Food companies seek new flavour of CEO
Pepsico Inc’s incoming chief executive Ramon Laguarta is the latest of a new generation of leaders tasked with reigniting growth at the world’s best-known food and drink brands as they fight back against media-savvy independent rivals. Six of the world’s ten biggest food firms, including Nestle, Mondelez International Inc and Kellogg Co, have replaced their CEOS in the past three years.
Campbell Soup Co and Hain Celestial are also on the hunt, with more in the broader consumer industry expected to follow.
Traditional titans that dominated their sectors have lost ground to smaller brands that have done a better job selling online and connecting with millennials on social media, while facing pressure from outside investors to become more efficient.
In response, boards are looking for relatively young CEOS who can crunch data like technology executives and cut costs like private equity investors.
“Fundamentally, this new generation of CEOS has a remit for change,” said EY’S lead analyst for consumer products and retail, Andrew Cosgrove. “Boards are realising that we need new thinking.”
That means introducing new skills into the C-suite.
Last year Mark Schneider became the first outsider in nearly a century to take the reins at Nestle, the world’s largest food company. The 52-year-old healthcare veteran, nearly a decade younger than his predecessor, has stepped up acquisitions and divestitures and restructured parts of the business as he contends with activist shareholder Third Point.
Sean Connolly, 53, took over the helm at Conagra Brands in 2015 and has already moved the group’s headquarters, announced sweeping cost cuts, launched new products aimed at millennials and agreed to buy rival Pinnacle Foods.
By top management standards, early50s is still relatively young, given that the average age of CEOS in the S&P 500 was 57.4 last year, according to executive recruiter Spencer Stuart.
FRESH PERSPECTIVE: Just over half of the 39 consumer packaged goods companies in the Fortune 500 have changed their CEO in the last two and a half years, according to executive search firm Russell Reynolds Associates.
That represents 15 per cent of all CEO changes in that group of companies in that period, even though the sector only makes up 8 per cent of the Fortune 500.
Analysts are speculating whether the latest new appointment Laguarta, a 54-year-old Spaniard who speaks four languages, will be more open to strategic options like separating Pepsico’s US bottling business or breaking up the company.
Laguarta is a Pepsico veteran with 22 years at the company, but others have looked elsewhere for new leaders.
About half of the new CEOS hired in the sector hired in the past five years have been internal candidates, down from roughly three quarters over the past 20 years, said David Cooper, head of Bain’s consumer packaged goods practice.
Private equity firm 3G, known for engineering mergers and slashing costs, shocked the industry in 2015 when it combined Kraft Foods with its HJ Heinz, keeping partner Bernardo Hees in charge. Nelson Peltz’s Trian Fund Management recently won a board seat after a proxy fight with Procter & Gamble Co.
“A lot of companies have been spinning and reacting, trying to figure out how they can essentially ‘3G’ themselves to preempt being taken over, being the next victim,” said Andrew Hayes, a Russell Reynolds consultant who has helped several major consumer companies find top managers.
Six of the world’s ten biggest food firms, including Nestle, Mondelez International Inc and Kellogg Co, have replaced their CEOS in the past three years