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247. Bull, Bear & Beyond – PZ Cussons: executive interview
23 Plays12 days ago
In this interview, PZ Cussons CEO Jonathan Myers reflects on how the business has evolved since he joined six years ago, highlighting the shift towards a clearer strategic focus on locally loved brands across personal care, home care and baby care in the group’s four lead markets, which account for 85% of sales. Jonathan discusses progress in strengthening the balance sheet, with net debt in Nigeria reduced from more than £110m to around £30m and Nigerian cash holdings capped to manage devaluation risk, while reiterating the group’s target leverage range of 1.0–1.5x. He also addresses the outcome of last year’s strategic review of the Africa and St Tropez businesses, explaining the rationale for retaining both and outlining the operational changes, including a new North America distribution partner, which have already returned St Tropez to double-digit growth in that region. Finally, he sets out what he believes underpins a successful FMCG brand and discusses the scope to replicate high market share positions, such as Morning Fresh in Australia, through expansion into adjacent categories, including dishwasher capsules.
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Transcript
Introduction of Jonathan Myers, CEO of PZ Cousins
00:00:08
Speaker
Hello and welcome to Edison TV. I'm Chloe Wong and I'm joined with Jonathan Myers, CEO of PZ Cousins. Jonathan, thank you for being with us today. Thanks for inviting
Refocusing and Brand Strategy in Key Markets
00:00:19
Speaker
me.
00:00:19
Speaker
So you've been CEO for six years now. Could you describe how the business has changed from when you first started to where it is today? So when I was lucky enough to join the company as chief executive a little over six years ago, I found a business that had ah an amazing history, real proud history, some examples of pioneering spirit and courage with some very strong brands.
00:00:46
Speaker
More recently I found a business though that had lost its way a little bit and in particular may have lost its focus. So what i got to grips with quickly and have really tried to stay true to ever since is providing the business with a very clear focus.
00:01:02
Speaker
Actually a very clear strategy which is essentially a set of choices about which we were going to really focus and allocate our resources so that we could maximise the return on the resources that we were deploying.
00:01:17
Speaker
And the most fundamental building block in that was our brands. And in particular the fact that we have really an amazing portfolio of what we call locally loved brands that really resonate in their home markets. And there are only four markets that we really concentrate on. We call them our lead markets. Together they represent 85%
Growth of Locally Loved Brands
00:01:38
Speaker
of the business. And it's by focusing on how we're going to ah grow those locally loved brands in those four lead markets that I think give us the potential to unlock value.
00:01:49
Speaker
We're not a big multinational like a Unilever or a Reckitt or a Procter & Gamble, so we don't need our brands to win in 50 or 60 countries using a very, very similar playbook that's averaged out across all those markets.
00:02:03
Speaker
What we can afford to do is to focus on what it takes to win in one of our lead markets, on one of our locally loved brands, and winning just on Customs Baby in Indonesia, that's enough to justify the effort and focus that we put on that business. And the good news is that now six years on, having had a few twists and turns and some fairly significant external challenges, we're laser beam focused on growing those brands in those four lead markets.
00:02:30
Speaker
And what would you say is the most important change that you've implemented since you've joined?
Strategic Changes in Product Categories
00:02:37
Speaker
So I think there are some mechanical changes, if you'll allow me to call them that, and one or two softer. So in terms of the mechanical changes, it was really declaring the business that we're in. We're in the business of building brands. We are all about serving more consumers and serving them better than our competition.
00:02:55
Speaker
We're really clear that we have three core categories. That's personal care, home care and baby care. And our job is to win in those categories with our brands in our four lead markets.
00:03:07
Speaker
And it's that clarity of strategy that now enables us to really make the binary choices about where we will put our money and our effort and where we won't. And that's perhaps been the most mechanical change that we've made.
00:03:20
Speaker
Beyond that, somewhat softer is that we've really tried to hark back to what built the business for many decades, for the 146-year history that this company has, which has been really unleashing the pioneering spirit of the organisation, so that we're willing to take informed risks, never reckless, but we are bold enough and brave enough to do what it takes to drive the business, to build the brands. And so there's really been more of a focus on evolving a performance culture that's very proud of where it's come from, very humble about where it is, but really excited about our future potential to create value by serving more consumers better.
Financial Strategy in Nigeria
00:04:03
Speaker
And for the net debt that you've had in Nigeria, that has significantly gone down now. Could you share what level of debt you're comfortable holding and do you still hold cash in Nigeria?
00:04:15
Speaker
So we've worked really hard since the devaluation to reduce the amount of net debt that we have as a company to give us a stronger balance sheet and more options for how we're going to deploy capital in the future.
00:04:26
Speaker
So in our latest trading statement, we let everybody know that we have reduced our net debt over the last year from in excess £110m down to around £30m. We were also really clear back at the capital markets event in February that we are targeting a leverage of 1 to 1.5 times, so that gives us some headroom versus the £30m that we have announced most recently. And in terms of the amount of cash that we will have in Nigeria, we are targeting to have no more than 20 million. So we have sufficient to run the business, to invest in the business, to grow the business.
