Grow a Dairy Cow

The global tobacco company BAT reported in its business report for the past year that it achieved total revenue of £25.7 billion, which is 0.4 percent less than the previous year. In contrast to the slight decline in total revenue, the revenue from the sale of new product categories increased by 51 percent last year, and the number of users of its products from that segment increased by 4.8 million over the year, reaching 18.3 million. Although revenue from the sale of new product categories just exceeded £2 billion, BAT’s CEO Jack Bowles emphasizes that the company 'is on track to achieve revenue of £5 billion by 2025, as well as profitability in new categories'.

If large global tobacco companies had sat idly by while public health campaigns against smoking were being conducted worldwide, they would today be well on their way to near extinction by 2025, as could happen to smaller cigarette manufacturers who do not have the strength to develop a new product category themselves or did not realize it in time and thus sought shelter under those who can, as the Rovinj-based Adris Group did by selling TDR to BAT.

New product categories, namely heated tobacco products, are thus becoming what is referred to in business jargon as a cash cow. The term originated at the Boston Consulting Group about fifty years ago and refers to a product or service that generates a lot of money over a long period in a company or an entire sector with low growth. Cash cows tend to grow slowly but are usually market leaders in industries where there are many barriers to entry, which, on the other hand, means there will be less competition.

When we talk about business restructuring in Croatia, we mainly think of financial restructuring, and then concepts such as cost-cutting, optimization of the number of employees, and similar. Completely new products, those that would replace existing ones and ensure stable revenues for companies in the long term, are rare, but they do exist. It was a long time ago when a relatively small company from Koprivnica launched Vegeta, a product that is largely responsible for Podravka becoming a relatively large food company.

We have found several excellent examples of domestic companies that have already created their new cash cow or are at least on the right path to do so. Which companies are these and what are their experiences, you can read in the printed and digital edition of the new Lider.