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."
Fifth-generation chairman of the baked-goods company
Many will recognise Jonathan Warburton as the man who appeared beside Sylvester Stallone and The Muppets in his own ad campaigns. But he is no Victor Kiam. He flies the flag not just for his family but also for bread – "grain, the miracle product".
Twenty-five years ago, Warburton’s father, two uncles and cousin all retired on the same day. Since then, Warburton and his cousins Ross and Brett have run the company. "We have improved the business massively," he says. There is lot to feel triumphant about. When the three cousins first started, the Bolton-based bakery only delivered within a 50-mile radius. His father and uncles had tried to expand the business, investing in everything from jewellery to fishing and even a health spa in Boston, Massachusetts.
The trio shut down a lot of these operations and focused on the bakery. Warburtons is now the second-biggest grocery brand in Britain by sales, according to Nielsen. Another change is distance. Whereas Warburton only lived three miles away from the brand’s headquarters as a child, he now lives more than 50 miles away and has brought in outside talent to run the day-to-day operations. Growing up, doing van sales as teenagers at the bakery, the cousins got on well: "We were not close friends, but socialised together."
"We are not like Innocent, where you scratch really hard and find there’s not a lot there"
Unlike the other two, Warburton skipped university and spent some time in the US and also had a sales and marketing stint at Unilever. "We all have different skillsets, and we came together at a time when it was right for the business and for us," he recalls. "Our greatest triumph has been to accept each other’s talents and make that work as a trio. And, unlike our parents, we don’t socialise too much, so we don’t end up talking shop all the time."
In a sector dominated by corporations – afraid to speak out because their reputations are under constant scrutiny – the Warburtons brand is able to make a stand. "By sticking your neck out like we do or I do," Warburton says, "it brings a level of commitment and personality to the business. We are not like Innocent [now owned by Coca-Cola], where you scratch really hard and find there’s not a lot there." Warburton, of course, has a lot to shout about.
He and his cousins have achieved what the Sainsbury, Cadbury, Sieff (Marks & Spencer), Moores (Littlewoods) and Morrison families were unable to do – retain full ownership of the companies their predecessors established. He is also free to speak his mind on controversial issues: "Brexit is a very good thing to have happened. We are well out of the rotting corpse of Europe. We could either continue to be in the European Union and wait for it all to collapse around us, or we could make our own way out of it and crack on as an independent nation. We decided the latter."
The fifth generation to lead the family’s eponymous high-end supermarket in the north of England
It is with enormous pride that Edwin Booth tells the story of his great-great-grandfather – also called Edwin Henry Booth, and an orphan – who founded the business at the age of 18. Everybody tried to keep him out of business, the story goes, because he was an upstart and very entrepreneurial. In a world dominated by big supermarkets, Booths now has 28 branches across Cumbria, Cheshire, Lancashire and Yorkshire.
"To me, our business of retailing was more than just a job – it was a way of life. I’m as excited about it now as I was in 1973," according to Booth, who joined as a trainee on the shop floor.
But it can be difficult for a company to remain entrepreneurial across generations.
"It’s all to do with the volatile, unpredictable world in which we live," Booth says. "We’re supposed to be disruptive, but not everyone can be because it’s not their personality. Not every member of Edwin Henry’s family over the generations has been either as disruptive or as entrepreneurial as he was.
"When I joined in the 1970s, there were certain thingsI was told we can’t do because we’re small, we’re a family business and we’ve got a heritage. That was like a red rag to a bull."
Some of the changes Booth is looking at include exporting the brand abroad and expanding its prepared-food offering. The brand was the first business to issue electronic receipts to smartphones, Booth adds proudly.
Booths is an exception at a time when big supermarkets are focused on growing their market share as quickly as possible. Booth says he probably would have taken more risks if he had been his great-great-grandfather, with nothing behind him but everything to play for: "What I’ve got now is an entity with an infrastructure, a balance sheet, 3,000 staff – so, yeah, you do have to consider the welfare of the operating business to a certain extent."
Despite Booths’ size, 96% of the company is still owned by the family – although some members are no longer actively involved in the business: "Once upon a time, it was all up to the family to say what went. We have a lot of very bright people now who are not called Booth. We’ve always been very careful not to overpopulate the business with Booths."
The "family protocol" is to take only one child from each of the families, and Booth expects only those actively involved will retain ownership in the future.
His brother’s son Henry has been working at Booths’ commercial division for four years. Booth’s eldest daughter Emma has completed an MSc in business management and is now looking for roles elsewhere, although she does some temporary work in the buying department.
Would he like his daughter to follow in his footsteps and join the company? A woman at the helm would be a first for Booths. "She’s fascinated by the business and full of ideas. But I’d like her to go and test her theories somewhere else first and then come back and tell us what she has learned," Booth says.
Whoever ends up taking over the leadership in the future, Booth says he would "certainly prefer a family member to remain the chairman".
The fourth generation in charge of Somerset-based cider producer Thatchers
Martin Thatcher’s great-grandfather William Thatcher started the company in 1904. Like most Somerset farmers, he had apple trees and made cider – not for sale but to give to his workers as part of their wages. It is said that his cider was particularly good, so he started selling it locally, and the business grew from there. It was John, Thatcher’s father, who developed the company and started looking for new markets and expanding the styles of cider it produced.
Growing up on the farm, Thatcher helped plant trees, make the cider and deliver it to customers. Although he had wanted to be a farmer, Thatcher left school and dived straight into the family business, and was promoted to managing director in 1992 upon his father’s retirement. Thatcher’s brother runs a farm in Worcestershire (another family business – from their mother’s side). "I enjoyed the outdoor life and looking after the sheep and the cattle and all the stuff that goes with farming. From there, taking up the reins of Thatchers was a natural progression," Thatcher says. "There are worse things to be doing than making cider in Somerset."
As for the next generation, his two teenage children (a boy and a girl) have been brought up on the farm and been involved from an early age. They both spend as much time as they can learning about the business. Thatcher says he understands why succession planning is seen as one of the thorniest issues when it comes to a family-owned company. Sometimes certain members of the family want to grow the business while others simply want to maintain a good lifestyle. However, in a family you also know early on who you can educate and nurture to enter the business. That long transition is quite an advantage to have.
"It is about enthusing the next generation and giving them the right opportunities," Thatcher explains. He does not have a "properly documented succession plan" but believes the way a family business trains the next generation is a measure of its success.
Thatcher dismisses the suggestion that ensuring the company stays within the family dilutes opportunity for innovation. "The older and larger your business gets, you make sure you do more innovation than less," he says. "You have to be more entrepreneurial in order to take the business to the direction of where your consumers are going. The secret to success for any family business is this licence to plan ahead and really think hard about where we want the company to be in ten or even 20 years’ time."
Meanwhile, Thatchers has been enjoying a revival in cider, both in domestic and international markets, with sales growth in fruit and served-over-ice brands continuing to outpace beers. But there are still challenges, such as cider duty, which Thatcher has concerns about. "A new government and a new philosophy could bring in a new duty level, which wouldn’t be very good for our industry," he concedes.
Thatcher has more in common with Jonathan Warburton than just being the head of a family business. He calls Brexit a "wonderful thing to have happened", since the weakened currency has been "fantastic news for our exports".