In the Spotlight: Froggatt and Dunsmore
The earlier-than-expected departure of Tony Froggatt as CEO of brewing force S&N has set the City rumour-mill churning. The brewer insists the move is a planned succession but, Chris Brook-Carter writes, whatever the reasons behind Froggatt's accelerated departure, new CEO John Dunsmore will have little time to settle into his new job before addressing shareholders' concerns.
So we have a change of landlord at the S&N Arms then. That Tony Froggatt is leaving is no surprise. However, the timing of his departure and the speed of his exit - he will be gone by November - has been a shock for some of the locals at least, while the news that John Dunsmore will soon be behind the bar was greeted by a fall in the company's share price.
Most of us in the trade expected the genial Froggatt to have his hands on the pumps at least into next year, but S&N's spokespersons have played down any mystery surrounding the announcement last week. "Tony's departure is by mutual consent between Tony and the board. This is in-line with a succession programme developed by the board," one told just-drinks.
Froggatt assumed the position at S&N in May 2003, and as the spokesperson pointed out, "when Tony joined the company, he said five years in the position would be about right."
Chairman Sir Brian Stewart echoed that sentiment. "The natural time for a change was before the start of the new year rather than the middle of the year," he said
The media, as one might expect, have been less convinced that it is as straightforward as that.
Froggatt has pulled S&N into the modern age over the last four years, expanding its business base away from stagnating Western markets by acquiring sensibly in fast-growing markets such as China and India. Whilst S&N is still some way off packing the kind of global punch that InBev or SABMiller can boast, Froggatt has streamlined operations in the difficult home markets of the UK and France.
All of this gives little clue as to why Froggatt has gone early, even if it is only by seven or eight months.
But there have been suggestions that Froggatt is a casualty of the poor performance in recent months of Western Europe. That would seem a harsh call if true, as he has little control over the dismal weather or the tough comparisons with last year's football World Cup-filled summer. And as we have said, under his tenure Western Europe has become a far slicker operation than it was before 2003.
Froggatt's departure is a scenario made all the more mysterious by the continuing speculation that Carlsberg and S&N are in discussions about a potential merger.
S&N shareholders and city analysts seem to believe it's the right move for S&N, which needs to continue to build scale if it is to truly compete with its larger rivals. However, the departure of Froggatt will put that on hold in the short to medium term.
A merger with Carlsberg could have been a fitting finale to the Froggatt era. But, at the very least, Carlsberg will have to begin talks anew with his successor. In all probability, Dunsmore is going to want to take time to get his feet fully under the desk before he pursues a policy with such huge implications for the business.
The new CEO will have a tough time calling for patience from investors as he eases himself into the job. Dunsmore, however, knows both S&N and the City well. He started his working life as a graduate trainee at S&N before diverting into the City with roles as a drinks analyst and head of equities at NatWest Securities, before then returning to the brewer.
He has had a successful tenure as managing director of S&N's western European unit since May, with one analyst saying this week: "Dunsmore has done a very good job in the UK against pretty tough market conditions.''
That promotion in May made him the obvious successor to Froggatt, and his CV suggests he is a safe pair of hands in which to take S&N forward. But at least one commentator has already speculated that the move is a defensive one.
"That City career is not irrelevant, but S&N shareholders could be forgiven for seeing something else. Now they have a chairman, Sir Brian Stewart, who has been on the board for two decades, and a chief executive who was reared within the group," pointed out the City desk of UK newspaper The Guardian.
"S&N keeps telling us that it's not the inward-looking Scottish fiefdom of legend, but the message is not getting across. On a good day for the markets, the shares fell almost 2%. A former top-rated analyst like Dunsmore will know how to read that: S&N investors, bored with the hard graft of brewing in Britain and France, would sell like a shot."
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