Two ways to profit from nostalgia

published 1 February 2010

The Royal Society of Chemistry is trying to get hold of an unopened can of Party Seven. This, we are told, is purely for the purposes of scientific research and not because the Society's learned members want to crack open one of these famous seven-pint cans of Watney's beer and have a knees-up.

Unless you are of a certain age you will not even know what I am talking about. Suffice to say that no party in the Swinging Sixties really swung without a few Party Sevens. And I am sure they are responsible for many happy, if hazy, memories.

A few more memories came back to me yesterday when I was looking through 'The 1950s Scrapbook'. This is a clever publishing idea that contains little more than pictures of all the common household goods from that decade.

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Hands up if you are old enough to remember Force Wheat Flakes, Chivers Jellies, Echo Margarine, Kia-Ora, Frys Peppermint Cream, Spangles, Wills Woodbines, Dan Dare, Matchbox Toys and Dixon of Dock Green.

Ah, nostalgia! Isn't it wonderful? Not long ago I listened to a radio programme that did nothing more than recall the days of crinkly 'medicated' toilet paper remember Bronco and Izal?

Why the brands of yesteryear remain so popular

It is interesting to look back at these famous brands of yesteryear and see how many of them still survive today. Actually there are quite a few. And the grand-daddy of them all is Tate & Lyle's Golden Syrup.

Ever since 1885 this has been sold in the same green tins bearing a picture of a lion and the biblical inscription 'out of the strong came forth sweetness'.

Tate & Lyle make brands introduced in the 1950s seem mere babes. Even so, the likes of Persil, Birds Eye Fish Fingers, Sugar Puffs and Wagon Wheels have shown their staying power.

Also available in the 1950s and indeed for many years before that was Cadbury's Dairy Milk Chocolate. If you want one reason why Kraft thinks it is worth shelling out £12bn to buy this famous firm, it is the longevity of its brands, which should be generating sales and profits for decades to come.

But why do we still buy Cadbury's Dairy Milk? Is it because it is the best chocolate bar around? Or is it because it has happy associations with our childhood?

Nostalgia can be a powerful business tool. Asked by a television reporter why they take their summer holidays in Blackpool every year, two old ladies explained that it was because they had always done so as children.

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Why the nostalgia industry is only going to grow

So here is an investment theme to conjure with. We know that the population is ageing. We know that this means more pills, more zimmer frames and care homes.

But perhaps we ought also to think about products from long ago. As we get older we increasingly revert to the comforts of youth. And this could explain why two small companies with unashamedly retro products are powering ahead.

Among the many trading statements delivered since the start of the year, those from Stoke on Trent's favourite pottery maker Portmeirion (LSE: PMP) stood out.

Last-year sales of £43m were well above forecasts, and were driven by our continuing love affair with traditional china. In 2009, Portmeirion bought Spode and Royal Worcester. With the help of these, and the successful shift of manufacturing to the Far East plus the enduring appeal of the traditional Portmeirion brand the business is going strong.

Portmeirion was founded in 1960. But there's another retro company that was around in the 1950s that also announced strong trading this week. This was Hornby (LSE: HRN). Hornby is famous for its electric trains, but is also very well-known for its Scalextric, Corgi cars and the Humbrol model kits.

Hornby has also shifted production from its original home in Margate to China and executed a succession of strong licensing deals most notably with the Thomas the Tank Engine brand.

But the real attraction of the shares is the play on nostalgia. Forget kids playing with the train set or the racing cars this is strictly dad's territory.

You may have seen the TV programme in which James May builds a Hornby railway all the way from Barnstaple to Bideford. A bit of a waste of time? Or proof that when the cares of working life and raising a family are behind us, we like nothing more than reverting to our childhood.

Nostalgia may not be what it used to be. But there's money in it!

This article was written by Tom Bulford, and is taken from his free twice-weekly email the Penny Sleuth

Tom worked as a fund manager in the City of London and in Hong Kong for over 20 years. As a director with Schroder Investment Management International he was responsible for £2 billion of foreign clients' money, and launched what became Argentina's largest mutual fund. Now working from his home in Oxfordshire, Tom Bulford helps private investors with his premium tipping newsletter, Red Hot Biotech Alert.