Brand Retention and Operations in Africa
00:05:04
Speaker
But we are not going to allow ourselves to have excess cash on the ground that, despite some attractive interest rates potentially from depositing it there, we are not going to leave ourselves at excess risk of a devaluation in the future.
00:05:18
Speaker
And in Africa and for its Central Pay, you those went under strategic review last year, but neither of them got significant enough interest for the board to be persuaded to sell.
00:05:32
Speaker
Are you relieved about that in hindsight? So I'm really clear that the board made the right choices. First of all, to look at our portfolio, to see how we could simplify, how we could strengthen our balance sheet.
00:05:46
Speaker
But through that process, we also learned a couple of things. First of all, that actually the most value that could be created on Saint-Tropez was by keeping it and driving it harder ourselves, and in particular making the most demonstrable change in the North America business, which is the part that had been in double-digit decline. So we changed our route to market. We found a new partner that we'd had some previous experience with from Child's Farm that is proving a really reliable and capable distribution, account managing, and brand activating partner for us. And that's why at our interim results, we were able to report that the North America business was already back in double-digit growth on Saint-Tropez.
00:06:29
Speaker
And moving to Africa, we also evaluated should we draw a line after more than a century of having operations there and move away from Africa, or actually should we stay and play but doing so with the guardrails in place that can mitigate the risk of volatility of exposure to a market like Nigeria, but still leave us exposed to the upside opportunity. Because one of the things that we learned through the process of the strategic review was the resilience of our operations and our people on the ground, but also the strength and the power of our brands.
Essence of a Successful FMCG Brand
00:07:05
Speaker
More than 70% of the revenue of our business in Nigeria come with from brands which have a number one position of their category or subcategory. These are strong, locally loved brands that people have grown up with. And actually, what we have now realized is our opportunity is to drive those brands harder, pushing deeper distribution into more stores, whether those are in cities, towns or villages, to activate the brands in even more culturally, locally relevant ways. And whilst imposing the guardrails to mitigate that risk,
00:07:38
Speaker
Ideally, opening ourselves up to benefit from the opportunity of the upside revenue growth that comes from exposure to a fast-growing market like Nigeria in the future. And in your view, what makes a successful FMCG brand?
00:07:54
Speaker
So it needs to be a really clearly defined brand that consumers recognise and ultimately will be willing to pay a price for. Whatever that price is, whether it's something very low or something very high. It could be Premier Soap, which is a few naira, or it could be Saint-Tropez, which is tens of dollars.
00:08:13
Speaker
But the real essence is the consumer believing and buying into what that brand is promising for them so they feel like they're growing great getting great value as we deliver them a product that will meet their needs and ideally also meet their aspirations and hopes.
00:08:29
Speaker
I see. And how many of your brands do you think fit this criteria? Oh, good question. So I don't think it's all of our brands, but I think it's the vast majority of them actually meet that criteria already.
00:08:42
Speaker
But there's no room for complacency because you have to work every day to justify the purchase of every bottle or every tub as a consumer takes something off the shelf or clicks online. So we need to make sure that every day we are working to strengthen what our brands stand for in the minds of a consumer, to make sure the product delivers, that it's available where they're shopping, and it's available at a price that they're willing
Market Share Strategies in Australia
00:09:07
Speaker
to pay. If we get all of that right and we do it day in, day out, we'll grow market share, we'll serve more consumers, and we'll create more value for our shareholders.
00:09:16
Speaker
And you've touched a little bit on how you have some very high market shares for some of your products. um in aus australia In Australia and Nigeria, for example, Morning Fresh has a very high market share. I think it's around half of the market.
00:09:32
Speaker
How do you think this has been achieved and do you think it can be replicated? So you're absolutely right, we have some very significant market share positions around the world, which is a testimony to the fact that our brands are locally loved and in many places they have been there for decades. and We are benefiting from the legacy of many of those that have come before us in building those brands and making them more relevant.
00:09:57
Speaker
So that's now our job to deliver for those that come after us to make sure we continue to strengthen them. And there are ways in which we can do that. We can make them even more relevant to the needs of a consumer. We can make sure that they're available in even more stores, in more formats that suit their needs, and always making sure they're available at a price point that the consumer is really willing to pay.
00:10:19
Speaker
What we can then do is move our brands not just in ah to play in the categories that we play in today, but potentially to move into other categories as well. And a really good example in the last two or three years of that has been the morning fresh washing up liquid you refer to in Australia has about a 50% market share. You bet, we want 55 and 60.
00:10:39
Speaker
What we also need to do though is see how shoppers and consumers are changing their habits and the reality is many of them are also using auto dish tablets in their dishwashers. So therefore we've introduced Morning Fresh auto dish capsules to compete with some very significant branded players and the great news is we're seeing explosive growth in Australia as a result of not only playing in washing up liquid but also now playing in auto dish tablets as well.
00:11:09
Speaker
Thank you Jonathan fom for joining us today and sharing your insights into Peazide Cousins. Well thank you for inviting me and thank you for your time. Thank you everyone for joining Edison TV.