"OPPORTUNITIES ARISING FROM INTERNATIONAL BUSINESS TRENDS"
Sir Derrick Holden-Brown, C.A. Chairman, Allied Lyons PLC and Hiram Walker-Gooderham & Worts
Chairman: Nona Macdonald President
Sir Derrick Holden-Brown might well be labeled a "Canadaphile" for his affinity to us, as we shall hear today in his first major public address in this country. Sir Derrick comes here as the new chairman of a company that bears names well known to Canadians for the past one hundred and thirty years: Hiram Walker-Gooderham & Worts Ltd. will be linked now with Allied Lyons of Britain.
For those who may be wondering, the Lyons name originates with the familiar Lyons Corner House and Tea Shops in England and the Allied comes from Allied Breweries. Now this sounds like a lot of cakes and ale and it is just that.
Allied-Lyons holds title to seven thousand pubs in Britain and is purveyor of ice cream, donuts, tea and sherry. Add to that the Hiram WalkerGooderham & Worts products: scotch, rye, liqueurs and cognac. We know one reason why, at least, Sir Derrick makes a point of keeping fit and active with his beloved cross-channel sailing ventures.
After leaving the Royal Navy in 1946, his chartered-accountancy credentials became his food and drink. After a series of management roles in various brewing companies, he took on the two-fold appointment in 1978 as Chairman of Allied Breweries and Chairman of the Brewers Society. After receiving his knighthood in 1979, he became Chairman of the Allied-
Lyons, PLC (Public Liability Company), in 1982. Last year, he played a gentlemanly role in the game of negotiating with Canada's Hiram Walker Resources Ltd. and Gulf Canada to merge the British and Canadian interests. For those who recall, it was a spirited skirmish resulting in the acquisition by Allied-Lyons of fifty-one percent of Hiram Walker-Gooderham and Worts Ltd. and the other forty-nine percent owned by Gulf Canada.
We, the spectators, have been kept informed by the business pages and national newspaper ads about Allied-Lyons which, at that time, was relatively unknown to Canadians. More information is to come today.
So let us welcome the Chairman of Hiram-Walker-Gooderham & Worts. His topic will be "Opportunities Arising from International Business Trends."
Sir Derrick Holden-Brown:
I consider it a great privilege to have the opportunity today of addressing The Empire Club of Canada. 1 feel 1 can take considerable comfort in the fact that we share many mutual interests, including our commitment to the democratic process, our appreciation of the common heritage of the Commonwealth, and our confidence in the future of Canada.
I am not unmindful, Madam Chairman, of the long list of distinguished speakers who have appeared before this club over the years. I hope that my remarks today, which will focus largely on the international business environment and the opportunities we see for Canada in the emerging global economy, will contribute in some small way to the wisdom and knowledge brought to you by your previous speakers.
Before moving on to my main task today, however, I would like to give you a brief background of my own very long involvement with Canada.
Somehow there has been a strong Canadian thread within my life for 45 years. I first became aware of Canadian drive and determination when I was serving in the Navy in World War 11. We were in small ships in the Mediterranean with one flotilla commanded entirely by Canadian officers--and very aggressive and successful they were, too. It is enormous pleasure to me that my own commanding officer at that time, Tom Ladner, is here today.
In the 1950s, I was employed in the United Kingdom by one of your great Canadian companies, a company with a worldwide reputation and a great export business. It may come as no surprise to you that the company was Hiram WalkerGooderham & Worts.
In the early'60s even the formation of the group that is now Allied-Lyons came about specifically because a certain E.P. Taylor was busy in the UK buying up and putting brewery companies together to form a completely new competitive force in our brewing industry.
Last, but by no means least, my wife is Canadian. She grew up in Toronto, and, of course, is delighted that we now have more frequent opportunities to visit this wonderful city.
Today, few would argue with the fact that investors expect organisations to which they have entrusted their funds to show continuing growth. The alternative, as we say in the United Kingdom, is that shareholders will vote with their feet-and move their investments over to other, more promising looking corporate entities.
It is in order to find new areas of growth that companies are focussing on global markets. I could give you a number of examples, but a good one is that well-known North American institution, McDonald's Restaurants. With well over seven thousand outlets already in operation in the United States and Canada, there are not many prime locations left for them on the North American continent. Expansion must therefore come from abroad.
McDonald's business strategy is to go into partnership with local entrepreneurs, just as they did in Canada with George Cohon. Thus they are a good example of a multi-domestic operator.
Let me explain. A multi-national company can come in many guises. It can own a series of domestic operations-thus my description multi-domestic. Or it can be a product or brand-based operator, with worldwide sales and manufacturing facilities in one or many locations, or any possible combination of these.
