Dear Friends,
I have been reviewing performance of many of our public companies for half of year 2015 , most are posting topline declines of between 5-10% vs same period in 2014. Most are also turning in declines in profit of over 20% vs same period in 2014.
The often stated reason for the abyssmal perfoemance is generally the following:
Weakening consumer demand occasioned by
- Devaluation of the Naira
- Lower oil prices
- Insurgency in the North East
- Instability due to elections.
I have some issues over this .. I have reviewed results of 4 of the companies in Food and Beverage - food products , Alcoholic beverage between 2006 and 2009 - of these 4 organisations , 3 posted 15% topline and over 20% bottomline CAGR (compounded annual growth rate) .
I have alos checked - the period from 2006 to 2009 presented exact same scenario - oil price dipped to $32 per barrel , Naira devaluation , high rate of insecurity (kidnapping in parts of Nigeria) , elections in 2007. I'm wondering why they posted much better performance then and not now.
Macro data show GDP growing at ear 3% vs 2014 in Q2 while most categories were either flat vs 2014 , or growing low single digits or outrightly declining.
However , everyone is blaming the same listed issues above for poor performance ... This is absolute Dominant LOGIC to me!!
Granted the times are tough , but external data does not support declines of well over 10% in value terms (we suppose in volume terms , we will be seeing over 15% decline - if you discount price increases!
The poser!!
Are the companies truly clear on why they are turning in poor performance ? Are they telling us all they know. You know we cannot diagnose correctly if our assumptions are incorrect!! Again , sounds like the 'Nigerian issue'....
One observation I have made in the course of my trade visits is the following:
Within the food and beverage category , the number of new brands and pack formats may have trippled between 2011 and today. And so I ask ... are some of these organisations losing market share (share of pocket and throat) to smarter new entrants?
I had always posited that the real meaning of Local and Foreign Direct investment is .. simply COMPETITION for my share of market!!
My Dear Friends .. let me know your perspective on this!!
Regards.
Concerning the business issue above, my perspective will take a slightly different turn:
ReplyDeleteIn today's organizations, indiscipline amongst our industry captains (leaders) has left us with poorly developed manpower. The passion (fire) to build great brands, great organizations and great managers is fading away quicker than we all imagined.
Between 2006 and 2009, lot of the General Managers today were great team leaders back then and they had passion to build great brands and organizations through development of great manpower forming formidable teams. These teams drove the successes of YESTERDAY!
To win, we need disciplined captains leading great team leaders, team leaders who are ready to develop formidable team members. We need to bring back discipline! we need to bring back the fire (desire, passion or commitment or whatever name fit for you) that bring success; that build great brands and great organizations.
The business place is now more interesting as you have rightly mention sir the numbers of beverage manufacturing companies have since double from 2007 till date with new entries in months and years to come. The evolution on milk consumption is been challenge from all angles from price to information on healthy diet. In most of the developing countries like India and Brazil fresh milk sales it's a billion dollar business but am sure few if not non of premium milk brand are exploring this opportunity. The business environment is getting squeezed by stiff competition. Surviving the downturn requires stepping into clients/consumer mind to feel what they are feeling, in today's market have seen two non competing brands compete for dominance, capital, presence etc. the market place requires a highly dynamic management that respond to every tune been played in the market place. With numerous choice to choose from the consumer have never had it this good in making decisions on where, when and what to buy.
ReplyDeleteThe biggest challenge most businesses has today from my perspective is the inability to develop business leaders. Current leadership of most businesses are more interested in garnering faithful followers than building and making great business leaders out of the mid level managers.
ReplyDelete