by Sean Keyes
Posted 14th March 2017
If I sit up in my chair at Agora Financial, look out the window to my right, and squint, I can just about see the Unilever Building.
It’s hard to miss Unilever HQ around this part of London. Its a big imposing stone thing at the corner of Embankment and Blackfriars bridge. Like it’s guarding the entrance to the City of London.
It reminds me a bit of the Rockefeller Centre in Manhattan. They were both built at the end of the roaring 1920’s. They were both built in stone, in the art deco style. They’re both obviously meant to impress. They both have strange sculptures of heroic men harnessing the world’s energy, like something out of an Ayn Rand book: at Unilever he’s taming a horse; at Rockefeller he’s carrying the world on his broad shoulders.
The buildings are monuments to industry. And if any company deserves a monument I suppose it’s Unilever. It’s been a giant multinational for over a century, one of the crown jewels of the UK economy. It’s worth over £120bn.
Now, this newsletter is all about finding fast-moving, fast-growing investing opportunities. So why am I writing about an old blue-blood like Unilever?
I’m writing about Unilever because something important is happening there. I think its business model is starting to crack. And I’ve found a way to profit.
7 trillion of soap and margerine
Unilever is part of the consumer packaged goods (CPG) industry. CPG companies basically make all the things you find in a supermarket. You might not realise it, but a small number of big companies like Unilever, Nestlé and Proctor & Gamble own most of the supermarket brands. The same company makes your soap, margarine, deodorant and frozen pizza. Small competitors find it hard to get a look in – giants like Unilever either squash them or buys them up.
The CPG giants make huge money, year after year. Last year, CPG was worth more than eight trillion dollars. That’s trillion, with a t. The giants have dominated that business for over a century. That’s how they were able to afford a giant stone headquarters in 1929. And it’s how they’re still occupying it.
I said that I think their business model is starting to crack.
Over the last number of months I’ve been researching the CPG industry. And there’s something important happening there.
The “moats” which they use to defend their business don’t work as well as they used to. Tiny startups have figured out a way across.
In the last few months I’ve targeted two tiny companies which are starting to tap the CPG market. And they’re gorging themselves, like a mosquito biting an elephant.
This week in Risk and Reward I’ll present some of what I’ve found. And if you’d like the full story – including the two companies which are breaking through – click here to find out about The Penny Share Letter.
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