Wednesday, October 28, 2009

Lion sleeps tonight

Lion Nathan, one of New Zealand’s oldest companies, ceased to exist today: It was de-listed from the New Zealand Stock Exchange (and Australia’s, too) after the company was acquired by Japan’s Kirin Breweries. While this was a bit of a yawn by itself, I think it says something about the modern business paradigm.

The brewery was formed in Auckland in 1840 by John Logan Campbell, and only became Lion Breweries in 1977. After tycoon Doug Myers took control of the company in the 1980s, the company bought New Zealand’s largest retailer (at the time), LD Nathan & Co. from the asset-stripping merchant bank, Fay Richwhite and formed Lion Nathan.

In the early 1990s, they bought the brewing companies of Aussie tycoon Alan Bond, Tooheys Brewery and Castlemain Perkins. A few years later, Kirin bought 45 percent of the company.

The Kirin move sparked a major revamp of the Takeovers Code because ordinary people couldn’t participate in a partial takeover. The Kirin move solidified government resolve and the new Code was completed in time to prevent Lion Nathan from taking over wine maker, Montana.

In 2000, after the Kirin partial takeover, Lion Nathan moved its headquarters to Sydney. By the time of the company’s death, it controlled 50% of the New Zealand beer market and 40% of the Australian market.

What’s instructive about this is that the company followed the current business imperative for New Zealand companies: Grow big, so big that international expansion is required to continue growing profits, then be taken over by a multi-national corporation. This, conservatives tell us, is the highest and best result for any company.

That’s true—if greed is your sole motivator.

While the right wing considers globalisation to be holy, it’s not always, nor the best objective. As once proud New Zealand companies are reduced to irrelevant branch offices of multi-national corporations, something of our cultural identity is lost, as well as a stake in the success of the company.

Multi-nationals try to force consumers into a kind of great global goo, and in the process the unique cultural heritage, traditions and even preferences of a place get reduced to mere “local market variations”. All decisions, and the fate of NZ workers, are decided in some foreign country that won’t feel the consequences of their actions here.

Economic conservatives tell us while that’s sad, it’s ultimately the way of the world. Describing a situation is not prescribing it. Investors hell-bent on acquiring maximum wealth no matter what may not care if a New Zealand town loses its biggest employer when the foreign owners move production to Asia (for example), but there ought to be value in a company that digs in its heels and seeks to maximise its profits AND its connection to New Zealand. That’s what’s missing from the current business paradigm that values maximised profit over everything else.

So Lion Nathan is gone. I won’t mourn it, since, in my view, it was hardly a “good corporate citizen” in its last couple decades. By the time of its death, it wasn’t really a New Zealand company anymore, and neither were its profits or its commitment. And that’s the problem.


Anonymous said...

Though I see your point, given the size of the company before the takeover they had probably turned into something resembling a multinational company by this time anyway. A 50% market share does not a mom-and-pop store make.

Arthur Schenck said...

Thanks for the comment. I absolutely agree that by the time of its death, Lion Nathan wasn't a New Zealand company any more, despite its listing on the NZX. And I'm not arguing that NZ companies shouldn't grow into, or be taken over by, multinational corporations. Basically, I object to the almost religious belief that this is always the best thing to happen and that a company that doesn't seek to do it is inherently awful, badly run, etc.

As for 50% market share, in a small market like New Zealand, that's not necessarily a hard thing to achieve, particularly when you have iconic brands from the days before multi-nationalism took over.