Food Companies Churn Through CEOs, Desperate for Fresh Ideas

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Meals Corporations Churn By way of CEOs, Determined for Recent Concepts – WSJ

Brokers for change are sought as grocery-shopping habits shift to brisker elements, web

America’s meals giants are shedding a era of CEOs at a exceptional fee, the fruits of years of bleak gross sales in an business that till lately, had gone unshaken for half a century.

Over the previous two years, not less than 16 main packaged-food and beverage chief executives have stepped down, in keeping with a Wall Road Journal evaluation. The departure of

Campbell Soup

CPB -1.55%

Co. chief

Denise Morrison

earlier this month adopted CEO adjustments at

Common Mills
Inc.,

GIS -Zero.02%

Mondelez Worldwide
Inc.,

MDLZ -1.17%

Kellogg
Co.

Ok -1.13%

,

Nestle USA
,

NSRGY -Zero.56%

Hershey
Co.

HSY -Zero.21%

, J.M. Smucker Co. and Twinkie-maker Hostess.

“I don’t assume we’ve ever seen one thing like this,” stated Greg Wank, accomplice at Anchin, an advisory agency that works with meals corporations.

The outgoing executives have contended with a brand new period of American consuming and grocery procuring habits, shepherded in by millennials and the web. Stalwart meals manufacturers not can constantly command larger costs from retailers, forcing administration to deal with value cuts. And as executives attempt to make investments on change, traders need stronger revenue margins. The S&P 500 Packaged Meals & Meat subindex has dropped 15% prior to now two years, whereas the S&P 500 has climbed 30%.

The highest 25 meals and beverage corporations within the U.S. have continued to lose market share, averaging annual gross sales development of two% from 2012 by means of 2016, in contrast with 6% for the remainder of the business, in keeping with consultancy A.T. Kearney.

“You’ve received quite a lot of CEOs which might be at their wit’s finish making an attempt to determine development,” stated a now-retired big-food-company chief.

“It was actually a lot simpler in my early many years than at present’s CEOs have it,” stated former Conagra Meals Chief Gary Rodkin, who retired in 2015.

10

TreeHouse Meals

Campbell Soup

Nestle USA

Hostess

Departed in 2018

Mondelez

Common Mills

Nestle International

Coca-Cola

Kellogg

Hershey

Dean Meals

2017

J.M. Smucker

Hormel Meals

Pinnacle Meals Tyson Meals

Keurig Inexperienced

Mountain

2016

Whereas every firm’s scenario is a bit of completely different, corporations say they now have the best leaders in place to navigate subsequent steps. Mondelez stated its prior CEO improved its revenue margin over the previous few years whereas gross sales development was slower than it hoped. Many of the different corporations talked about on this article declined to remark additional.

Hershey’s Chief Digital Commerce Officer,

Doug Straton,

stated the business for many years educated individuals on how issues had been—together with specializing in bodily shops and never e-commerce. “It’s actually exhausting to burst out of that mindset, together with for the CEOs,” he stated, including that typically a brand new face on the prime can try this.

Sean Connolly,

who joined

Conagra Manufacturers
Inc.

CAG -Zero.29%

as chief in 2015, rapidly shook issues up on the maker of Hunt’s ketchup, Peter Pan peanut butter, and Chef Boyardee. He relocated its headquarters to downtown Chicago from Omaha, Neb., and offered off two huge chunks of the enterprise.

With Conagra shares up 26% since he took over, Mr. Connolly has referred to as out rival meals corporations for neglecting manufacturers and letting forms impede innovation. Strolling down the frozen-food aisle, “you’ll nonetheless discover loads of merchandise that appear to be they’re left over from the 1980s and 1990s,” he stated at a convention this month. “They’re going to have bother hanging on to that actual property until they modernize themselves.”

Till lately, huge manufacturers had been synonymous with the meals they made—Kraft and cheese; Heinz and ketchup; Kellogg and cereal; Coke and soda. They gained prime shelf area with retailers and had huge advertising budgets that furthered their favor with customers. And so they might at all times cost a bit of bit extra for his or her merchandise to maintain earnings rolling in when prices rose or gross sales slowed. The technique for fulfillment was simple and infrequently attainable.

Now, shifts towards less complicated elements and purchasing for meals on-line, mixed with an increase in area of interest, small manufacturers and grocery-store manufacturers, have made the outdated playbook irrelevant.

Campbell tried to interrupt into the fresh-food sector by buying Bolthouse Farms in 2012. However the transfer backfired in some ways, weakening revenue margins and revealing the difficulties of managing the availability chain for perishables. In the meantime, Campbell’s core soup gross sales continued to battle. Ms. Morrison’s departure got here as the corporate confronted its fifth consecutive yr of decrease U.S. soup gross sales.

Traders stated the CEO shuffle is a optimistic step for the business, notably when a brand new government is introduced in from outdoors. “There’s at all times a bit extra intrigue when you could have an exterior rent come into an organization that’s been round for 100 years,” stated Jacob Gamerman, senior analysis analyst at Neuberger Berman Group, which manages $299 billion of investor funds.

Lots of the meals corporations which have modified CEOs over the previous two years, nonetheless, have promoted inner candidates as an alternative. Campbell’s interim chief and board member

Keith McLoughlin

stated the corporate is open to inner and exterior candidates for its CEO.

Just a few components unite a number of the newly named leaders. Many, like Common Mills’

Jeff Harmening

and

TreeHouse Meals

’ Steve Oakland, have labored throughout completely different divisions of corporations and convey expertise integrating acquisitions or restructuring operations.

Others, together with Kellogg’s

Steve Cahillane

and Mondelez’s Dirk Van de Put, have labored on growing worldwide markets, the place packaged-food gross sales have been rising quicker than within the U.S.

In the meantime, since 2016, activists have publicly demanded adjustments equivalent to a CEO substitute or sale at greater than 40 food and drinks producers all over the world, in keeping with information from Activist Perception, making meals processing one of many consumer-goods industries most susceptible to activists.

Some anticipate extra adjustments.

PepsiCo
Inc.

PEP Zero.11%

CEO

Indra Nooyi

has been main the beverage and salty-snack large since 2006.

Unilever

PLC’s Chief

Paul Polman

has been on the helm since 2009, and folks accustomed to the matter advised The Wall Road Journal final November that the board was in search of his successor. Pepsi and Unilever declined to remark.

“The business type of reminds you of an NFL low season with all of the teaching adjustments,” stated Brett Hundley, meals analyst on the Vertical Group LLC. “When a staff adjustments its head coach, that doesn’t do something in and of itself until that particular person brings a brand new technique and will get a unique end result.”

—Cara Lombardo contributed to this text.

Write to Annie Gasparro at annie.gasparro@wsj.com and Jacob Bunge at jacob.bunge@wsj.com



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