In 2006, when 53-year-old Sean Summers quit Pick n Pay after 11 years as CEO, then executive chair Raymond Ackerman moved to quickly reassure investors that everything was in hand. Summers, who had been with the group for 34 years, had overseen a period of strong growth and enhanced shareholder value, helping to cement Pick n Pay’s position as the country’s leading grocery retailer.
Summers’ seemingly premature departure should be of no concern, said Ackerman, referring to the group’s well-primed succession strategy. So primed, said the Pick n Pay founder, that the board had a good idea who the CEOs would be for decades down the track.
First up was Nick Badminton, also a Pick n Pay lifer who had been at the group 27 years. Unfortunately for Badminton, he hit a particularly tough patch in the group’s history and was forced to deal with the pressure of major industry changes. Crucially, this was the required switch from a decentralised structure to a centralised one and, more dangerous as it turned out, the growing threat of a rising Shoprite.
In February 2012, when trading profit slumped almost 11% and margins shrank to 2.3% from 2.8%, Badminton called it a day. Deputy CEO Richard van Rensburg covered until Richard Brasher, a Brit and former CEO of Tesco UK, took up the position a year later in February 2013 with plans for a revival. The market was delighted, and the share immediately bounced 16.9%.
Brasher did manage to stop the deterioration and reverse the decline in margins. The problem was Pick n Pay management was not only trying to address legacy issues, it was trying to keep up with an aggressive, fleet-footed competitor moving much more rapidly. Brasher stabilised and modernised the company but didn’t restore its competitive position, and the damage of his cost-cutting only became evident after his 2021 departure. At that stage the board was talking openly about challenges and the need for a turnaround plan.
So, another outsider was brought in. Dutchman Pieter Boone immediately set about launching a new strategy with ambitious plans to win back consumers.
The outside-insider
Just over two years later, following weaker than expected results, Boone was replaced by Summers — the outside-insider — who didn’t take long to unveil a three-year turnaround plan. “The group was facing a crisis and swift and decisive action was required to stem the losses, stabilise the balance sheet and secure group liquidity over the longer term,” the board said ahead of Summers’ appointment.
After the 2026 results, this three-year recovery target was pushed out to 2028 and Summers agreed to extend his contract from the original three years to five.
Last week the group announced it had appointed former Woolworths executive Spencer Sonn as CEO-designate.
“The position of CEO and succession is one that has challenged me as the complexity of this position is such that it is little appreciated or understood,” said Summers in an announcement to his staff. Summers also made special mention of insider Dallas Langman “for the leadership he has shown as head of our core Pick n Pay retail operation that is at the heart of rebuilding our momentum and growth”.
No doubt it is an extremely tough job, especially when you’re up against such a dominating competitor. But how is it possible that for the past 14 years the Pick n Pay board could not find anyone among its 22,000 employees to take up the top position? Is that the cause of Pick n Pay’s problems or the effect?
Meanwhile, over at Shoprite we have precisely the opposite situation. The group, founded in 1979, 12 years after Pick n Pay, has had just two CEOs: founding chief executive Whitey Basson, in the top seat for 37 years, was followed promptly by Pieter Engelbrecht, who had worked for Shoprite for 20 years. After an initial period of uncertainty, Engelbrecht has taken the group to amazing new heights.
Dominant shareholder vs family control
Could Pick n Pay’s problem lie in the family control structure in which excellence may have been defined in terms of Ackerman priorities?
Yet Christo Wiese’s dominance of the Shoprite board seems not to have the same debilitating impact, probably because he was face to face with an equally dominant Basson.
Then there’s Woolworths, which was doing reasonably well until outsider Ian Moir took over with ambitions to conquer the Australian market. His value-destroying era was followed by another outsider, Roy Bagattini, who scored a few victories but overall wasn’t a significant success. When Bagattini announced his departure in June, the board decided to make its first internal CEO appointment in 16 years: Sam Ngumeni, who has been with the group for 30 years.
Woolworths had some of Pick n Pay’s characteristics: a board and executive team dominated by the founding Sussman family and an evidently flawed operating model. As with Pick n Pay, the founding family are no longer in the picture, but years later the flaws remain unresolved.
What is there to say about Spar? Spun out of Tiger Brands in 2004, it was doing very nicely until CEO Graham O’ Connor launched an ill-considered international acquisition strategy shortly after his appointment in 2014. O’Connor had been involved with Spar most of his life, having worked within management and run his own Spar stores. In addition, he owned an industrial catering business that had contracts with Spar.
After O’Connor left the company in December 2022, outsider Mike Bosman was appointed as chair and for the next 3½ years was considered the dominant leadership force in the group. He appointed Angelo Swartz, an insider, as CEO in 2023. When Swartz unexpectedly quit last February, he was replaced by outsider Reeza Isaacs.
Legacy issues
Bosman did well to address some of the crippling legacy challenges he was faced with but was unable to effectively reverse the group’s fortunes. Perhaps most damning, and maybe a result of his outsider perspective, was Bosman’s inability to work with the independent retailers.
The list of speculated replacements for Bosman includes insiders and outsiders. Whoever it is will likely have a sound appreciation of the importance of independent retailers.
Beyond grocery retailing, Mr Price initially proved just how successful an insider-only strategy can be. The group, set up in 1985, was run by its founders Laurie Chiappini and Stewart Cohen until insider Stuart Bird took over as CEO in 2010 and then CFO Mark Blair took over in 2019.
For how much longer the board remains committed to insiders could depend on how Blair’s controversial acquisition of German retailer NKD turns out.
Then there’s the extreme example of Truworths where insider Michael Mark drove a strong performance for almost 30 years but refuses to relinquish the CEO position despite the company languishing for the past eight years. In a year or two the board will have to select one of the two deputy CEOs or look to an outsider.
Perhaps the most persuasive example of selecting from insiders comes from the banking sector. Capitec, Standard Bank and FirstRand are the standout long-term performers in the sector. Each of the three has relied on its own army of employees to supply members of the executive class.
That said, Nedbank has only recently relied on an outside supply source. Jason Quinn, Absa’s former FD, was appointed to replace long-serving CEO Mike Brown when he retired in 2024.
Shareholders at his alma mater must be hoping desperately that the encouraging performance of its latest CEO appointment, Kenny Fihla, will be sustained for Absa to shake off its long-held “laggard” status. The bank has seen six CEOs since Maria Ramos’s departure in 2019.
Certainly, outsider CEOs can change the flagging fortunes of a company, but this tends to be in cases where an activist shareholder such as VCP or A2 Investment Partners is driving a recovery process. Otherwise, it seems tantamount to wishful thinking by a board that has not paid much attention to succession planning.
Hopefully Sonn and Fihla will shift the scales. But members of Pick n Pay and Absa’s nomination committees could be doing far more to earn their fees.