Whether you’re a grocery retailer, a casual-dining restaurant chain or a branded food manufacturer, all companies in the food industry are facing a turning point. The golden years of steady growth are under threat, and many companies in the sector are embracing a change of guard at the top to try and transform their fortunes.
In the U.S, last year saw the highest number of CEO departures since 2008, including changes at big-ticket names in food like PepsiCo, Dunkin Brands, Starbucks, Premier Foods and Papa John’s.
Faced with slower growth, the new-guard of food CEOs are seeking to break into new segments and target new audiences, often through acquisitions.
These moves are largely seeking to pre-empt or counter the rising tide of shareholder activism sweeping across the food sector. Investors are seeing clear opportunities to derive more value in this new world, often starting with cost-cutting, restructures and zero-based budgeting.
But activism isn’t just coming from shareholders, it’s also coming from consumers.
Last week in Davos, a 16-year-old climate activist from Sweden, Greta Thunberg, told world leaders that “I want you to act as if the house is on fire, because it is”. In doing so she delivered an impassioned call to arms for leaders to address climate change urgently. This would have been unheard of a decade ago.
Consumers are no longer just generating influence through their purchasing decisions. They’re taking to the streets, signing petitions and campaigning against brands on social media and outside their front door.
Consumers are increasingly becoming food citizens, seeking to influence business decisions along the entire supply chain.
This is what’s led to the unprecedented media interest on plastic waste and veganism (alongside David Attenborough of course).
In just two years, articles mentioning the two topics have doubled in UK press. And we shouldn’t forget that both are interlinked as environmental issues, once a topic that had little interest for national media.
All this while the political arena turns to regulatory intervention instead of voluntary engagement, putting further pressure on companies’ costs of capital.
In the UK, the challenges are greater because of the macro pressures surrounding Brexit, currency fluctuations and a possible change in political leadership.
This makes the universe of issues facing food businesses greater than before. The external headwinds facing value-creation in food currently feel closer to a tsunami.
And yet, while so many conventions in food are changing fast, companies’ own approach to influencing these issues are typically stuck in a slow and traditional groove. The corporate affairs function sits within a company, yet often remains detached from core decision-making.
Corporate affairs teams should play more of a central role in aligning internal teams, from marketing and insights, to risk and investor relations, so that there can be one coherent business response to the changing environment.
The new-guard CEOs need this if their ambitious growth plans are to have a chance of coming to fruition.
Without a new approach, external headwinds could exacerbate a slowdown in growth and destroy the investment case for the opportunities that could be transformative in creating value.
Carrying on the same way won’t deliver the desired results. If all other conventions in food are changing, then the industry’s approach to corporate affairs needs to change too – and fast.