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Nelsons: Natural family healing

When the Wilson brothers picked up the Coutts Prize for Family Business in June, there was naturally much jubilation and pride at having their efforts rewarded. But as camera flashlights lit up the room and champagne bottles were uncorked, it could not have been further away from the day, 37 years earlier, when the Wilsons took over Nelsons following the tragic plane crash which killed the last remaining descendants of the company's founding family.

Today, Nelsons is a leader in the field of natural medicines and Europe's oldest and largest manufacturer of homeopathic medicines. Its brands, which include Rescue Remedy®, Bach™ Original Flower Remedies and Nelsons™ Homeopathy, are distributed around the world from its base in London. Its heritage dates back to 1860 when Ernst Louis Armbrecht moved to London and opened a homeopathic pharmacy. Six years later he married Charlotte Nelson, began trading as Armbrecht, Nelson & Co, and the Nelsons dynasty was born.

Tragic beginnings

The original pharmacy remains the centrepiece of the company today and continues to provide remedies, advice, expertise and service from its premises at 73 Duke Street in London's Mayfair. However, it is the tragic events of 1972 that mark the beginning of Nelsons rise to a world player in its specialised field.

Robert Wilson, the second-generation chairman, takes up the story: "It was a commercial British European Airways flight from Heathrow headed for Brussels. There was a major conference on homeopathy and all the great and the good of the homeopathic world were onboard that plane, as were a number of the top Irish industrialists, including the chairman of Guinness. The owners of Nelsons' were onboard as well, including Dudley Everett, who was married to a Nelson. They were the last of the direct line."

The plane crashed on takeoff into a field beyond the
airport in Staines, near London, with the loss of 118 lives.

Robert's father owned a meat business whose biggest clients were the pet food industry, while both his father and great uncle had an ongoing interest in homeopathy. Indeed, great uncle Andrew was a member of the Homeopathic Trust, which was a charitable body that supported a number of homeopathic hospitals in the UK.

It was for these two reasons that the Wilson family was approached to buy what was left of the Nelsons business, which at the time had a turnover of about £100,000, and just six employees.

"Andrew was approached as the family was known to be business-minded and had certain financial wherewithal. He asked if my father would join him and the two of them bought the company. My uncle was reasonably elderly at this stage and had never intended to be actively involved. So he asked after a few years for his shareholding to be bought out by my father, and for my father to run it," explains Wilson.

But the decision to buy the business was far from a purely business or financial decision. "Although homeopathy didn't have the appeal that it does today, even in the 1970s Nelsons was still a very established name. There was a great sense that Nelsons may cease to be. It was really a heart-based decision because Nelsons was a very small concern, and wasn't greatly profitable. But because my father and great uncle were so passionate about it, they wanted to make sure it
survived and were consequently seen as its saviours."

Values that money cannot buy

Ever since, the Wilsons have been keen to carry on the one value that money cannot buy – heritage. "The products have been around a long time and it's a very trusted brand. If you ask anyone who knows Nelsons they would think of words like 'Integrity', 'Quality' and 'Consistency'.  And that's part of what we've hoped to maintain right through our ownership."

Robert's father sold his meat business 10 years after the purchase of Nelsons to concentrate on running it full time, although he relied heavily on the non-family management team. By the time Robert joined the business in 1987 it had increased sales to just shy of £1 million and had 30
employees. Brother Patrick joined the following year.

"Although there was no overt pressure, my father was keen for my brother and I to get into the business.  He was not there all the time and was more of a non-executive chairman, so I think he was looking forward to his sons really putting the stamp of the family on the management team."
It was with a full complement of family members that the business really started to grow. Robert started in the sales department before moving into marketing while Patrick showed a keen interest in the export side of the business, which was still very nascent at that point in time.

Non-family advantage

Robert says the non-family managers accepted the arrival of the brothers: "I think there was an understanding that this was how it was going to be. However, after a while we realised that we needed a better management team. Luckily, it wasn't a difficult process because the general manager was about to retire so we used that as the launch pad to make some other changes and the business improved and steadily grew in the level of professionalism."
A central aim of the Wilson family has been to combine the best bits of family businesses with the professionalism of blue chip companies.

"Some of the criticism family business receives is that it doesn't have the same rigor that you might find in a publicly quoted firm. I'm not a great subscriber to that theory because I actually think family businesses, if well run, can be the most dynamic and fast moving of any. But one of the things I learnt from my father was that an organisation needs discipline in the form of management reports, formalised board meetings and a strict structure right from the start. At the same time of course, family values must be central."

Such an approach clearly resonated with the Coutts judging panel, including Jonathan Hagger, former CFO of the Grosvenor Estate. "As a successful second generation family business, which has displayed an impressive level of growth and produced a business which will flourish regardless of the economic cycle, the things that impressed the evaluation committee about Nelsons included:

The incorporation of family values into the brand reputation.

The close link between corporate and family governance with some non-executive directors also acting as family trustees.

The use of a phantom share scheme to incentivise key non-family managers.

The pace of growth over two generations to become a market leader.

The emphasis placed on communication including quarterly staff meetings hosted by the Chairman.

The importance of corporate and family philanthropy including the establishment of a family charitable trust, donations of homeopathic medicines and gifts of over £1,000,000 per annum."

In particular, Robert cites the family's use of non-executive directors as a key driver of their success. "It was part of my father's philosophy so right from when we joined the business there were non-executive directors. Some of these had been what one would possibly refer to as family retainers – there was a gentleman for instance who had worked with my grandfather. At the time we couldn't afford to employ the necessary quality of staff in either our finance or marketing departments, so we used consultants to begin with.

According to Robert the non-execs play an enormously valuable role and he believes that, more generally, they are a very under-utilised resource. In fact, he says they are more important in a family business than in a non-family equivalent:

"In family businesses there is always the potential for tension. And often emotion is part of that tension. The trusted non-exec can often play the role as the honest mediator. He/she can also help enormously with guidance on corporate pay structures. Remuneration committees run by non-executive directors are very helpful things to have."
Nelsons itself has two boards: the main board that runs the day to day management of the business and a senior board comprised of non-execs and family members that discusses issues relating to the family and the broader strategy of the business. A family trust owns 12% of the business and is run by four independent trustees, plus Robert and Patrick. It meets regularly just to make sure its interests are aligned with those of the business.  

Robert has four children while Patrick has three, although the eldest of all of them is just 14. "We're probably 10 years away from them coming in, so a number of the more gritty family issues that come up are probably some way off. But what we're trying to do is to make sure that we have the governance in place so the structure is there to be able to deal with these issues when they finally arrive," says Robert.

In particular, the Wilsons are working to form a family constitution and a family council in the future. Robert says the family board currently performs the latter's task to a limited extent but there will only be a real need for it when the third generation becomes involved.

And he feels bullish that the business will be an enticing one for the next line in family management. Natural medicine is really at the beginning of its growth curve, and we would see this business growing substantially over the next 10-20 years. Until the recent credit crunch we've been growing at double digits for a number of years. Sadly, we're not going to be able to do that this year, but it's still a thriving business and I would have thought there is a good degree of appeal to the next generation."

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