Tiger Brands' chair­man on re­cov­er­ing from Nige­ria

Tiger Brands CEO-des­ig­nate Lawrence MacDougall is an old Africa hand in the fast-mov­ing con­sumer goods mar­ket. Chair­man An­dre Parker spoke to Gi­uli­etta Talevi about the com­pany’s fresh start af­ter a se­ries of ill-fated deals in Africa

Financial Mail - Investors Monthly - - Front Page -

Q What was Tiger Brands look­ing for in its new CEO? A We were look­ing for some­body with a track record of op­er­at­ing in SA as well as other de­vel­op­ing mar­kets be­cause Tiger’s fu­ture can­not be lim­ited to SA alone, in terms of sources of growth. As you know we have been look­ing for and made some in­vest­ments out­side SA — not all of them spec­tac­u­larly suc­cess­ful, prob­a­bly a point you’ll get back to. So we wanted some­one who has op­er­ated out­side SA as well and then ob­vi­ously some­one from that branded FMCG space, prefer­ably with multi­na­tional ex­pe­ri­ence, able to bring across some proven pro­cesses and sys­tems, how to build brands, how to in­no­vate suc­cess­fully … and some­one who came out of the hard op­er­a­tions — sales and mar­ket­ing — and I think we found the guy in Lawrence. Q Did you look inside and then widen the search or was it thrown open from the start? A Our peo­ple were in­cluded from the start. Hei­drick & Strug­gles helped us with the search. We had some good [in­ter­nal] can­di­dates who were short on ex­pe­ri­ence and one ex­cep­tional in­ter­nal can­di­date in Noel Doyle and we com­pared our own peo­ple with what came out from their in­ter­na­tional search — and we used them be­cause they do have of­fices all over the world. Q Quite a few an­a­lysts were wor­ried that if Noel was passed over for the job he’d leave. Is he happy to re­sume the role of chief op­er­at­ing of­fi­cer? Was he dis­ap­pointed? A I think it’s fair to say that he was dis­ap­pointed but in the time that I’ve spent with him he has ac­cepted the fact that we’re bring­ing in Lawrence and he’s pledged to work with Lawrence and be part of the Tiger story in the years ahead, so I’m pretty con­fi­dent that Noel’s on board and set­tled. Q You talk about some­one hav­ing “hard ex­pe­ri­ence” in the FMCG sec­tor — is this a tacit ad­mis­sion that for­mer CEO Peter Mat­lare was the wrong can­di­date for Tiger? A You know, if you cast your mind back, when Peter started it was just af­ter that bread price fix­ing de­ba­cle and Peter did a heck of a job to re-es­tab­lish our rep­u­ta­tion. And in fact our South African busi­ness through­out his ten­ure has done pretty well in tough cir­cum­stances. (Peter) said the Dan­gote Flour Mills (DFM) en­try in Nige­ria wasn’t ex­e­cuted per­fectly, he could have done a lot bet­ter. He’s a very hon­est and en­dear­ing man, and I have the highest re­gard for him. When we started look­ing out­side SA to build a busi­ness … we set our­selves a tar­get of get­ting up to 30% of earn­ings out­side SA. I think that was prob­a­bly where Peter’s lack of ex­pe­ri­ence in work­ing out­side SA came in. [Tiger Brands’ earn­ings have been in de­cline since 2012, due in part to losses in­curred through the DFM ac­qui­si­tion.] But to just blame it on Peter would be ob­vi­ously wrong: I mean we as a board were also com­plicit and Africa has struck some head­winds. It’s not the get-rich-quick sce­nario that per­haps once we naively thought it might be. But Peter gave it his best shot, and both Peter and our­selves felt that seven or eight years at it was prob­a­bly a good time for lead­ers to change any­way, so let’s try to find some­body who has some ex­pe­ri­ence of what it takes to be suc­cess­ful out there. Q So it wasn’t just Peter’s er­ror in buy­ing DFM, but that of the whole board? A I sup­pose you should be the jury, or your read­ers. The facts, as we see them … [were] that the DFM ac­qui­si­tion was bang on our stated strat­egy: we had to look north of SA’s bor­ders for growth. Nige­ria was the next big thing and there was a cred­i­ble en­tity that gave us an en­try into the Nige­rian mar­ket of some sub­stance. Then, to be frank, in the early days we could have done a bet­ter job of check­ing out in terms of our due dili­gence. You know, we did a nor­mal, de­cent tech­ni­cal due dili­gence as you would ex­pect with PwC, so the num­bers all stacked up. But it was the more dif­fi­cult things to read, such as route to mar­ket, the strength of the DFM brand that we took on board, the in­tri­ca­cies of the in­dus­try in­clud­ing some new ca­pac­ity that was in the process of com­ing on stream — and that was the stuff that we were prob­a­bly neg­li­gent about sig­nalling right up front and

