Will new CEOs at Tata Global, Bajaj Consumer improve performance?

ET Intelligence Group: Tata Global Beverages (TGB) and Bajaj Consumer Care (BCC) are getting outsiders from unrelated consumer businesses to helm their respective fast-moving consumer goods (FMCG) companies.

The two CEOs are coming on board at a difficult time for the industry, when consumer demand has turned sluggish amid economic slowdown. Investors of each company are likely to have different expectations from the new appointees since stock of TGB hit a record high last month while that of BCC’s has slid 55 per cent from its record high seen in January 2018.

Sunil D’souza, currently the managing director of Whirlpool India, is replacing TGB CEO Ajoy Misra, a company veteran, who retires in April this year.


D’souza has his task cut out at the mid-sized TGB. One involves overseeing the integration and subsequent leverage of the consumer brands of Tata Chemicals (in salt, spices, pulses, etc.) that are being acquired by TGB; second will be to improve the return on capital employed of the consolidated business.

The brand presence and market penetration of the company’s beverage and water brands need to be increased. The profitability of the business, which remains exposed to volatility in prices of tea and coffee in global markets, also warrants attention. Incidentally, D’souza leaves a successful legacy at Whirlpool. The stock of the consumer durable company soared 68 per cent in 2019 against the 19 per cent gain posted by the ET Consumer Durable Index and 12 per cent by the benchmark Nifty 50 index.

Jaideep Nandi, the new CEO of BCC who has joined the company this month, is a veteran from the paints industry leader Asian Paints. He is joining the smallsized FMCG company at a time when its business has been going through a difficult period of contracting growth in the hair oil category and slowdown in rural demand.

Last April, BCC hired management consultant Bain & Co on board to chalk out its strategy for growth — appointment of a new CEO seems part of that strategy. Promoters have pared the company’s debt through selling their stake. The new CEO needs to push the company’s market share in the hair oil category as well as improve profitability through cost rationalisation and change in product mix.

FMCG companies have traditionally changed CEOs during volatile times and that has often resulted in better shareholder returns.

During 2013 and 2014, eight leading companies of the BSE FMCG Index appointed a new CEO. In four of these companies (HUL, Marico, Britannia and Nestle), the performance of the company’s stock remarkably improved in the year following the change at the top.

In five of these companies (HUL, Marico, Britannia, Godrej Consumer Products and Colgate Palmolive), a change at the top led to superior operational performance over the trailing four quarters, characterised by double-digit revenue growth and improvement in operating margin.