It’s funny how your eyes can be opened to something that you were blind to for so long. Take for example, the consumer goods company Unilever. Up until early 2015, before I started investing in the stock market, I had never even heard of the company. I had no idea of its existence and yet, it was, quite literally, staring me in the face. When you start investing, your eyes are opened to a whole new world.
When I’m at home and I’m feeling peckish, I will have a bagel with Marmite (Yes, I firmly fall into the ‘Love it’ camp) washed down by a refreshing Lipton ice tea. When I shower, I use Dove soap and growing up, my choice of body spray was Africa by Lynx. Although, sadly, the ‘Lynx effect’ (suddenly becoming irresistible to women) failed to ever materialise. False advertising if ever there was! I never once thought about the company behind them, which I’m sure you’ve guessed by now is…….(drumroll please)…….Unilever!
Take a look around your house and it’s more than likely you will stumble across a product made by Unilever, as seven out of every ten houses around the world contain at least one. 2.5 billion people use a Unilever product on any given day. People are creatures of habit, and everyday purchases become routine and ingrained in us.
How many Unilever products do you have in your home?
It doesn’t end with Unilever.
Reckitt Benckiser or RB as it’s also known, is another consumer brands company that I was oblivious to. If you’ve ever felt amorous, you will most likely have used a Durex condom, the world’s number 1 brand. As we are in the midst of flu season, I know that when I inevitably fall victim to the dreaded lurgy, my one-two punch of Lemsip and Strepsils will help steer me back to good health. When the girlfriend pays a visit, I rely on Harpic toilet cleaner to ensure that I stay in a relationship.
If you’ve ever washed your clothes with Aerial, cleaned the dishes with Fairy Liquid, washed your hair with Head & Shoulders or had a shave with a Gillette razor you will have used a product made by the American consumer goods company Proctor and Gamble (PG).
These companies contain brands with wide moats that are in the top of their respective fields, and thanks to their vast advertising budgets stay relevant in the minds of consumers and maintain brand loyalty. When upstart brands become popular or start to create new markets, they are often bought out at a premium, ensuring that these consumer goods companies continue to dominate the aisles in our supermarkets. This occurred last year when Unilever threw a billion dollars at the ‘Dollar Shave Club’ and snapped them up bringing them into the fold.
I have investments in all three companies and have no intention of ever selling them. I will hold them through the good and inevitable bad times, reinvest the dividends and buy more when opportunities arise. Many argue that with the rise of discount retailers such as Aldi and Lidl and supermarket own brands , the pricing power and dominance of these companies and their top brands are under threat. Although there are undoubtably challenges ahead for these companies in their bid to stay in the hearts and minds of consumers, I personally believe that these companies and their brands will always be relevant, even long after I’m gone. Brand loyalty is severely underestimated in the media these days. Yes, there are some products where buying the cheaper generic brand is an option but more often than not consumers will often pay that little more to purchase they brand they know and love. Proctor and Gamble has been around since 1837 and Unilever, 1929. These are companies in it for the long haul, have seen it all and aren’t going anywhere. They will adapt to changes in consumer taste and different fads and come out of it all the stronger for it.
I know personally, far into the future when I’m an old man, that I will continue to enjoy my hamburgers with a dollop (actually more like avalanche) of Heinz ketchup. Wash it down with a nice, cold can of Coca Cola while finishing up with some Ben and Jerry’s or Haagen Daz. So if you truly want to get started in investing, open your eyes and take a look around you, you might be surprised at what you start to see.
As always do your own research.
Long KO, PG, RB and ULVR.