Treasury Wine’s CEO choice under fire

21 February, 2014 by

By James Atkinson

Treasury Wine Estates’ board of directors faced a grilling by analysts over its decision to appoint as CEO a British FMCG executive who lacks any alcohol experience.

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The TWE board used yesterday’s interim results announcement to name Michael Clarke (pictured), previously of companies including Kraft Foods and The Coca-Cola Company, as its new managing director and CEO.

The appointment was not exactly well received. Merrill Lynch analyst David Errington told chairman Paul Rayner and acting CEO Warwick Every-Burns he had grave misgivings about whether they, along with Michael Clarke, were the right leadership team for the winemaker.

“The three most important decision makers in this organisation… have got no experience operating in the wine industry, and have got no experience operating in the Australian retail industry,” Errington said.

“That lack of experience was borne out in this current first half result, when Warwick admitted he had to look at scan data that was dated at least a month to work out that there was a problem with your planned strategy to walk away from promotional activity and effectively competitiveness in the key Christmas period,” he said.

“It really does confirm to me that there’s a lack of retailer relationships at that top end of TWE… How can we as major stakeholders be confident that you’ll be able to realise the full value of these assets?”

JP Morgan’s Stuart Jackson questioned whether Clarke had the know-how to deal with TWE’s “extremely complex, long dated supply chain”.

“Kraft isn’t exactly an agricultural producer, it doesn’t exactly milk cows,” he said.
 

'Maybe we need a new board'

Errington further asked Paul Rayner whether he was aware of the perception in the marketplace that as chairman he has “an overly influential role at TWE”.

Rayner rejected the suggestion, commenting that he “spends no more or less time in this company now than I did under the previous management”.

But this response drew the ire of Credit Suisse's Larry Gandler, who said investors had lost confidence in the board.

“You just said yourself, you’re not spending more time on this company than previously," Gandler told Rayner.

“Maybe you should be and maybe we need a bit of a board shuffle.”


Why we chose Mike Clarke: Paul Rayner

Rayner said there were a couple of candidates with wine experience on the shortlist for the CEO job.

“We chose Mike because of his outstanding track record, his experience in all the markets in which we operate and his experience in dealing with the retailers that we need to deal with,” he told the analysts. 

“You talk about complexity, when he was at Kraft he was responsible for sales of $14 billion dollars, multiple factories… multiple different supply chains and he delivered substantial improvements,” Rayner said.

“The key thing we want to get through to people is, he’s done extremely well at every job he’s ever had.”