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jerryking : jab   5

Andrea Illy: adapting a family business to a multinational world
JULY 20, 2019 | | Financial Times | by Rachel Sanderson.

*The coffee group chairman argues his style of capitalism is good for business, workers and the consumer*

Andrea Illy, third generation heir of the Illycaffè dynasty, last year struck an alliance with investment group JAB Holdings to produce and distribute Illy coffee capsules...he makes it clear that he does not intend to sell the closely held family company..... “It is a very simple principle about preserving our freedom,” he says of his and his family’s decision, one....Freedom is a word that comes up frequently in conversation with Mr Illy.....who espouses a sort of pick-and-mix version of capitalism, resolutely refusing to focus only on sales and profits. Illy argues his style of capitalism is not charity but good business.......Illy has paid its growers on average 30% more over market value for decades in order to maintain its supply of top Arabica beans. “....The company is rooted in the border city of Trieste....which is also ingrained in the nature of the family......globalisation and increasing competition in the coffee sector has forced Illy to adapt. Staying closely held does not work any more. Co-opetition is his new mantra."“It is like the way to adapt in the savannah. If you do not want to be prey to the big lion, you live in a tree.”"

Part of that adaptation has been the deal with JAB, which allowed Illy coffee capsules to be produced and distributed in supermarkets globally, something that Illy could not do alone......The global coffee industry has become increasingly like the beer tie-ups of the 1990s, with big groups such as JAB and Nestlé snapping up smaller companies. Illy has risked being squeezed between these behemoths and the microroasters emerging as the hip caffeine hit for millennials and Gen Z.....Bigger groups have circled Illy for years. Mr Illy says the family chose JAB because it had the technology he wanted and accepted a licensing agreement rather than an equity one.....To build its global presence, Mr Illy is now looking for a retail partner in the US to help launch Illy coffee bars in the world’s largest coffee market. He says he could even sell a slice of equity. But he is very specific who it would be to: a private financial investor, not an industrial group.....there have been other adaptations. Three years ago, Illy hired an outside chief executive — Massimiliano Pogliani, a former executive at Nestlé’s Nespresso — for the first time since the company was founded in 1933 by Mr Illy’s grandfather, Francesco. Mr Illy has also built a board including executives from clothing group Moncler and Italian cosmetics group Kiko...... studies show that family businesses often fail in the third generation. The move to hire outside management and governance comes as studies also show that family-owned, professionally-run companies are among the best performing in the long term. ......Mr Illy sees these alliances as the only way for a family business model to thrive and to not have to cede control to a multinational when “complexity is becoming too big for a single person to manage”.
.....good stewardship is good business......The Illy family is a supporter of arts and culture, including Trieste’s annual sailing regatta, the Barcolana, where hundreds of boats race across the bay. Mr Illy says this creates a virtuous circle: the more attractive Trieste becomes, the more talented people Illy can attract to work for it and the more visitors come to the city and raise its brand profile........A portrait of his father Ernesto hangs opposite his desk. “I put the painting there to ask him to control what I do,” Mr Illy says.

What, then, has he learnt from his family? “Society is made by the private sector, mostly. And if you want to improve society then we need to be able to pursue long-term goals which are beyond profitability, and then you have to be free and accountable only to yourself,” he says.

Three questions for Andrea Illy
Who is your leadership hero? I have three: Muhtar Kent, former chairman of Coca-Cola; my father; Sebastião Salgado [the photojournalist].

If you were not a CEO/leader, what would you be? A neurosurgeon.

What was the first leadership lesson you learnt? My father asked me when I turned 14 years old where I wanted to go to school. Do you want to start a journey to be a leader or do you want to have fun? I chose the first option and as a result chose boarding school in Switzerland over a local school at home. There I learnt about discipline and hard work but also about the power of a charismatic leader from my headmaster.
alliances  boards_&_directors_&_governance  climate_change  coffee  coopetition  dynasties  family  family_business  family-owned_businesses  financial_buyers  heirs  high-quality  Illycaffè  investors  JAB  licensing  Nestlé  premium  private_equity  privately_held_companies  stewardship  sustainability  the_counsel_of_the_dead  virtuous_cycles 
july 2019 by jerryking
JAB’s Peter Harf: hire ambitious talent and give them a mission
February 16, 2019 | | Financial Times | by Leila Abboud and Arash Massoudi.

JAB oversees its portfolio of coffee, beverages, and casual dining companies. .....When everything was going wrong last year at Coty, the cosmetics company backed by investment group JAB Holdings, Peter Harf reacted with characteristic ruthlessness, replacing Coty’s chief financial officer and chief executive, and taking back the Coty chairmanship from his longtime associate, Bart Becht. Describing last year’s share price decline of more than 60% as “unacceptable” for JAB and its co-investors, Mr Harf says the situation “had to have serious consequences” even for his inner circle......Harf believes that identifying talented people — and incentivising them through performance-based pay — have been key to his success over his nearly 40-year career..... just as important to Harf is knowing when to jettison those who are no longer serving the mission he has overseen since he was 35: growing the wealth of Germany’s reclusive Reimann family who are behind JAB....Harf's vision was for JAB to be modelled on Berkshire Hathaway, the investment conglomerate built by his idol, Warren Buffett. Success would come not only from backing the right leaders but by patiently building brands, embarking on deals and taking companies public to cash in on bets....Harf felt he had assembled a dream team: “My mantra has always been that I need to hire people who are better than me. Lions hire lions and sheep hire other sheep.”

Three questions for Peter Harf
(1) Who is your leadership hero?

“Warren Buffett. Hands down. All this stuff that I intend to do to make JAB into a long-term investment vehicle, he does it to perfection. He’s the greatest investor in the world, and I want to be like him. If we invest as well as Warren, we’ve won. Very simple.”

