Consumer-focused UK businesses have often failed to translate their success over to the bigger – and more competitive – US market, mainly due to their failure to understand the market and elevate their business enough to compete.
But there are three possible exceptions according to Legal & General Investment Management’s Gavin Launder (pictured) that might be worth considering.
“Type ‘Brits abroad’ into Google and it’s fair to say that the content and imagery is hardly flattering,” said the fund manager. “Let’s face it, we don’t have the best reputation overseas. 
“I’m not just referring to the wretched perception of our travelling football fans and the quality of our cuisine. For a number of consumer-focused businesses, UK companies have tried but miserably failed to light up Broadway.”
He added: “Competition for consumers’ attention is fierce in the US, with buyers uncompromising in their demands.
“For me, capturing market share early is crucial. This is exactly why it makes more sense for a company to seek an acquisition as a route to market.”
As such Launder – who oversees the £203.8m L&G Growth Trust – has highlighted three companies he believes have the potential to succeed: Fever-Tree, JD Sports and Cineworld.
First up is soft drinks manufacturer Fever-Tree, where the firm has a huge opportunity for expansion into the US premium mixer market.
Founded in 2003 by Charles Rolls and Tim Warrillow, the company – which has a market capitalisation of around £2.8bn –has been a big success story since its initial public offering, although it has struggled since peaking last September.
Performance of stock since September 2018
Source: FE Analytics
In the US, the firm recently underwent a distributor change in line with its recent collaboration with Southern Glazer’s Wine & Spirits, a partnership which Launder said will push them forwards in the US expansion.
He said: “While the ink on this deal has only just begun to dry, this will significantly bolster Fever-Tree’s attempt to create a premium market for on- and off-trade mixers.”
Rolls and Warrillow’s ethos is a ‘no compromise on quality’ attitude and a ‘single-minded mission’ to produce their premium tonics.
Looking at the company’s performance in the US Launder said early indications from the first-quarter earnings season, indicates that current trading is clearly positive for market sentiment.
He added: “Future growth from disciplined capital allocation, alongside the benefit from a marked improvement in the product mix and offering, should help drive demand and spending. Importantly, this helps build conviction on the asset quality and growth credentials.”
Next up is sports fashion retailer JD Sports, the Manchester-based company which offers brands such as Adidas, Nike, Puma alongside their own labels Pink Soda and Supply & Demand to fill the high street's ‘athleisure fashion’ trend.
The LGIM manager said market commentators had been wrong to write off the company following its acquisition of sportswear retailer Finish Line in 2018.
“While it was clear that both deals represented transformational strategies, history provided a reasonable rationale for caution,” said Launder.
“Despite this wider uncertainty, the deals struck me as a great opportunity for a strong UK business to turn around these stale US franchises.”
Performance of stock over 1yr
Source: FE Analytics
He added: “Of course, it’s likely that the value created by the acquisitions of the number-two American players in the sporting-goods markets will need a degree of shareholder patience and investors may require a longer time horizon to see these deals truly bear fruit.”
Whilst the UK remains their biggest source of revenue, opening 44 stateside stores have proved to be a success generating 21 per cent of its 2018 profits.
Launder’s final tip for UK companies to crack America is cinema chain Cineworld, which like JD Sports he believes was wrongly pushed aside by investors and market analysts last year.
Describing themselves as “the best place to watch a movie” they have almost 800 sites spread over 10 countries, with the majority of these sites (555) located in the US.
But Launder said this aggressive US approach is worth it for the potential opportunities where – as in the case of JD Sports – supportive consumer trends can be found and it can leverage the strength of its existing business model.
“From our recent conversations with management, such a huge opportunity in the US represents a potentially lucrative market for both companies,” said Launder. “They are applying sensible aspirations for improving these businesses, seeing ample scope for both evolution and growth through capital deployment and greater operational efficiency.”
Calling the three companies the “latest British invasion,” the LGIM manager said that the signs for their success are positive and the opportunities are vast.
“While these businesses weren’t born in the USA, they could well conquer it,” he concluded.
Launder has overseen the L&G UK Growth Trust – which invests in companies the manager believe has strong growth prospects – since September 2014, during which time it has made a total return of 51.80 per cent compared with a gain of 31.61 per cent for the average IA UK All Companies peer.
Performance of fund vs sector under Launder
Source: FE Analytics
The fund has an ongoing charges figure (OCF) of 0.78 per cent.