Jul 2014 Financial News

TAKING THE NEAL OUT OF MASSY...conglomerate rebrands, refocuses and looks to expand

Jul 03, 2014

Many people werestunned on Monday when Neal & Massy Holdings announced that it was rebranding the group and changing the name of every single one of the 60 companies in the consortium’s portfolio to incorporate Massy.

Would the group change the name of Hi-Lo, the 64-year-old enterprise that has almost become synonymous with supermarkets in T&T?

Why was Massy dropping the Neal from its name?

And what does all of this mean for the generations of Trinidadians who have grown up buying their groceries from Hi-Lo, their cars from Neal & Massy Automotive and their homes from Nealco Properties.

In an interview on Thursday last, Massy’s group CEO Gervase Warner said the process of arriving at Monday’s announcement—which took place officially at an evening function at NAPA—began in 2011, when the group did two things that led to the rebranding: First, it crafted a new vision statement that stated that it would be “a force for good: the most responsible and profitable investment holding/management company in the Caribbean Basin.”

That vision statement set the company an aspiration for growth that was beyond the shores of the English-speaking Caricom countries to the region’s Latin American neighbours.

Warner, who was appointed as CEO of the group in 2009 following the death of Bernard Dulal-Whiteway, said Neal & Massy also embarked on a strategic planning exercise that “identified that there were a number of businesses that we had that if we were to find a way to bring them to better work together—to work on behalf of consumers and customers—we would have some very powerful offerings to the marketplace.”

So the company set about to restructure the organisation around a strategic investment portfolio and an integrated consumer portfolio that would make it easier for customers to access services or products from the group.

The integrated consumer portfolio had the group’s automotive company, its retail offerings (which included its supermarkets in T&T and Barbados, and hardware stores and pharmacies in Barbados), its consumer finance companies, the consumer side of its insurance businesses and its loyalty card offerings.

Warner said: “When we looked at the integrated consumer portfolio, it was clear that we were touching the lives of millions of consumers in many different ways, but not as a group.

“So what we were trying to say to customers was that you could buy your car and finance and insure it under the same group. You could come into a grocery and get your pharmacy products, pay your bills, shop with an in-store credit line, get consumer appliances all from the same group—and with a card that would earn you loyalty points.”

And one of the elements that the group wants to develop is to offer extended warranties from its insurance entities for consumer products such as computers.

The Massy CEO said these bundles of consumer offerings made sense and the group, in the last few years, started to execute the greater integration of the group.

“But one of the things that we had to confront was because all of the companies had different names it was hard to productise the message: all of these offering were coming from the same group. It was hard to get the message across to customers, and it was also hard for us to get the kind of behaviours we wanted inside our organisation around the need for collaboration and joint thinking from employees.”

The group eventually concluded that to maximise the possibilities from the integrated offerings, it needed a common brand across the group.

Before the rebranding exercise, many of the group’s 60 companies had brands and logos that looked completely different from other members of the group. There was nothing that said to customers—or even employees—that this was a member of the Neal & Massy group.

“Harnessing the consumer power of the group has been difficult for us,” Warner said. The consultants the group brought in to assist with the restructuring advised that the group needed a name that could be used across the entire group.

The group then embarked on an internal discussion about options for a new name and the option that many employees kept coming back to was Massy.

“In Trinidad, in particular, people already referred to us as Massy. They talk about ‘people working Massy’ or ‘they going to Massy’, meaning the car distributor in Morvant. Massy was a well-established abbreviation for Neal & Massy, he said.

The new logo retains part of the old name as the symbol before the Massy in the logo has an N and an M in it, which harkens back to the group’s heritage. Given the group’s desire to expand into Latin American, the new name also has a strong translation into Spanish, as disaggregated, Massy sounds Mas Si, which means more yes.

“Most of us we like this is kind of obvious. Why are we going to invent a new name, when it would be so easy to connect this new name to who we were,” Warner said.

To complement the name change, on Monday Massy rolled out a new loyalty card that can be used across the group from buying food at its supermarket chain (now Massy Stores), to purchasing a car from Massy Motors, to financing the purchase of the car (from Massy Finance) and insuring the car (from Massy United Insurance).

