EDITORIAL: Odd choice of CEO for troubled Tiger Brands
Former CFO Noel Doyle has been responsible for some bad moves at the company
Change of personnel in the CEO’s suite of Tiger Brands’ headquarters in Bryanston was inevitable, but that office needed an injection of fresh blood.
Tiger Brands promoted company veteran Noel Doyle from CFO position to the corner office on Thursday, replacing Lawrence Mac Dougall, who is retiring on Friday after just four years at the helm of the R38bn consumer foods company.
Mac Dougall’s tenure at the maker of household names such as All Gold tomato sauce, Tastic rice and Koo tinned foods has been overshadowed by a reputation-sapping, financially crippling listeriosis outbreak and the company’s underperformance both operationally and in the stock market.
Now Doyle’s job is to help the company navigate a class-action lawsuit brought by victims of the listeriosis outbreak, which was traced to the company’s processed meats factory. It killed more than 200 people and left more than 1,000 sick.
The 2018 outbreak, the worst the world had ever seen, and the subsequent response by Tiger Brands tarnished its image. The company, which has taken no responsibility for the outbreak, is looking for a buyer to take the factory off its books.
The legal crisis is probably more in the hands of lawyers and indemnity insurers, but investors will look to Doyle to contain the public relations disaster stemming from the outbreak and litigation. It will be a tough sell given that the outbreak happened when Doyle was part of the leadership team.
Shareholders will also be keen to see how the former Southern Africa head of fast-food chain Nando’s will reposition the company in the consumer foods market — where it has lost ground to nimbler rivals such AVI, Libstar and Pioneer Food Group — and boost a share price that has dropped by nearly a third since 2016.
The swift appointment of a new CEO is a commendable effort of succession planning. But Doyle, who was sanctioned by Tiger Brands for his role in the bread price-fixing scandal more than a decade ago, is an odd choice if operational revival is among the top priorities for the board led by Khotso Mokhele.
Doyle, who was with the company from the late 1990s until 2008 before returning in 2013, was part of strategic thinking under Mac Dougall and Peter Matlare, who now heads lender Absa’s rest of Africa division.
As the second in command, Doyle was involved in Tiger Brands’ ill-fated expansion strategy into the rest of Africa, where the company trashed billions of rand in shareholders’ capital — including $200m (or roughly R3bn in today’s money) on a flour business, which was sold back to its previous owner for a nominal $1.
The company, which has been pulling back from East Africa under Mac Dougall’s strategic review, also took its eye off its mainstay SA market, which brings in the bulk of its R29bn annual revenue and R2.6bn operating income.
For evidence of that, look no further than profit margin erosion in its two biggest divisions. Tiger Brands’ grains division, which makes breakfast cereal Jungle Oats and staple Ace maize meal, suffered a four percentage point decline in profit margins to 10% in the latest annual earnings report, while margins at its grocery unit dropped from 11% to 4.9%.
Tiger’s market share is slipping too, with its bread market share, grains, maize and cereals dropping one percentage point each. Tastic’s portion shrank from 46% to 43%.
Sure, the economy is trapped in its longest downward spiral since the 1940s, industries from retail to mining are laying off workers en masse and wage growth is at its lowest on record, but Tiger Brands is the worst hit.
And investors seem unconvinced that the board led by Mokhele, who told Business Day TV on Wednesday that Doyle’s vision of the company was “compelling”, made the desirable pick.
Shares in Tiger Brands dropped more than 5% on Thursday, their biggest decline since late November, underperforming rivals and the broader JSE all share index.