Where I get my investment ideas from is a question I get asked a lot. For some reason, I can never give a straight answer. It is not as simple as walking to the fridge for a bite to eat when you are hungry. Good companies have various characteristics, not all of them are readily apparent. Luckily, I have a natural interest in good companies and their characteristics and therefore I have chosen to specialise in the subject. Through the years one learns to appreciate how rare outstanding companies actually are. The most difficult part of an investment decision is spotting the company. Once you are aware of the possibility of a good company then it is usually simply a case of travelling down the road to see where it leads you. The fact that just about everybody in the world was drinking Coca Cola was a not so subtle hint that I should take a look at the company. I picked Coke up from the convenience store. I picked up our company under discussion today on the football pitch.

This week's company is a great Spanish family business, which you might know a lot better than you think. Don't feel bad if you don't know them because all their customers, including you, are suckers. In fact, they want to turn the whole world into suckers.

I was having a chat with my favourite coach in Yokohama stadium a few months ago, just before the start of the Soccer World Cup in Korea-Japan. It was quite bizarre. The whole stadium was empty, with only a couple of players and coaches strolling around the pitch. We all just wanted to get a feel for the place in the absence of a screaming crowd. I have to tell you, there is something about empty stadiums. Anyway, David Beckham, the England captain, strolled passed sucking on a lollipop. 'Coach', I asked, 'Isn't he a bit old for that?'. 'Come on B', the coach replied, 'Don't tell me that you, of all people, don't know that everybody in the game is sucking on Chups these days. In fact, do you want one? (With that he produced a Chupa Chups from his inside pocket). Never mind, he continued, I can see you have no idea what I am talking about, and so let me fill you in. Apparently, it all got started in the football fraternity by Johan Cruyff, who came over to our dinner table last night to greet my friend the coach. Cruyff was the former coach of Barcelona Football Club. He had a heart attack a while ago and had to quite smoking. Apparently, Chupa Chups sent him a box of suckers to help him quit. They couldn't have purchased better publicity. Photos of him sucking on his lollipops at football matches got the whole football fraternity in Catalonia sucking. One thing led to another and as you just read, now even Beckham sucks!

On my flight back I had a look at their website, www.chupachups.com. If you think you don't know the brand, then do yourself a favour and go to their website. You will instantly recognise its logo designed by Salvador Dali. SMINT's, the triangular mints with the funky dispensers, and the slogan "'ere you been Sminting again?" are also a Chupa Chups product.

In 1958 Enric Bernat founded Chupa Chups in Spain. Initially, the company stuck to Spain but in 1967 it initiated distribution in France. The 1970's and 1980's saw it concentrate on international markets. Distribution was extended to include Germany, Italy, Japan, Australia, the US and the UK. In the 1990's it really became a global company with distribution in Russia,China, Brazil, Mexico, South Korea, Canada and South Africa. Oh, and lets not forget that in 1995 the company really spaced out, by sending the first lollipop into orbit. It was a gift to the Russians on space station MIR.

In 1995 SMINT was launched globally with enormous success. It took Chupa Chups only 44 years (2001) to grow into a company with a turnover of EUR414m. Its growth has compounded by 27.3% since 1992! This growth was achieved by clever marketing and almost flawless distribution. Chupa Chups likes to enter markets on the back of what it calls 'celebrity suckers'. Examples are the merchandising deals it has with The Simpson's, Barbie, Pokemon and the Spice Girls. My favourite celebrity suckers have to be James Brown, Dennis Hopper and Mr Spock! They also have the likes of Madonna, Armani, Ronaldo and Magic Johnson.

For Chupa Chups sucking is truly family business. Currently the family members on the board are:

- Xavier Bernat, President

- Ramon Bernat, Vice President

- Marcos Bernat, Vice President (2)

The rest of the 'family' is truly global. 50% of the employees are from the European Union, 26% are Russian, 11% are Mexican, 9% are Chinese and 4% are from the rest of the world. Chupa Chups has manufacturing centres in Spain, Mexico, Russia and China. In the top sugar confectionary rankings Chupa Chups is number 2 in the world after Halls, which is owned by Adams (Pfizer). It is ranked number 10 in the world rankings of company sales of sugar confectionary. Companies such as Kraft Foods, Hershey, Mars, Cadbury and Nestle are higher on the list. Currently it operates in 170 countries and sales can be broken down as follows:

-47% Western Europe

-20% Eastern Europe

-17% Americas

-13% Asia Pacific

-03% Africa, Middle East & South East Asia

Chupa Chups' long-term vision is simple. It wants to become the Coca Cola of lollipops. With more than a billion Chupa Chups sold in Russia per annum, it seems to be well on its way!

Whatever you are up to, I hope it is profitable and ethical!

Mr. B

mail_mrb@yahoo.com

Posted: 2002/07/29 07:37 View Archive