Milling & Baking News Corporate Profiles - 2017 - 8

Company Overview

Editorial

Peeling through deep layers
of change in food industry

f food sector observers were polled to identify a single story
as the most dramatic development in the food and beverage
industry over the past year, almost surely it would be Amazon's acquisition of Whole Foods Market. Having experimented
in the food business for several years, Amazon's move seemed a
definitive confirmation that e-commerce in food, already revving
up, is for real.
Still, for those trying to get a handle on the most important
forces driving the food business, this acquisition may be viewed
as a distraction. After all Amazon and Whole Foods combined
account for less than 1.5 per cent of U.S. retail food sales. This
figure certainly will grow and help reshape aspects of the food
business, but it is abundantly evident in the profiles on the pages
that follow that there are many other important forces disrupting the industry today. This marriage of an e-commerce giant
and a natural/organic retail pioneer represents only a fragment
of the wrenching change gripping the food industry.
Key elements of the multi-dimensional forces at play were
nicely captured in remarks in September by an executive at The
Kraft Heinz Co., a company that itself is one of the major change
agents in the food sector.
"Change happening today is unique, because it is happening
at three levels," said George Zoghbi, who was the chief operating officer of the U.S. Commercial business of Kraft Heinz. "We
are seeing the consumer landscape changing. We are seeing the
retail landscape changing. And we are seeing business models
changing, all at the same time and at a very high speed. And
I truly believe once we adjust to dealing with it as organizations, the growth will come as a consequence. Because it is a
big wake-up call for all of us."
On a company-by-company basis, this change is being manifested in numerous ways. Merger and acquisition activity was
lively over the past 12 months, though not extraordinarily so.
What stands out in reviewing the deals, and has been the case
for a few years, was how many acquisitions were predicated on
the idea of a company overtly seeking to chart a new course away
from its core business as part of a fundamental transformation.
The remaking of companies stretched beyond M.&A. activity.
The Kellogg Co.'s move to a warehouse delivery from a directstore delivery model and a major organizational restructuring
at Flowers Foods, Inc. are striking examples of how some of the
industry's oldest and historically most successful companies are
intent on reshaping their business.
Similarly noteworthy during the year was the turnover among

8 \ October 2017

top executives of the food and beverage industry's leading companies. While a certain number of these moves likely were routine successions, the number almost certainly was magnified
by the chronic challenges companies continue to experience
in achieving long-term financial targets. Tellingly, rather than
through promotions, an unusually large number of successors
selected to lead major food companies were outsiders, suggesting the conclusion of boards of directors that fundamentally new
approaches will be needed to restore growth.
This message, that different thinking is required, has not been
lost on current food and beverage management leadership. Indeed, finding the right talent and establishing a more effective
culture have become major preoccupations for a number of food
industry leaders.
Sam K. Reed, chief executive officer of TreeHouse Foods, Inc.,
in March discussed how much his job had changed from a time
when finding ways to identify and fund investment activities was
his principal preoccupation.
"I've moved from taking money, buying plants and building systems to developing people, I.T. systems and infrastructure," he said.
"And really importantly, create a unified strategy. This marketplace
is evolving, and you have to reinvent yourself to stay ahead."
Michele G. Buck, in her first year as president and c.e.o. of
The Hershey Co., described a somewhat similar focus. Beyond
ensuring the successful management of the company's core
business, she said figuring out how to position Hershey to better capitalize on growth opportunities amid the changing consumer landscape was her principal concern.
"More and more, I'm focusing my time on the organizational
construct piece, the culture, what I need from my leaders, all
of those things I think are really going to be the accelerators
that make the difference, that enable us to either win and make
these changes and implement and change and reinvent who we
are or not," she said, adding she is seeking "the mindset of people who are willing to take risks, who are very growth oriented,
who are comfortable with change and expansive thinkers."
She went on to say that established C.P.G. companies need a
way to compensate for not having "the power of the founder or
entrepreneur, those people that have a real vision" while competing with so many entrepreneurial start-ups.
Whether this exercise bears fruit, it's clear that Ms. Buck and
her peers are determined to probe, experiment and change until
the food industry once again gains preeminence not only in size,
but in innovation and growth. CP

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