The new loyalty card, which would be one of the most visible aspects of the rebranding exercise, will also come with a credit component that has been outsourced to Republic Bank, in Trinidad, because of regulations and the lack of a banking licence. The credit component has to be applied for at the Massy Stores, but will be approved by Republic Bank. The loyalty card, which will have the customer’s name on it, is meant to replace the approximately 150,000 Hi-Lo’s shoppers’ card in existence. Those cards were available for distribution to customers at their most-frequented Hi-Lo store from last Monday, the first day of the official rebranding.

Asked about the cost of the rebranding exercise, Warner said that it is in the “tens of millions,” but the group does not as yet have a firm handle on the final cost because this is a work in progress. The Massy CEO said the cost will be disclosed in its quarterly accounts to June.

On the financial benefits of the rebranding, he said it would be “tremendous,” as many of the group’s entities would experience an uplift in their revenues as customers “would understand the message and would want to be part of that ecosystem.”

Customers, said Warner, would want to sign up for the loyalty card because they would be able to see the instant benefits of the card, which would give them points for buying a $300,000 vehicle at Massy Motors that they can use at Massy Stores. While the redemption aspect of the loyalty card now requires a voucher, Massy is moving to have this available electronically so that the points can be redeemed at the point-of-sale terminal.

“That’s a huge benefit that people will want to have as they will want to get the benefits of membership.”

In terms of uplift, Warner said that he expects Massy United Insurance to experience increased sales and visibility.

“People don’t know that United Insurance is part of the Massy group. It does not have brand recognition in Trinidad, although it does in Barbados. We expect that the rebranding will take that offering a long way as more people will want to give their business to Massy United Insurance.”

Among the other benefits of the loyalty card would be greater loyalty to the group and improved service levels by employees. On the business-to-business side, Warner envisages that more consumer product distributors would want to work with Massy Distribution and Massy Trading are in Miami, Barbados, Jamaica, Guyana and in T&T.

“Quantifying the financial benefits has been difficult, in terms of what we expect, but we are pretty certain that we will recoup the tens of millions in rebranding investment from incremental revenues and profits in a very short space of time,” said the Massy executive.

He said the rebranding of the group will also allow investors in the publicly listed company “to really begin to understand the Massy story.”

Asked whether the rebranding exercise was related to his experience working as a partner at the international management consulting firm, McKinsey & Company Inc, Warner said that McKinsey were the consultants that Massy used for the strategic planning exercise in 2011.

They set the platform for the strategy, he said.

Referring to the rebranding consultants—the same firm that advised Barbados Mutual in its name change to Sagicor—Warner said the rebranding exercise is more than just changing the name of the group.

Warner, who holds an MBA from the Harvard Graduate School of Business Administration, said: “This is not a cosmetic change. We have been doing deep, deep work within the organisation to get people to own the new value that is to be provided, to understand the whole issue around collaboration and working with one another.”

He said back in 2010, the group introduced a Customer Service Management System, which was first introduced at Hi-Lo and then at Neal & Massy Automotive and has now spread across the group.

“We have been doing work on customer service, training programmes with employees around behaviour and leadership in preparation for the changes. We have been adopting new management principles around what I refer to as conscious capitalism.

“Our vision is to be a force for good. It’s not just that we want to be rich and make a profit. We want to do good by being able to be a profitable organisation that gives back. Our employees are part of that; our customers are part of that; our society and communities are part of that; making sure that our investors get a healthy return is part of that as well.”

Asked whether the argument could be made that the Massy Group was too dependent on the fortunes of the T&T economy and on imports into it, Warner said: "Of course, that argument could be made. About 75 per cent of our profits come from T&T, so that we are still quite dependent on this economy.

"Interestingly enough, when we had the economic downturn from 2008, T&T survived better than most of our Caricom neighbours. We as a group were badly battered in Barbados and we had to close some hotels and some other businesses and rationalise a business that we bought in 2008.

"We view downturns as opportunities...

