. From Bankside in Southwark, it must look as though the age of austerity, far from being a tempest, is much ado about nothing.

Neil Constable, the Globe's chief executive, believes it has benefited from offering value for money. 'We are not seen as a luxury,' he says. 'People are cutting back on big purchases but they see coming here as affordable.'

The past year was particularly good, but turnover has been steadily rising throughout the past decade, from £8m in 2002 to £16m in 2011, and one key to that has been making every part of the organisation perform, says Constable. Commercial activities, such as events, weddings and conferences, raised 25% to 30% of revenues last year, which 'allows us to put on a wide-ranging programme and take some risks, such as running Shakespeares that are less well known, and creating new work'.

The Globe also runs highly successful tours throughout the year, which together with an exhibition brought 312,000 visitors to the site, up 13% on the previous year. 'Everything comes from the building, which is truly iconic and in a wonderful spot beside the Thames,' says Constable, and it's true that other arts companies must look with some envy at the Globe's site. Nevertheless, there is clearly a commercial nous at work not often seen outside West End theatreland. As Constable puts it: 'We are certainly fleet of foot, we balance our artistic and educational programmes with the commercial and, in the same way we get our prices right for ticket sales, we are competitive for events and weddings.'

What's more, unusually, the Globe positions itself as an international institution, acknowledging the prominent position Shakespeare's plays occupy in the world's cultural heritage. The payoff is that more than half of all visitors are from overseas, while US philanthropists provide a significant tranche of fundraising support.

Even being self-supporting, with no public funding, is turned into an advantage. 'We know where our income and costs are and we don't have to create work to meet government strategies or appease funding bodies,' says Constable. 'We put on work we think will do well and we run a pretty lean team.'

Success has bred a level of confidence that in turn supports innovation. While West End theatres are worrying about the impact of the Olympics on their box office receipts, the Globe's takings are already ahead of last year's and the theatre is embracing the international nature of the event full on, with a programme called Globe to Globe, in which all 37 of Shakespeare's plays will be performed by international companies over six weeks, each in a different language. 'We felt it was Olympic both in feeling and ambition,' says Constable.

BEEFING IT UP

DEREK EVANS MD, BUTCHER'S PET CARE

A few weeks ago, Northamptonshire-based Butcher's Pet Care - slogan 'Fit as a Butcher's Dog' - opened a £38m factory outside Rugby with a high-tech production line capable of filling up to five million cans with dog food every week. While the RSPCA issued warnings that more pet owners were likely to abandon their pets in the recession, Butcher's has increased its sales - and market share - right through the economic downturn, and then found the confidence to make a major investment, with the creation of 50 permanent jobs. Success, in other words, that you wouldn't automatically associate with serving up a dog's dinner.

Butcher's was founded 25 years ago by a family - the Bakers - with an award-winning heritage in beef cattle. It is now privately owned by its chairman, Graham Baker, and is the number two brand in the UK's canned dog food market.

Managing director Derek Evans says that while the UK's pet food market is growing at only 2% to 3% a year, Butcher's has increased its sales by 68% over the past four years, with profits up 250% over the same period. With 90% of sales in the UK, it achieved that by stealing market share from competitors - its share of the wet canned dog food market is up from 15% five years ago to 20% now - quite an achievement given its main competitors are Mars and Nestle.

'One of the things we've done is keep our brand strong,' says Evans. That has been achieved partly through new packaging, but perhaps more importantly, he says, the brand has delivered on its promise. 'The more dogs or cats have a liking, the more the owners will stick to it,' he explains. Butcher's prides itself on being the only main brand of dog food that doesn't contain any cereal, soya or gluten. Over the past few years it has concentrated on delivering more to pet owners, for example, launching a super-premium range with real meat pieces, and a Pro-Vitality range with added health benefits.