there­fore in tem­per­ing our ap­petite for that ac­qui­si­tion. And also in the early days, we sent in a man­age­ment team and were per­haps a bit naive [to think] we’d do it the South African way of build­ing brands and get­ting to our cus­tomers. There were some Nige­ria-spe­cific ways of do­ing things that took us a while to learn and get un­der our belts and that led to us, as you per­haps know, chang­ing our man­age­ment team. In fact, we have a re­ally good strong team un­der Thabo Mabe there, who has Unilever ex­pe­ri­ence in Nige­ria, and op­er­a­tionally things were do­ing quite nicely un­til the ex­ter­nal fac­tors started hit­ting us in the past two years: oil price drop­ping, for­eign ex­change short­ages and so on.

Q Does it put Tiger in a real fix in that you can’t only look to grow in SA, you need ex­ter­nal growth, but Africa is clearly full of pit­falls? Do you just have to be res­o­lute?

A I think you’ve an­swered your own ques­tion [laughs] … that’s the chief rea­son why we changed lead­er­ship and brought Lawrence in: to come and help us with that. You’re dead right — we can’t stay SA-bound — though there’s more to be done in SA, and it will for the fore­see­able fu­ture be the chief con­trib­u­tor to our earn­ings, but we have to ex­pand out­side SA. Be­cause of the prox­im­ity and our knowl­edge, and the fact that we ex­port lots of prod­ucts into the rest of Africa, it would be the next log­i­cal theatre for us. But the pit­falls have in­creased and Lawrence needs to help us find a way into Africa and other growth mar­kets.

Q Tiger’s shares were sold off, so you did take pun­ish­ment from the mar­ket. But they’ve ral­lied on the news of Lawrence’s ap­point­ment — do you feel that your in­vestors are sup­port­ive of Tiger?

A Yes, cer­tainly in my in­ter­ac­tions and those of our in­vestor re­la­tions folk, and the share price move­ment, our moves to close DFM and to ap­point Lawrence have been wel­comed by our share­hold­ers as the kind of cor­rec­tive ac­tion they were ex­pect­ing from us. The is­sue with a thing like DFM is that apart from the bleed­ing there it also con­sumed man­age­ment and the board. It just takes so much time and at­ten­tion. As hard as it was to just shut the busi­ness and exit, and apart from fur­ther cap­i­tal that would have been re­quired, it just frees up man­age­ment time and at­ten­tion to fo­cus on fur­ther growth op­por­tu­ni­ties.

Q It strikes me that when I go to stay with fam­ily in Italy, apart from the ex­change rate, goods there seem to be much bet­ter priced and SA has be­come re­ally ex­pen­sive. Some an­a­lysts say that lo­cal firms just can’t pro­duce com­pet­i­tively or ef­fi­ciently. Do you think that’s a fair crit­i­cism?

A I would say that your crit­i­cism is valid as far as Tiger goes … I don’t think we have been as pro­duc­tive and ef­fi­cient as we could be and should be. Cer­tainly Lawrence and his team must look at that. In a way those are the low-hang­ing fruit and hope­fully he can come with his bench­marks from the likes of Mon­delez and Kraft and help us on the unit costs front. I’d just make one com­ment though: a lot of our raw ma­te­ri­als are im­ported — all Tas­tic rice is im­ported; lots of our flour is im­ported; so, given the weak rand, that com­pli­cates di­rect com­par­isons [with overseas pro­duc­ers]. But, in prin­ci­ple, I think we’ve got to have a good close look at our cost base.

IM

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An­dre Parker Chair­man, Tiger Brands

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