"And that's part of the reason we are making the investments in Latin America. We need to extend our economic footprint. Massy is now over $10 billion in revenue and close to $900 million in profit before tax and the growth potential for the group is not really within the region (Caricom).

"When you get to this size, if you want to put on ten per cent growth on that, it is hard to find it in Barbados, Jamaica, St Lucia or Guyana. But we can find that in economies like Costa Rica, Colombia and Panama, which are bigger economies and are growing.

"A big part of our strategy is geographic diversification. We think that is important for T&T as well. If you have entities like Massy doing this, that will create opportunities for locals and it allows us to earn foreign profits that we can bring back here in the form of dividends."

Summary of Neal & Massy's history

The roots of the Neal & Massy group were planted in Trinidadian soil 82 years ago with the merger of two companies—Neal Engineering, led by Harry Neal, and Massy Ltd, led by Charles Massy in 1932—which was initially called the Neal & Massy Engineering Company Ltd.

Two wholly-owned subsidiaries were then established: Neal & Massy Ltd and Tractors and Machinery (Trinidad) Ltd (Tracmac). In the late 1920s, Charles Massy had secured the dealership for the Caterpillar brand and the Chevrolet brand in T&T and these became the first in a long list of exclusive brands for which Neal & Massy became agents, in T&T and later in other Caribbean islands. Tracmac still holds the Caterpillar dealership today.

Through the strategies of cautious, debt-free expansion and reinvestment of profits locally, Neal & Massy maintained a presence in T&T. The innovation of the two businessmen and the transformation of their merged company saw them through the economic trials of the Great Depression of the 1930s.

Essentially, Neal & Massy started with two business units: transportation and industrial and engineering equipment. During the time of WW II (1939-1945) the company adapted to ensure its continued existence by shifting primarily from sales into parts and service.

By the early 1950s, Neal & Massy was involved mainly in importing machinery and engineering services. By this time, the wellestablished tractor department offered industrial equipment like cranes and compressors, while the electrical and engineering departments supplied service and smaller items.

In 1958, the company went public. In the years from 1923-1945, the number of cumulative total shares grew to only 66,250, with a massive increase of almost 200 per cent in the war years 1942-1945. After the war, share allotments continued to grow significantly. The bold move of its public offer significantly increased the operating capital of Neal & Massy, with cumulative total shares moving from 200,000 in 1957 to 363,150 in 1959 to 450,000 in 1965.

Among its initiatives, the mergers/acquisitions with Cannings and Company in April 1975 is noted as one of the boldest moves in the history of the Group. This was a major success story for the Group with the Hi-Lo Food Stores chain, which started in June 1950 as part of the Cannings Group, gaining dominance as the major food supplier in the nation.

From 1982-1988, the oil price collapsed and as a result, the economy in T&T caved in. Coming on the heels of a major growth spurt, companies were caught with high inventory levels and lofty operating costs and as the effects were felt nationwide, many of the receivables became difficult to collect and Neal & Massy reacted by quickly moving to rationalise and consolidate within the Group. Neal & Massy’s head count fell from 9,000 in 1981 to less than 4700 by the late 1990s.

Between 1986 and 1996, the national economy was slowly on the mend. In 1992, the Group acquired T Geddes Grant (another major conglomerate at the time) and one of the foundation subsidiaries upon which Marketing & Distribution was created. By the sheer size of the acquisition, Geddes Grant reinforced Neal & Massy as a trading company. This rapid expansion put a strain on the company’s capital structure and the company divested parts of the Geddes Grant Group.

When Bernard Dulal-Whiteway became Group CEO, the furniture and appliance businesses in Barbados were sold to the Barbados Shipping & Trading Company (BS&T) which had acquired the 20 per cent share block of Neal & Massy from Angostura in the mid-1990s.

In 2008, Neal & Massy acquired the Barbados Shipping & Trading Company Ltd (BS&T), which has positioned the Group as one of the largest Caribbean corporations in the region.


Source:
ANTHONY WILSON
anthony.wilson@guardian.co.tt
Trinidad Guardian
Thursday July 3, 2014

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