(3) What was your first leadership lesson?

One of my biggest role models was Bruce Henderson, the founder of Boston Consulting Group. When I worked for him, I prepared a three-page analysis about a problem. It had 10 bullet points as the conclusion. He dismissed it as way too complicated and said: “Don’t try to field every ball.” He meant that if you wanted to be a good leader, you have to be able to focus on the important stuff first.
+++++++++++++++++++++++++++++++++++++++++++++++++++
The trouble often starts when leaders start listing five or seven or 11 priorities. As Jim Collins, the author of the best-selling management books “Good to Great” and “Built to Last,” is fond of saying: “If you have more than three priorities, you don’t have any.”
BCG  Berkshire_Hathaway  beverages  casual_dining  coffee  commitments  CPG  dealmakers  deal-making  departures  exits  family_office  family-owned_businesses  HBS  hiring  investors  JAB  Keurig  lifelong  mission-driven  private_equity  portfolio_management  ruthlessness  talent  troubleshooting  Warren_Buffett 
february 2019 by jerryking
JAB chair Bart Becht quits in split with partners
January 14, 2019 | Financial Times | Leila Abboud in Paris and Arash Massoudi.

Bart Becht's departure is the first outward display of tensions within JAB, created to manage the wealth of Germany’s billionaire Reimann family. The chairman of JAB Holdings, the acquisition-hungry owner of Pret A Manger and Keurig Dr Pepper, has quit after a five-year $50bn takeover spree led to a split with his two partners over the scale of the investment group’s dealmaking.

According to two people with direct knowledge of his decision, Bart Becht, a hard-charging 62-year-old consumer industry executive, stepped down after failing to convince JAB to scale back its takeover ambitions to focus on improving operations at its sprawling portfolio of companies.....The once-obscure investment vehicle has vaulted itself into the top tier of consumer products groups through acquisitions of high-profile US brands like Krispy Kreme, Peet’s Coffee and Covergirl owner Coty, competing directly with industry giants including Nestlé and Coca-Cola in coffee and L’Oreal in make-up......One person who has worked closely with JAB described Mr Becht’s decision as “undoubtedly a surprise”, especially since the trio of executives had only recently been raising money from outside investors and pitching themselves as long-term investors.

JAB operates in a similar way to a private equity investor, but with much longer time horizons. It is often willing to own portfolio companies for decades, often engineering an expansion via acquisitions.....The fundraising also coincided with a strategy shift as JAB exited investments in luxury and fashion to focus on what it calls premium food and beverage, casual dining, and coffee.
CPG  dealmakers  departures  exits  family_office  family-owned_businesses  hard-charging  investors  JAB  Keurig  private_equity  portfolio_management  time_horizons 
january 2019 by jerryking
An unusual family approach to investing
May 30, 2018 | FT | John Gapper.

JAB’s acquisition of Pret A Manger resembles private equity but with a long-term twist.

Warren Buffett’s definition of Berkshire Hathaway’s ideal investment holding period as forever. ....Luxembourg-based JAB, owned by four heirs to a German chemical fortune, takes a family approach to investing. It is unusual in that this holding company seeks to retain its portfolio companies for at least a decade. These include Panera Bread, Krispy Kreme and Keurig Green Mountain coffee, which it merged with Dr Pepper Snapple in an $18.7bn deal in January 2018. This week JAB acquired the UK sandwich chain Pret A Manger for £1.5bn, continuing its buying spree of cafés and coffee, mounting a challenge to public companies such as Nestlé.

**These companies are acquired not to be traded but to be invested in and expanded.**

JAB is an innovative combination of ownership and investment in a world that needs challengers to stock market ownership and private equity. It is family controlled, but run by veteran professional executives. When it invests in companies such as Pret A Manger, it deploys not only the Reimann family’s wealth but that of other entrepreneurs and family investors.......Some of the equity for its recent deals, including Panera and Dr Pepper, came from funds raised by Byron Trott, the former Goldman Sachs investment banker best known for being trusted by the banker-averse Mr Buffett. Mr Trott’s BDT banking boutique specialises in advising founders and heirs to corporate fortunes, including the Waltons of Walmart, and the Mars and Pritzker families.

This is investment, but not as most of us know it. By definition, the world’s companies are mostly controlled by founders and their families — only a minority become big enough to be floated on stock markets and need to disclose much of their workings to outsiders. Family fortunes also tend to remain as private as possible: there is little incentive to advertise how much wealth one has inherited......As [families'] fortunes grow in size and sophistication, more of the cash is invested in other companies rather than in shares and bonds. That is where JAB and Mr Trott come in.

Entrepreneurs and their families tend to be fascinated by their own enterprises and bored by managing their wealth. But they want to preserve it, and they often like the idea of investing it in companies similar to their own — industrial and consumer groups that need more capital to expand. It is not only more interesting but a form of self-affirmation for the successful....Being acquired by JAB is appealing. The group turns up, says it will not take part in an auction but offers a good price (it bought Pret for more than its former owner Bridgepoint could get by floating it). It often keeps the existing executives, telling them they have to plough their own money into the company, and invests in long-term growth provided the business is efficiently run.

This is more congenial than heading a public company and contending with a huge variety of shareholders, including short-term and activist investors. It is also less risky than being bought by 3G Capital, the cost-cutting private equity group with which Mr Buffett teamed up to acquire Kraft Heinz. While 3G is expert at eliminating expenses it is less so at encouraging growth.
coffee  dynasties  high_net_worth  holding_periods  investing  investors  JAB  long-term  Nestlé  Pritzker  private_equity  privately_held_companies  Unilever  unusual  Warren_Buffett  family  cafés  Pret_A_Manger  3G_Capital  discretion  entrepreneur  boring  family_business  heirs 
may 2018 by jerryking

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