Want a step up the corporate ladder, a multi-million dollar a year salary and you think you know a bit about the food industry? Executive head hunters in Australia are looking for three people who fit these criteria to fill vacancies left by the sudden departure of chief executives in three of Australasia’s biggest food and drink companies: Goodman Fielder, Coca-Cola Amatil and Kellogg. Dave Robertson reports from Down Under.
Goodman Fielder, the largest food manufacturer in Australia and New Zealand with 15000 employees, lost CEO David Hearn last month, as did Coca-Cola Amatil with its boss David Kennedy. Kellogg Australia managing director Mohammed Elsarky has also departed leaving three companies, with combined annual sales of over A$7bn (US$3.6bn), rudderless.
Although all three presided over well run companies they appear to have been victims of a global trend in the food industry; stagnant growth in mature markets leading to poor share price performance. The final nail in Hearn’s coffin appears to have been worse than expected trading conditions in the first half of this year (and second half of the Australian financial year) which led to a forecast downgrade in profits of 5% on last year’s A$123.4m. And this was before substantial restructuring costs.
Announcing Hearn’s departure Goodman Fielder chairman Jon Peterson congratulated him on the restructuring before firing the final bullet. “Under David’s leadership, the company has been re-positioned into a more focused Australasian food group, with a much stronger core portfolio of branded businesses delivering improved margins. In addition, the company now has an excellent management team that will ensure our future plans are delivered. “As the next phase requires a dedicated management direction for at least the next five years, and as David Hearn is nearing the end of his contract, it is therefore appropriate that the Board search for a new Chief Executive,” he said.
Headhunters Spencer Stuart are scouring the world for an appropriate replacement with two internal candidates, NZ managing director Doug McKay and finance director Grant Logan, and former Southcorp CEO Tom Park already cited as possibilities. Finance director Mike Ihlein, head of Australian bottling Andrew Reeves and Philippines managing director Peter Baker are all touted as possibles for the top job at Coca Cola Amatil. Kellogg is expected to recruit from within the company.
The departure of all three CEOs prompted the Australian Financial Review to quote billionaire Warren Buffett who said: “When a manager with a good reputation meets a business with a bad reputation it’s usually the business that retains its reputation.” “This is essentially a matter of low growth in a fast moving consumer goods market,” Ausatralian Food and Grocery Council chief executive Mitchell Hooke told just-food.com.
Anybody wanting to apply for a job at any of these three companies, or any other in the developed world for that matter, had better be able to come up with some answers on how to deliver growth in share price on the back of stagnant growth in the food business. “Stable low growth presents a huge challenge to any incoming CEO,” adds Hooke. “They will have to understand the relationship between technology and competition for a start. Companies use technology in stocktaking, packaging and ecommerce as a tool to rationalise and consolidate so they are getting specific characteristics of what the market likes.”
But the incoming CEOs may get some help from the Australian government, which is considering measures that would expand these companies’ markets. The most important area, Hooke believes, is in free trade. “The food industry just seemed to miss the whole Uruguay round of the GATT talks and we’ve been left with high barriers to entry,” he says.
This is a major problem for Australia, which is one of the world’s largest agrigarian economies. “This is a major issue for us. This country has 1% population growth and negligible immigration so to grow we have to go offshore. “High tariffs and tariff escalators are endemic. The Australian food industry could do more if these trade barriers were not there.”
Although the Europeans are notorious for their protection of domestic food producers there is hope that the USA, the other global bad boy when it comes to food tariffs, might drop some restrictions. Australian prime minister John Howard is due to meet US president George Bush in September with a bilateral free trade agreement high on the agenda. With an election shortly afterwards Howard is desperate to come out of the discussions with an agreement that would help Aussie lamb, beef and wheat producers.
But this will depend on which way Bush swings. Will he protect the powerful farm lobby in Washington or will he follow his personal agenda of signing bilateral trade agreements? Only time will tell but the new boys at Australia’s food giants will have to hope that Howard can help their cause – and share price.
By David Robertson, just-food.com correspondent in Australia
To view related research reports, please follow the links below:-
The Market for Packaged Food in Australia