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Pioneer’s new CEO will transform the foods group

He arrived with a mandate from the board to drive top line sales; improve the margins, profitability and the return on invested capital. Considering that on all of these metrics the company is performing sub-optimally, he has a big task ahead. “We are talking about transformational change,” he says. “I wasn’t given a mandate to tinker.”

In this short time Roux and the management team have subjected every part of the business to a strategic review. “The pace has been frenetic. During this process I resisted the urge to pronounce and listened attentively – though it’s not my best trait.”

He found a complex business with lots of moving parts; a depth of talent and institutional knowledge, whose only limitation is the lack of diversity (in race and thinking); and a margin that is inferior to Pioneer’s peers and “unacceptable.”

“We need to tackle our costs, efficiencies, pricing power and our portfolio mix.”

Seed, weed and feed

Done listening, Roux has developed a five-point plan. First up is the product portfolio. ‘Seed, weed and feed’ is the new mantra. Seed implies developing adjacencies in the product portfolio and could include acquisitions. “We are in snacks and treats but not in sweets for instance.”

Tiger Brands has proved itself a master at developing brand extensions – Jungle bars come to mind – and Roux will be well placed to apply this expertise in Pioneer.

Weed implies selling businesses that are not core and quietly shelving certain product extensions that add complexity rather than value. Already Pioneer has implied that Quantum Foods (the chicken business) is not core, though the decision to sell it has not been confirmed by the board. “Do we really want to be in a cyclical business whose margins are paper thin? I don’t think it fits our business.”

Other disposals are being considered, though Roux declines to name them. Pepsi must be one of the brands under the spotlight. Its underperformance, along with Quantum and the biscuit business, is a drag on group margins. Mitigating against a sale is the fact that Roux has recently appointed Kerr Higgins, previously head of CocaCola Sabco in Uganda to run Pepsi – perhaps he can turn the ailing business around.

The next step in the plan involves resetting the cost base. “It’s a commercial imperative,” Roux says. The Bokomo and Beverage businesses will be merged to create one consolidated entity focused on consumer brands. Together these businesses contribute 31% of group revenue. The benefits include lower overheads as well as increased efficiency for instance in customer management and marketing.

This step will be supported by the plan to centralise group functions like logistics, finance and admin and procurement. Pioneer already procures raw materials centrally and already runs SAP across all the divisions, so it makes sense to take this to its logical conclusion, says CFO Leon Cronje.

More painful is the plan to right-size the business. “Our ratio of people to productivity is unbalanced,” says Roux, “and this has to be addressed.”

The third step involves focusing on and revitalising the group’s power brands. “The brands are not tired; I just don’t see a consistent application of strategic marketing.” Pioneer’s last marketing executive retired three years ago and Roux has a shortlist of potential candidates. “I want someone with solid marketing capability who will work alongside the leadership team in driving growth.”

Strategic customer management is next up. “Retailers in this country are very powerful. Yet we tend to do things through our divisions and as a result we lose leverage. We need to harness our strength as Pioneer.”…..

Moneyweb.co.za: Read the full article

Additional reading:

Pioneer Foods appoints new chief

See an interview with Phil Roux on Summit TV

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