By Permira’s Head of Consumer, Cheryl Potter
Two interconnected and disruptive trends are reshaping the Consumer sector. The first is the emergence of a new generation of consumers who are far more focused on experiences than material possessions. Overlaying this is the use of technology, which is forcing companies to reassess all aspects of their businesses. Coupled together, these trends are driving a pace of change more rapidly than at any stage in the Permira funds’ 30+ year investment history.
'Doing stuff not buying stuff'
In terms of changing consumer habits, there is a major shift towards experiences rather than material purchases. This is happening at both ends of the age spectrum: baby-boomers have gone past the ‘stuff accumulation’ phase and are investing much more in travel and experiences. At the other end, millennials don’t attribute the same value to ownership, and are spending a far greater proportion of their disposable income on unique experiences and bespoke brands.
We now spend much more of our time thinking about how these trends will play out in the long-term. For everyone, spending time with friends and family is highly valued. This has driven strong growth in the casual dining market. Sushiro Global Holdings Ltd (P4, 2012) is a sushi restaurant chain operator in Japan. We worked with management to expand the successful concept, growing its store presence
Technology is accelerating and accentuating changes in consumer behaviour. Historically, companies have done everything they can to protect their brands by exerting tight control over all touchpoints with their customers. New technology and new channels have changed that.
The online ‘review culture’, where consumers consult people they’ve never met before as a matter of course to supplement brand-led content. Combined with the rapid growth of popular culture ‘influencers’ on platforms like YouTube and Instagram which are increasingly intermediating brand messages.
In a world where buying decisions are informed by so many disparate sources and the consumer has unlimited choice at their fingertips, having the right product is more important than ever. At Dr. Martens (P5, 2016), the iconic British shoemaker, management has sought to build engagement with customers by building new stores, staging pop-up gigs and producing more editorial. The company encourages customers to share their experiences and style tips because it believes in the product and recognises that happy customers are the best brand ambassadors.
Backing tomorrow’s winners
We have a 30-year investment track record backing brands like Hugo Boss, Valentino and Homebase. We have helped these, and many others, develop online and mobile strategies, roll out new stores and develop products and services. And we have done this around the world and through multiple economic cycles.
Over the period 2000-2015, the only institution that has invested more in consumer brands is French luxury goods company, LVMH.1
The breadth of previous success stories gives us an unparalleled view on the complex themes reshaping the Consumer sector. In a world where capital for successful businesses has largely become commoditised, having this bank of success stories and institutional knowledge is critically important. We believe the funds' track record and global network of Permira professionals and relationships is a clear USP for businesses looking to expand in a complex and rapidly changing market.
1 Bloomberg LP and Bernstein analysis. Note: Includes Bloomberg LP. categories: apparel manufacturers, footwear and related apparel, retail apparel store/shoe, retail – jewellery and textile apparel.