“What planet are they from?” cynical rivals will say of Mars, the global candy and pet food behemoth. The business, whose brands include M&Ms and Snickers, loftily aims to embody Five Principles. These are quality, responsibility, efficiency, mutuality and freedom. Tellingly, shareholder returns do not make the cut.
Being a private, family-owned business has served Mars well, allowing it not only to survive for 111 years but to expand from consumer brands like Wrigley’s gum and Pedigree pet food to services like the massive veterinary business it acquired in 2017. Annual sales of nearly $45bn puts Mars ahead of Coca-Cola and makes it one of the biggest privately owned businesses in the world, with more than 140,000 employees in 80 countries.
A sustained stock market sell-off and the growing risk of an economic slowdown is likely to highlight the admirable resilience of many family-controlled companies.
Mars faces the same cost pressure as competitors. Its extent is unknown. As a US private company, its disclosure requirements are low.
But numerous studies show that family enterprises do well during challenging economic times. They have far less debt, on average, than peers with public listings or private equity owners. There is less pressure on them to cut costs severely during downturns. They can come back faster during recoveries.
Capital is harder to access and usually costs more. But long-term investment is easier without quarterly stock market scrutiny.
Even among listed companies, recent research by Credit Suisse revealed that family-controlled companies — defined as those in which the founder or their family owns 20 per cent of shares of votes — have outperformed the broader equity market. Between 2006 and the end of first quarter of this year, they have returned 350 basis points more than other stocks.
Sibling rivalries bedevil many family-owned businesses. The Mars family has sensibly delegated management to outsiders. But what stands out about Mars is the impressive scale and growth of the business. If this company was public, activists and private equity would be trying to break it up.
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