Before Kobus Gertenbach joined South African food manufacturer Premier FMCG as CFO in 2011, he spent his career learning how to turn around struggling enterprises and keep them financially healthy.
After a brief stint in New York as a Senior Associate at Alvarez & Marsal, a professional services firm that has helped reverse the fates of major US corporations, he returned to his native South Africa to work in private equity, eventually landing a top role at the investment holding company Brait.
When Brait acquired a majority stake in Premier, which was founded nearly 200 years ago and produces some of South Africa’s best-known food brands, it was because Premier had been struggling, and the firm saw a big opportunity in bringing Premier back to health. Kobus, of course, was the best person to handle the financials.
“My experience in America in turnaround and investment – the bankruptcy and turnaround business, if you like – taught me how to deal with really problematic companies that are already in difficult situations financially,” Kobus recalls. “At Brait, I honed my ability to manage funding arrangements and banks, deal with insurance companies and manage investors. I learned how one needs to think about investment strategy from an organic perspective.
“All of those things became very handy in becoming the CFO of Premier. At that point in time, given the financial difficulty it was in, Premier really needed a lot of support from a financial management perspective.”
Turmoil and turnaround
In the 1980s, Premier was one of the biggest food manufacturers in South Africa, but by the start of the following decade, the company was going through a major unbundling process, selling off many of the areas of its operation that weren’t part of its core business in a bid to improve performance.
“The business went through a lot of financial turmoil over those years,” Kobus says. “When we started in 2011, we inherited a company whose capital base had been neglected, the investment in the manufacturing equipment and the manufacturing facilities had been neglected for many years, and the products in terms of brand investment had been neglected for many years.”
The company’s leadership capabilities had also been neglected, he notes. So the newly formed executive team focused on these key areas. Bringing the company back to financial health would provide a strong base from which to make investments in new equipment and facilities, and that in turn would lead to better-quality products around which the company could rebuild strong, iconic brands. It has been more than 10 years since Kobus started that journey, and he has seen encouraging progress, but he doesn’t expect the mission to end anytime soon.
When we started in 2011, we inherited a company whose capital base had been neglected.
“Ten years sounds like a long time, but in actual fact, we are still busy with the turnaround at the moment, and it’ll probably take us another four to five years to finalise all the plans that we made in those days – to really get our capital base, our manufacturing facilities and everything to be absolutely world-class and ahead of our competitors in South Africa,” he shares.
In April last year, Kobus took on the role of CEO following the retirement of Tjaart Kruger, giving him a chance to reappraise the strategy of the past 10 years and drive forward with the completion of the turnaround. “When I took over as CEO, it wasn’t necessary to make any drastic changes to the strategy, but, together with the executive team, we have refreshed some of our thinking,” he says.
One major thing that occurred to him was that the executive team rebuilt the business around a set of values and a purpose, and so as CEO, he wanted to cement that legacy. Today, Premier operates with a clear purpose: to produce products that make a difference in the everyday lives of its customers.
Becoming CEO also means Kobus will now be at the forefront as the company reaps the benefits of the work the executive team has put into the turnaround over the past 10 years. “I see huge upside in terms of where we can take the performance of this organisation,” he reveals. “I feel that we have built the foundation, we have made the investments, but we are still in the process of fully realising all of those gains.
“Being CEO is really an opportunity to focus on certain nuances to get that performance on the board and really finish something that we started and that I was part of for many years. To get this company to actually fully realise its potential over the next five to seven years.”
I feel that we have built the foundation, we have made the investments, but we are still in the process of fully realising all of those gains.
As the company has undergone a transition in recent years, so too has Kobus. “As the business started to mature, I got the opportunity to develop my leadership capabilities, which is something that you don’t really get to do in the investment world,” he points out.
“You don’t manage a lot of people in the investment world, but here in Premier, you have to provide direction and get 12,000 people to all buy into that. You have to look at what their role is and how they are going to further the strategy of the whole business.”
Kobus attributes a lot of the knowledge, skills and leadership development he has gained over the past couple of years to working with Tjaart Kruger, who was his predecessor as CEO. “I think he has really prepared me extremely well to succeed him and take the reins,” he says.
