So, Lion Nathan has turned to a man more used to selling Nestle products for a living than sipping a Hahn Premium Light or sniffing a pinot or cab sav like incumbent, Gordon Cairns.
It’s not the first time this Japanese controlled former New Zealand company has looked outside the plonk industry for leadership. In fact, Lion seems to have a fetish for non in-house executives. Ttake the beaten candidate, Andrew Reeve, who heads up beer. He worked at Coca Cola Amatil before coming to Lion several years ago. Walter Bungo, a previous head of beer businesses came from Simplot Australia.
Gordon Cairns had a background in petfood, and who could forget previous CEO of Lion: Kevin Roberts, the bouncy Pom chap who ended up running Saatchis in London.
The Lion approach is very different to the ponderous, but quite apparent, in-house way rival Fosters selected Trevor O’Hoy to replace Ted Kunkel who was newly married on Saturday, March 20.
Trevor is now off around the world looking at how he can bring his Carlton beer cost-cutting touch to the troubled Beringer Blass group of Foster’s. Iit will be tough as the company has 102 seperate locations where business is conducted, from wineries, to admin offices to cold stores and vineyards.
It’s an unwieldy structure, but one that reflects the distributed nature of wine. Beringer Blass has already spent heavily trimming down wineries and vineyards. Cutting any deeper will be tough if it involves the beer marketing approach being introduced to wine. That strategy already cost one previous heir apparent to Ted his Foster’s job. Wine sales and profits tanked pre-Beringer when the then head of CUB moved to head up wine and looked to market wine in a beer-like way.
Trevor’s one big idea in saving Calton more than $100 million a year was to close and sell off the Broadway brewery in Sydney – a no-brainer if ever there was one.
But the changes at Lion will bring with them the usual demands from analysts for cost-cutting, restructuring and moves to get the wine business ‘ right-sized’ and ‘humming’.
Of course, they will be stunned to learn that the new CEO, like all candidates, went into the year-long process with some interesting handcuffs.
Lion Nathan chairman Geoff Rickets said this week the company would not be making any ‘major u-turns’ under the new leadership. But this doesnt give the complete picture.
When Robert Murray, Andrew Reeve and one other candidate were selected they had to agree to several very important points, before being involved in the long selection process.
All three had to agree that the current strategy in beer was ok (China would continue) and that the slowly developed ‘federation style of wine makers’, centred Petaluma, Knappstein, St Hallets and other brands in Australia and the Wither Hills operation in NZ’s South Island, would continue in its present form.
Any ambitions to change the latter in particular, would see the candidate out of the process. This was not only a key proviso from Gordon Cairns, the departing CEO, who helped (with assistance from Brian Croser of Petaluma and Brent Marris of Wither Hills) to create this loose, federation style business group, but also signed off by the board Murray has been part of the board since 2002 and signed off on that strategy.
In fact in a recent article in the SMH’s Good living section where Croser outlined his new international wine making ambitions he alluded to an early battle with some in the Lion head office when he fought proposals to centralise marketing of wine in Sydney and away from the wineries.
He won (some say with strong support from Brent Marris in NZ’s Marlborough district) and this then helped drive the creation of the federation arrangement – a strategy devised to take into account the strong-willed nature of the principals in each of the four wine making groups acquired).
Now the new CEO will have to make that system work and return money to the company: any move to tinker or alter the structure could very well see the federation implode as key members depart.
Not that Lion needs much in the way of major changes at the moment. Since moving its domicile to Australia about three or so years ago, the share price has risen from around $3.50 to the $6 level it now trades around meaning that controlling shareholder Kirin has gone from a paper loss to a substantial profit.
Fosters, meanwhile, has underperformed in comparison thanks to the dead-weight of Beringer.
Could the big change come at Foster’s with some sort of partial deconsolidation of wine?