Monday, March 02, 2009

Sack the CEO. And restart manufacturing.

Robert Gottliebsen's advice to Pacific Brands:

"...Rightly or wrongly the Pacific Brand’s CEO has become the number one corporate villain in Australia because she took a big pay rise while planning to sack workers in the middle of a recession.

The company's life blood, its brands, are being ridiculed in newspapers and on television and radio and the board that made the decisions that led to this crisis must be in a state of shock.

Saving Pacific Brands starts by examining the balance sheet. Pacific Brands shareholders funds stand at $1.1 billion but the biggest asset, intangibles, totals $1.3 billion – $200 million more than shareholders funds. The Pacific Brands banks are owed $900 million and for them to be paid, those Pacific Brands intangible assets, which are effectively brands or the value of the brands’ cash flow , must have substantial value.

So in a Pacific Brands-style disaster the first action is to determine whether the crisis is having a substantial effect on sales and brand value. If there is no noticeable effect on sales in the next few weeks, Pacific Brands might be able to tough it out.

However, that’s a dangerous course because one of the strengths of Pacific Brands has been its ability to convince the likes of Sarah Murdoch, Pat Rafter, Michael Clarke and others put their names and reputations behind its key brand, Bonds. The promotional strategy worked, but now the Bonds brand has been tarnished, so in future brand promotion of any sort let alone high profile personalities will be much harder. Without that promotion, generic branded products win.

If sales are currently being affected by the crisis, every Pacific Brands alarm bell needs to be ringing. Among the strategies that need to be considered will be replacing the tarnished CEO with a marketing oriented up-front CEO who brings back Australian manufacturing for the icon brands – Bonds and Yakka (the hosiery brands are not icons, so aren’t a problem)...

Read on...