Kobus and the executive team have invested a large amount of time in Premier’s people. One of his main goals as CEO is to continue developing the talent that has been flourishing within the company, ensuring they have the opportunity to realise the best of themselves and build fulfilling, long-lasting careers there.
Preparing to float
Brait has indicated that over the next five years, it will be unwinding its balance sheet and selling the majority of its investments in a controlled manner, meaning Premier will once again undergo a change in ownership. This time, though, the plan is to float on the Johannesburg Stock Exchange. Kobus hopes the company will be listed on the bourse in 2022.
“This is part of the opportunity I saw here as CEO – to take what we’ve built and do the preparation work and then successfully go and get listed on the public market,” he says.
Premier’s growth plans involve a combination of organic expansion, driven by significant investment into the company’s bakeries, as well as by an efficiency drive to boost profitability – plus acquisitions.
In June last year, the company acquired the local company Mister Sweet, which produces chocolate eggs, sugared gummies and licorice among its wide range of confectionery. The acquisition will help Premier compete with major players in the market such as Tiger Brands.
“We are continuing to look at acquisitions to add more categories onto the platform that we’ve built,” Kobus says. “We’ve got a very strong Southern African distribution footprint, and we’ve got very strong merchandising in all the retail stores – almost 4,000 stores in South Africa and the surrounding countries. So our ability to do bolt-on acquisitions in other categories is also a significant part of our growth plans going forward.”
It will be a mega bakery at a huge scale that will give us efficiencies that we don’t have with some of the old, small, antiquated bakeries that we’ve been operating.
In the near-term, a key area of focus for the company will be the completion of a brand-new, state-of-the-art bakery in Johannesburg. The company has been working on the ZAR500 million (€28.1 million) facility for the past two years and has suffered a delay because of the COVID-19 pandemic.
“That will really change our capabilities in the baking business in the inland region, and give us the ability to produce consistent quality that will drive brand loyalty and value share,” Kobus suggests.
“It will be the most advanced bakery in Southern Africa; it will be a mega bakery at a huge scale that will give us efficiencies that we don’t have with some of the old, small, antiquated bakeries that we’ve been operating to service the inland market.”
Bringing that project on stream and overseeing the operations as Premier reaps the benefits from this massive capital investment has been one of Kobus’s major tasks as CEO. Beyond that, he is pursuing growth with a range of strategies that vary according to each specific area of the business he is focusing on.
“Some are very efficiency-oriented, and others are more about strategic decisions, such as to onshore some of the manufacturing to reduce our cost base,” he says.
“We’ve invested in additional capacity in our biscuit manufacturing operations in Matola, Mozambique that will give us additional volumes. It will probably lift our volumes between 25–30 per cent in terms of our production capacity and give us the ability to fully service the Mozambican market and try to penetrate the rest of Southern Africa with the product.
“So there are a couple of really big investment areas that we’ve been working on for quite a while, and now we’re getting those capital projects to come on stream and really generate the benefits that we envisioned when we decided to make the investments.”
One key thing that sets Premier apart from its competitors, according to Kobus, is a strongly defined set of values and principles that guide everything the company does.
“We have a methodology with which we run this organisation – it’s called the Premier Way. It’s something that is deeply ingrained in our DNA and culture,” he explains. “It starts with treating each other with decency and respect, and working together in an environment for the greater good of the team. But it’s also our guide. It’s almost like the handbook with which we operate.”
The Premier Way focuses on collaboration, shared learning, innovation and efficiency with the goal of creating a high-performance culture. It’s something that Kobus believes has been pivotal to building leadership capabilities not just at the top of the company, but all the way down through the ranks to supervisors and frontline workers.
“I believe that from a competency, leadership and culture perspective, we have an incredible organisation that is capable, that is quite agile and has the ability to respond very fast to all the challenges that have been thrown at us in the past two years, especially with COVID-19 and with looting and everything else,” he says, referring to deadly unrest that gripped South Africa last year.
It starts with treating each other with decency and respect, and working together in an environment for the greater good of the team.
