Last week, Israeli food company Strauss Group (TASE: STRS) announced the appointment of former Ministry of Finance director general Shai Babad as CEO of the group in place of Giora Bardea. The appointment is a surprising one, not just because Babad lacks any experience in the food industry, but also because Strauss has a tradition of making internal appointments, and it was expected that Bardea’s replacement would come from the ranks of the company’s existing management.
Babad has never managed a company the size of Strauss Group, nor does his personality match the company’s image as an organization that is punctilious about solid and smooth management. After leaving the Ministry of Finance, Babad became CEO of Alon Blue Square, but left that post after less than six months.
Strauss Group announced this morning that it had signed an agreement for the sale of land in Safed for NIS 88 million plus VAT. The deal is due to be completed by January 25 at the latest, and the company estimates that it will record a gain of NIS 60 million. The announcement may well not be coincidental, and be designed to cushion the effect on the company’s share price of the appointment of an inexperienced CEO. So far today, Strauss Group’s share price is up 1.53%.
Babad comes to Strauss in one of the most challenging periods the company has ever known. In the past few months it has been striving to extricate itself from the crisis caused by the discovery of salmonella contamination at its confectionary factory at Nof Hagalil, and the biggest product recall ever in Israel. Strauss has a current market cap of NIS 10.1 billion, having lost over NIS 1 billion of its value since the salmonella incident began. The company also faces a Competition Authority investigation into allegations of price fixing. It will also be interesting to see how the appointment of Babad will affect campaigns over the rising cost of living. From December, Strauss will be headed by someone who, until not long ago, represented the other side, leading government initiatives to block or minimize food price rises.
In Strauss Group’s strategic plan, published in March this year, about a month before the recall, the company set growth as its main strategic goal, with a long-term aim of growing at an average of 5% annually. Strauss intends to expand its activity in Israel and to enter new areas of business, as well as to invest in accelerated growth and expansion of its international mainstays. Implementation of these plans will depend on the company’s management team, which is where Babad enters the picture.
"It’s surprising that they brought in someone from outside the company, and even more surprising that it’s someone who is not from the food industry at all, but he is probably young enough and talented enough to learn the industry," a senior source from the retailing sector told "Globes". "Today, Strauss a multi-faceted company. It’s a company with considerable social responsibility, committed to sustainability and responsible nutrition, an ideological company. And Shai Babad is an ideological leader. Perhaps this is one of the reasons that he left Alon Blue Square. He stood no chance there from the start, because Moti (Ben-Moshe - S.S.) is a very dominant personality, as is Shai. At Blue Square there was previously no CEO role. This was an attempt to create a new role that didn’t exist before, and in practice Moti continued to run things. Here, it’s very different, because it’s very clear what the CEO’s role is.
"Shai understands the macro aspect from his job as director general of the Ministry of Finance. There’s an ecosystem here of customers and suppliers and regulation and farmers and producers and long-term planning and strategy, and he has a complete team under him. This is not one company but a group of companies and there are many talented managers there. Strauss is planted deep in every Israeli refrigerator and kitchen. It’s not some startup that has to be built but an established firm."
Management school
Babad has filled several important jobs in both the public and private sectors, and also internationally. "As director general of the Ministry of Finance there’s nothing you don’t deal with, and nothing in the Israeli economy that you don’t see," an industry source says. "50% of Strauss’s business is overseas, and so they looked for someone with capabilities in the international arena, which he has. It’s surprising that they brought in someone from outside, but on the other hand it’s refreshing. They brought in new blood with a view to years hence. At Strauss, the CEOs are generally with the company for the long term."
Indeed, Giora Bardea, who was appointed five years ago, replace Gadi Lessin, who was in the post for about a decade, as was Erez Vigodman before him. Bardea was not meant to stay for decades. Babad is another story. "He doesn’t need experience in food. He needs to know how to manage. There are jobs that you know how to do and that you can do in a range of sectors. The rest you learn," the source says.
"People say of him that he’s a brilliant and talented person, and the Ministry of Finance is no less complex than Strauss. You are dealing all the time with political pressure, public pressure, and pressure from the media. Clearly it’s different, but it’s not for no reason that Ministry of Finance people go on to senior roles in the economy. It’s a school for management, for building strategies, taking situations, creating a work plan, and implementing it. In the end, it’s management"
Published by Globes, Israel business news - en.globes.co.il - on October 30, 2022.
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