Another example is Pepsi-Cola, which comes to mind because an associate company of Allied-Lyons has just acquired the franchise for the United Kingdom.
In the case of McDonald's, the motivation for expanding internationally was saturation of the domestic market, and in the case of Pepsi-Cola, the desire to increase volumes and also to get into some markets (the USSR for example) ahead of the competition.
A further force at work creating the drive towards a global economy is the pervasiveness of consumer trends and fashions, which today are spread rapidly from country to country by television, the cinema, and personal travel. The result is the development of a common global market for similar products, services and ideas, and, whether the product is jeans, perfume, leather goods, beverages or cigarettes, it is subject to these same pressures and preferences.
We are well aware of these influences in our business. When you have premium brands such as Harvey's Bristol Cream, Courvoisier, Ballantine's, Kahlua and Canadian Club, you will naturally follow that trend and promote your products internationally.
The ease of travel and telecommunications heightens accessibility to world markets, regardless of one's country of origin.
Concorde, for example, is now well over ten years old. it is not uncommon to meet people who commute regularly between London and New York, and indeed between Sydney and London.
In the telecommunications field, the facsimile machine has revolutionised the transfer of the written word. Most makes of computers, if equipped with the proper interface, can talk to one another, even to the extent of accepting a message in English and delivering it in Chinese. I am told that this latter feat, by the way, is most difficult.
The impact of these developments on the economy are obvious. The 24-hour market in stocks and bonds is only one example, and the City of London, together with the markets of Tokyo and New York, now find themselves vying for global leadership.
New York and London also seem to be vying to produce the greatest shocks. But this will pass, and the markets will, as always, concentrate on essentials deciding which economies and which companies offer the best prospects for the future.
This international competition for investment will have a profound impact on the future success of countries and companies, but the balance between short-term performance and long-term prospects is one that will come into even greater focus. Company chairmen will have to face up to the need to communicate internationally to ensure that their plans and strategies are fully understood and that investors will be confident enough to look long term.
Facilitated by technology, the world is therefore becoming one market, and, to illustrate just one consequence of that phenomenon for a moment, I think it imperative that governments also adopt an international dimension to such issues as competition policy.
In the United Kingdom, we are trying to convince the Office of Fair Trading (with, I believe, some success) that mergers must be viewed internationally. It may at times be necessary to accept a certain level of domestic concentration to achieve the formation of groupings capable of competing in world markets.
Let me now talk for a little about how Allied-Lyons came to be a player in this global marketplace.
Allied-Lyons is a strong, successful British-based food, beverage and leisure company. We are not a conglomerate. All of our activities are concentrated in these related areas. It is our intention to maintain this cohesion.
Worldwide, we employ well over seventy thousand people and, even before the acquisition of Hiram Walker, had annual sales of nearly seven billion dollars Canadian and profits of around six hundred million dollars Canadian before tax.
We are the second-largest brewer in the United Kingdom, owning around seven thousand pubs of which five thousand are tenanted and two thousand are managed. In addition, we are developing a chain of restaurant and cafe-bar-type outlets with considerable success. We also have major brands of lager and ale, some of which are international.
By the very nature of the beer business, it tends to be domestic and we see it remaining that way-but, again, we believe there is room for the multi-domestic operator. In fact, we are now seeing these develop, and our own small Dutch operation is a good example.
We have wide international interests in food. The main focus of the business is still the United Kingdom where we are strong in tea, coffee, bakery products and catering.
In the United States we own Baskin-Robbins ice cream, DCA Food Industries, producing bakery machinery and food mixes, and Tetley Inc. tea and coffee. All these companies are run by Americans and they themselves are developing internationally.
Baskin-Robbins is expanding as a multi-domestic operator. In Canada, Silcorp is the national franchisee, and in Japan and Korea Baskin-Robbins is in partnership with local operators.
DCA is also looking outside the United States. It has an operation in Canada and a very successful company in Spain, which is jointly owned with some lively Spanish partners.
We also have food companies in most European countries and in East Africa.
You will see from this that our claim to have an interntional food business is, therefore, well founded.
Now for wines and spirits.
We have a very strong presence in the United Kingdom wines-and-spirits market, both through our own companies and brands and through a joint venture in table wines with another major brewer. This makes us the largest wine company in the United Kingdom.
Although the wines-and-spirits market in the UK is mature, that in itself is, in our opinion, no obstacle to further profits growth. However, when maturity is coupled with a tight government policy on mergers and competition, it does mean we have to look elsewhere for growth.
This growth, we believe, must come from strong international brands.