A second key differentiator for Premier is the commitment it has made to its investments over the past 10 years. The company has spent more than ZAR2 billion (€112.4 million) upgrading its facilities. “We believe we have invested ahead of the market to ensure that our capabilities are state of the art,” Kobus asserts.
“While we started off with a massive deficit, I think we’re managing to overtake some of our competitors and will finally overtake them when we bring some of these mega projects on stream.”
With its strong culture and leadership capabilities, its heavy investment into quality facilities and its portfolio of brands, some of which are centuries old in South Africa, Premier has a winning combination of differentiators that mean it is well-positioned to establish a dominant position in the market.
“The combination of those three has really set us up to be extremely competitive vis-a-vis the rest of the playing field in Southern Africa,” Kobus says.
Respect every supplier
The culture of respect and working for the good of all that Premier cultivates also extends to outside the company. “You must never be in a position where you think you can dominate somebody and just demand what you want to demand without taking into consideration what it means for them,” Kobus warns.
While the company is always pursuing greater efficiencies, this doesn’t come at the expense of alienating partners and suppliers. In fact, Kobus views forming mutually beneficial relationships with other businesses as key to Premier’s success.
“It starts, first and foremost, with how you view your suppliers,” he says. “If you’ve got a view that you are the customer and they must dance to your tune, then I think you set yourself up for failure. Whereas if you have a partnership view from the start that knows that they need to be successful in order for you to be successful, then you have a very different relationship with them.”
Premier’s long-term strategic partnerships include one with the company Anchor Yeast, a key strategic partner on the baking side of its business. The latter also owns the only yeast factory in South Africa, supplying the whole baking industry there. “We value our partnership with Anchor and work together to produce the best quality bread,” Kobus shares.
The company has extremely close relationships with grain suppliers, which have grown along with Premier over the past 10 years. “I think that certainly is a part of our competitive advantage for the business,” he says.
Even in areas that may not be considered strategically essential, Kobus applies the same philosophy and recognises that every partner has a pivotal role to play in its own way. This was perhaps most apparent after COVID-19 began to spread, shining a light on the vital importance of the cleaning companies that keep its facilities sanitary.
“If you look at how they responded, with us being really on the front line and having to sanitise and make sure that our facilities are not infected or that the virus doesn’t spread inside our organisation, then those relationships have been extremely successful for Premier, and we will continue to work very hard to make them successful going forward,” he confirms.
The company’s strategic partnerships have also helped it to set up highly efficient operations, maintain its uncompromising quality and ensure the safety and health of its people under a zero-tolerance policy for anything that might put staff at risk. “From my perspective, these partnerships are really just an integral part of our business,” Kobus adds.
This closeness also helps facilitate trust, which can be a highly valuable asset. “There’s a lot of our packaging and raw material suppliers that have access to our information systems. So they actively manage the stock levels of some of our critical raw materials from their side to make sure that their manufacturing responds as our volumes change; it’s an ebb and flow,” he shares.
We believe we have invested ahead of the market to ensure that our capabilities are state of the art.
Premier has a partnership-style relationship with anybody that it deals with, regardless of size. “It doesn’t matter how big or how small you are – we are not in the business of trying to put a supplier out of business,” Kobus says. “We are in the business of working together with suppliers and making them successful.
“Somebody that makes a specific flavour for you on some of your ingredients might not be that big, but they’re still massively critical in your operation. So from our perspective, we will never treat a small supplier differently from a large supplier.”
In return for treating its partners well, Premier has high expectations of the companies it works with. “Every single supplier has to think to themselves that before they serve one of their other customers, they must serve Premier first, not just because we demand it, but because it’s actually the easiest to do business with us; we actually are who they think of first,” he explains.
Premier prides itself on being not just a great company to do business with and a great place to work, but also on being a great home for investors’ capital, Kobus reveals. “We’re a major staple food producer in South Africa that has made the investments and developed the organisation on a consistent basis,” he says.
“From an investor’s perspective, Premier has very strong margins and good products that are sustainable, and which provide a very good opportunity with good returns on invested capital. Premier has a really great value proposition.”
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