The Australian bottler of Coke, Coca-Cola Amatil (ASX: CCL), could deservingly be described as “the real thing.” It’s a high quality business with high quality management that has served shareholders’ well.
The announcement that long serving Managing Director (MD) Terry Davis will retire was engineered in a way that is unfortunately the exception rather than the rule. The company’s chairman provided the market with a timetable of 18 months for transition to an as yet un-named new MD, this is in stark contrast to that all-too-often “there one minute, gone the next” which we too often see.
Warren Buffett places great emphasis on investing in companies with high quality management teams. In the 11 years that Davis has been at the helm of Coca-Cola Amatil his team has deliver total shareholder returns of 400%, an outstanding achievement which highlights the advantages of investors seeking out a great business, coupled with great management.
High quality managers are important in any business, however none more so than where brand names must be managed and nurtured. The difference between a commodity bottle of cola, with little profit margin and a Coke, with a high profit margin, is its brand. If a management team ruins a brand name (it’s been done before!) then investors will likely be left with little value.
Looking at some of the major food and beverage companies in Australia, we find that they all have experienced managers protecting their brands.
Goodman Fielder (ASX: GFF) has a relatively new Chief Executive Officer (CEO) – Mr Chris Delaney – an experienced manager of global brands who has been brought on board to turn around the struggling group.
Patties Foods (ASX: PFL) was until recently, effectively a family run company with the founder’s sons Mr Richard Rijs and Mr Harry Rijs holding executive positions. They have now stepped back from day-to-day involvement however they began the transition a number of years ago, which has provided for an orderly shift from family centric control.
Treasury Wine Estates (ASX: TWE)has a deep pool of experienced and talented wine industry professionals who appear to be putting the company on a sound footing since being spun-off from Foster’s in 2011.
Investors should take a good, hard look at who is managing any company they are considering investing in, as the outcome from great managers and terrible managers can be extreme in creating or destroying shareholder wealth.
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