It was natural, therefore, for us to take advantage of the opportunity that arose early in 1986 to acquire Hiram WalkerGodderham & Worts. I am sure there is no need for me today to recount the details of the rather interesting period that followed, suffice to say that we are delighted with the outcome and the fact that in Gulf Canada Corporation, and through it, Olympia and York, we have such successful and committed partners.
Hiram Walker has a very long and distinguished history as a leader in the liquor business, not only in Canada, but also worldwide. When the next chapter of that history is written, I am sure it will be seen that the company has been reshaped to compete in a world with fewer but very powerful players.
I am delighted that Cliff Hatch, President of Hiram Walker, is here today. He and generations of his family have played a very major role in building the company to the position it now occupies.
The task we now face is to ensure that our investors, employees and customers obtain the maximum benefit from the fusion of our wines-and-spirits business with the operation of Hiram Walker-Godderham & Worts and the subsequent further international development of all our brands.
It is our business philosophy to delegate authority to the operators in all sectors of our organisation. We believe that, in this way, we obtain dedicated, positive and focussed management who are close to the marketplace. Through this means, Allied-Lyons has built an international business including some very successful domestic operations.
Canada, because it offers a stable, sound and growing economy, is an extremely attractive country in which to do business. It remains rich in natural resources, and possesses a significant and expanding technological capability. You hardly need me to tell you that.
Canada, as far as we are concerned, also offers the dynamism of a youthful and vigorous country, which springs from your relatively recent pioneering history. I am sure it must be difficult for visitors to appreciate that Vancouver, the site of Expo '86, was founded only a hundred years ago, and has grown from a very small city in the lifetime of many residents.
In international terms, however, Canada has a limited capital base. It needs to attract investment from abroad, while, on a reciprocal basis, permitting its citizens to make investments abroad.
Our own acquisition of Hiram Walker may well be a good example of the type of investment that will be seen in the future. It released cash into the Canadian economy that could be invested elsewhere for growth.
Our commitment to maintain the Hiram Walker base at Windsor, Ontario, and to use our own technology to develop the production capabilities in Canada, demonstrates that there can be other benefits in allowing investment from abroad.
The financial world will be watching with interest your own "Big Bang" in the securities industry as your brokerage firms respond to the new Ontario and federal legislation permitting them to open up ownership to chartered banks and foreign investment houses.
The increased competitiveness, and larger capital base that this will bring to your securities industry, undoubtedly will be beneficial to both Canadian and international investors.
History has taught us that competition increases efficiency, and leads to higher standards of living. We have also seen how peaceful international competition can reduce world tensions by moving the focus of attention from geopolitical to economic goals.
At the same time, it is not surprising that these global trends are sometimes a cause of apprehension and concern in Canada. You share your continent with a larger and more powerful neighbour. Your economy is largely dependent on the viability of your export industries, and we know that you are determined to retain your own cultural and national identity.
For all these reasons, it is understandable that your approach to freer trade with the United States must be cautious and careful. I happen to be confident that you will find a pragmatic way to deal with these concerns, while also enhancing your trading opportunities in the United States.
I also am convinced that Canada has a much stronger and more enduring cultural foundation than most Canadians realise. Your culture stems from a shared heritage with Britain and France, a heritage since enriched by the contributions of many other communities across the globe. It is a culture that is shaped by the uniqueness of your own national experience.
There are few countries that are spread out along four thousand miles of border with their neighbour. 1 understand that eighty percent of Canadians live within one hundred miles of this demarcation line. And despite the fact that the powerful influence of American culture flows readily across this line, you have opted to shape, and support, a distinctive Canadian identity. I believe it is an identity that is stronger than many people realise.
Last year two of your writers were contenders for the Booker Prize, the United Kingdom's most prestigious literary award. In the world of music, we expect to see the Montreal and Toronto Symphony orchestras in London because we know they rank with the world's best.
A statistic or two: Despite the constant presence of American culture, I am told that Canadians demonstrate a very strong level of support for their own media of communication. The free flow of books from the United States and Britain does not prevent Canadian titles from making up twenty-five percent of all books sold in Canada. Similarly, fully a third of all magazines sold on Canadian newsstands are published by Canadians. Could we in England, 1 wonder, be accused of losing our identity because certain of our newspapers are owned by Canadians and indeed some others by Australians.
Business, investment, fashion and, I hope, ideas, will become increasingly international-and I believe we can now see some signs that even the communist countries will be participants.
With your twin heritages, your dynamism, your vast resources and the proven vision of your artists and business people, I believe Canada is in a unique position to take advantage of the new opportunities of this emerging global marketplace.
I am delighted that Allied-Lyons is privileged to share in Canada's bright and exciting future.
The appreciation of the meeting was expressed by H.N.R. (Hal) Jackman, a Past President of The Empire Club of Canada.