Relationships with major retailers have also been crucial, says Evans. 'We have to find a way to grow with our retailers and that means helping them in what they do. One advantage we have is that we can be flexible: we won't say we have to launch a new product on a certain day, and we can run a promotion if we want to do it, without someone in the company saying it can't be done.'

Butcher's has also been looking overseas. It has been exporting to Italy for around 20 years, but more recently saw the opportunity to move into Poland and eastern Europe. 'The market in Poland is one-fifth of the UK's, but there are just as many dogs and cats,' says Evans. 'We run PR campaigns on the benefits of controlled diets and I can see the market in Poland being the same size as it is in the UK in 10 years. You have to look at where you'll build your business and then invest.'

Much of the confidence for Butcher's to invest has come from Baker's entrepreneurial drive and vision, and the company's funding from Lloyds is the fruit of a carefully nurtured relationship. 'We have brought them with us,' explains Evans. 'Our financial director has been discussing this investment with them for years. We have encouraged them to understand our business better and they come to the factory.'

Last of all, there may be some advantage to being a family business. 'When Graham walks around the factory, everyone says hello,' says Evans. 'When you are making a big investment you need everyone to be behind you and to want to be part of it.'

STAYING AHEAD OF THE GAME

ROB SMALL CEO, MINICLIP 

Being in a fast-growing consumer segment such as computer and video games can provide a welcome tailwind when the economy turns difficult. But it's no guarantee of success - as high street retailer Game recently found out to its cost. For Miniclip, a website devoted to playing games, the key to staying ahead has been choosing the right business model, then constantly innovating to keep abreast of what its users want.

Since it was founded in a London flat in 2001 by Rob Small and Tihan Presbie, Miniclip's user base has steadily grown and it now hosts more than 65 million players every month. They are drawn by the opportunity to play popular games such as Fragger, where you blow up moles with hand grenades, and the more child-friendly Club Penguin.

The company adds an average of two games a week to its website, making sure that there is always something new for its users. It is now one of the world's biggest gaming destinations.

Over the past three years, Miniclip has significantly increased revenues. In 2011, turnover grew by 15%. Chief executive Small acknowledges that some of that success is a direct result of the explosion of interest in so-called 'casual' gaming - but only because the company was prescient enough to choose a forward-looking strategy. 'In the past couple of years we've seen as much growth as we saw in the previous eight years of our existence,' he says. 'When we started, we were one of the pioneers in developing the free-to-play business model, monetised through advertising, and that has really taken off, especially with social media and mobile.'

The investment that Miniclip made in creating and publishing content over the year is now paying dividends. 'We have a catalogue of over 800 games that are intuitive and easy to play,' says Small. 'As new platforms emerge, we have a big stock we can call upon to create new content immediately.' The company initially focused on games programmed in Flash, but in 2010 it formed a new division to create games for Apple's iPhone and other smartphones In the first 12 months, the back catalogue helped the company achieve a remarkable 50 million downloads.

But in this fast-moving sector, swift and decisive calls are often required. 'Google's Android platform is a big focus for us,' says Small. 'All reports suggest it will grow at an incredible rate. But you always have to decide whether this new emerging platform is one that will come to dominate the sector.'

The company has also made a significant investment in attracting players from around the world so that its exposure to local economic circumstances is widely spread.

'When we started, we anticipated that our market would be in English-speaking countries,' says Small. 'But then we found that many of the games were so simple and easy to use they were picked up by kids in other countries.' Now, he says, 'we have users in every single country in the world', and the website is translated into 17 languages. 'Increasingly, we are offering games that are relevant to individual local markets, so, for example, in India they might be about Bollywood, or cricket.'

And while Miniclip has firmly embraced social media to promote its own site, it has been more circumspect in porting its own content to the Facebook platform, instead seeing an opportunity to court some of the social gaming companies that might be looking for an alternative to Facebook.

With the company privately owned by its founders and entirely independent - it has not even called on venture capital - it is untroubled by any continuing credit crunch and remains in charge of its own destiny. And that's a situation that many businesses can only envy.

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