Premier CFO Kobus Gertenbach focuses capex on the things that matter the most
The Premier FMCG CFO has the mantra of "build something, make it bigger, make it better."
Kobus Gertenbach is the CFO of Premier FMCG. He moved across to the business from Brait, in 2011 when they took a controlling stake in Premier. Kobus has a personal mantra of “build something, make it bigger, make it better” and he’s putting that in action at Premier, finding ways to expand the business in a tough operating environment. He chatted to CFO South Africa about how he’s facing the challenges.
What are the focus areas in your current role?
Like any normal CFO, I look after the whole finance function for the group, but then over and above what one would call finance, I oversee IT, legal, and both grain procurement and all other procurement for the business. And then I look after logistics for our milling and groceries business, which excludes the bread side. I guess I’ve inherited some areas that no one else feels like looking after. We also had a senior executive who left and we divided the responsibilities among us, which is how I ended up with logistics.
You say that your mindset is to “build something, make it bigger, make it better”. How is this approach playing out at Premier FMCG?
I think that the biggest determining factor in long-term shareholder wealth creation in a company revolves around capital allocation. So for me, the big drive is to try and influence and make sure that we make the right capital investment decisions within the business. That doesn’t just mean capex from an accounting perspective. It means that when you invest money in supporting brands and training people, whatever else goes through the expense line is also money spent. Over time, you have to try and focus expenditure on the things that matter the most and drive the most profitability in the long term. That, for me, is the key to building and growing organically.
We’ve been quite acquisitive over the years, so we also need to make sure that each and every one of the acquisitions make the business better and stronger, rather than just increasing in size.
We’ve bought the Lil-lets business. And when I started with Premier, we had no bakery operations in the Eastern Cape, so we acquired those from private individuals to consolidate our baking base. We expanded into Mozambique, acquiring CIM, which is a milling and staple foods business. These acquisitions all play a strategic part in building up our business and optimising profitability.
How has Brait’s stake in Premier helped the company to become competitive against market giants?
We work quite closely with the Brait guys, who are still more than 90 percent shareholders. When I came across to Premier, Brait increased their shareholding from 40 to 90 percent. So I have an interaction with them on a weekly basis on many different fronts.
We’re trying to build Premier back to what it once was, to its rightful position in the industry. It was one of the 10 biggest companies in South Africa. It owned 37 percent of SAB at one stage. It went through the unbundling phase that many other businesses went through in the 90s. What was left was the milling and baking business, which was bought by Genfoods, and taken off the Johannesburg Stock Exchange in 1998. Brait got involved in 2007, took a controlling stake in 2011, and was looking for someone to take over the CFO position, so that’s when I left the investment team I’d been a part of since 2006 and joined Premier.
What opportunities and challenges are you faced with in the current industry?
I think the South African consumer is under significant pressure and that is really filtering through to all businesses with consumer exposure in South Africa. And as the competition has heated up in the South African retail space, that competition has been pushed backwards into the supply chain and onto the suppliers in the FMCG industry, resulting in fairly tough conditions for all of us.
It’s highly competitive and the market isn’t growing, and there’s a fair amount of cost push or cost inflation, and it’s not always possible to pass that on to an overstressed consumer. So we end up being forced to become significantly more efficient. Nothing in life stands still. You either become better at something or you go backwards. In a business with over 150 years of history, many management teams have been faced with similar challenges in the past, and become more efficient and better and that’s why the business has survived.
We are always busy with product innovation. We are always looking to expand our product portfolio and offer the consumer more options, and we will continue to do that. Also, through our international business, we have made big progress expanding Lil-lets into China, so that’s becoming interesting for us.
And I think that in the industry we play in, there will be better acquisition opportunities in the future than what we’ve seen in the last few years as valuations become a little more realistic when times get harder. We’ll always look for the right acquisitions. It’s difficult to take big bets in South Africa at the moment, until such time as macroeconomically, the country starts to show some form of recovery.
What was your hardest day professionally? Or your toughest lesson?
I was working in New York in 2001, when the doctom bubble burst. I was standing on the side of the Hudson River watching the Twin Towers come down, and after that, things got hard really quickly in the US. From a professional perspective, that was the first time that I really experienced tough economic times. We were laying off people on a weekly basis. It was a tough cycle to go through – I had just turned 31, so I was still quite young.
But I believe quite heavily in what Stephen Koseff said, that bad decisions get made in good times. It’s also important to bear in mind that the cycle will get harder, so make sure that you are prepared for those times. But bad times don’t continue indefinitely either.
How did you choose a career in finance?
I was in my matric year in 1989 in Sentraal High School in Bloemfontein. I had managed to get a bursary for electrical engineering at Stellenbosch, and I went to the winter engineering school to go through all the different departments, and I said to my parents, “I’m not going to do that anymore.” It wasn’t that there was anything wrong. I just really wasn’t cut out for engineering. Instead, I wanted to study for a CA, which meant that I was going to lose my bursary. But very early on in my studies, I realised it was a steppingstone, and I wasn’t cut out to be an auditor. I left auditing the day I finished my articles, and went to the USA. First I did strategy consulting, then worked in Chapter 11 bankruptcy and turnarounds, where there was a lot of opportunity in that industry post the bursting of the dotcom bubble. Then I came back to South Africa, and nothing I had done in the US was something I could do here. I went into corporate finance, and ended up in private equity with Brait. When their whole business model changed in 2011, and it became an investment company, the opportunity came up at Premier, which was a win-win for both. I’d never done a financial management role in my life, so I had to learn quickly. I was lucky that I inherited a really strong financial team, which made the transition easier.
You lived and worked in the USA for a number of years. How has that influenced you and in what ways is the South African business environment different to that in the United States?
America has extremely flexible labour laws that allow business to continuously restructure quite easily. My perception was that that causes there to be a large number of employees that have suffered a downcycle and lost their jobs. That meant that getting employees to buy into what you are trying to do in a business – to get employee engagement – is really quite hard. I think that I spent enough time working in different companies there to understand how that influenced the ability of those businesses to perform. The difference between an engaged and unengaged workforce is substantial.
Premier focuses a lot of senior management effort on getting an engaged workforce. We have The Premier Way – an all encompassing culture that guides the way we operate. The most important part is to have an effective leadership culture, where everyone in the organisation is an empowered leader in some form or another, and has an important role to play all the way down the organisational structure.
What is your leadership style?
At the basic, theoretical level, I am a strong believer in “B Style management”. I give people the opportunity to feed their thoughts and ideas into a decision, but it’s ultimately up to the leader to make the decision. Once everyone is involved in the decision-making process, even if it doesn’t go in the direction that they wanted, they need to accept it and march in that direction. They can’t walk away or continue dissenting because they were involved.
Leadership is such a complex term. It entails so many different things, but it’s also about treating your employees with the same respect with which you need to treat every human being, and have a sound relationship with the people that report to you. If there are problems or issues, you should be the first one that they tell, not the last one.
What are your interests outside of work?
Finding ways to keep fit without too much pain is very important to me. I did mountain biking for quite a long time, got tired of, now not so much anymore, more CrossFit type of training early in the mornings.
Eighteen months ago, I did something I’ve always wanted to do and got a private pilot’s licence. I fly a Cirrus SR22, and use it to go to board meetings in Swaziland and Mozambique, so there’s a bit of a business application for it. But I also do it for the lifestyle. When we take holidays down at Nature’s Valley on the Cape Coast, I fly down with my family.
I’ve got two kids in high school, and really enjoy my family life. My wife and I have been married now for over 22 years and she’s very important in my life. I also enjoy spending time in nature, and I will probably focus a bit more on golf in the remaining part of my life.