Economic downturns have a way of separating good leaders from great ones.
After two years of uncertainty surrounding Covid-19, Europe is lurching towards a recession. In March, the outbreak of conflict in Europe for the first time since the end of the Cold War sent shockwaves through the continent. Business leaders are now looking toward a long winter, after Russia’s decision to cut off Europe’s gas supply added to the inflationary pressures affecting the cost of everything from construction to baked bread. It takes more than a business-as-usual approach to survive, according to the top-scoring chief executives in Institutional Investor’s 2022 Developed Europe and Emerging EMEA Executive Teams.
“This is the time for hands-on operating management,” said Mark Schneider, chief executive of Nestlé, who ranked first in the food producer category as voted for by buy- and sell-side participants in the Developed Europe survey. “Fast-paced decisions and tight performance controls take preference over 50,000-foot strategic thoughts in this environment.” Markus Krebber, chief executive of German multinational energy company RWE, agreed. “In these times risk mitigation is more important than maximizing revenues. In this regard, two things are crucial when managing a diverse and international company: ensure maximum transparency… and have the ability to take far reaching decisions quickly,” said Krebber, who was voted first in the utilities sector.
Nestlé addressed supply chain issues it experienced in the run up to Christmas 2021 with the use of robotics to replace manual pickers, improving both the speed and the consistency of how orders are prepared. At one plant in the UK, products including KitKat, Maggi, and Nescafé that used to be picked at a rate of 200 an hour by humans are now processed at a rate of 900 orders an hour by robots, an improvement of 77.7 percent. “I think we truly performed and transformed at the same time,” Schneider said. “We overcame extraordinary supply chain issues and input cost inflation and found a reasonable balance between maintaining growth momentum and protecting the bottom line.”
According to Krebber, it will take huge financial commitments to innovation to address massive gas supply shortfalls caused by the war in Ukraine. “To overcome the energy crisis whilst addressing the challenges imposed by climate change, massive investments are needed: in renewables, storage technology, ramping-up the hydrogen economy, as well as additional flexible power generation capacity and gas infrastructure,” Krebber said. “We urgently needed to make the energy supply system more independent and climate-neutral.”
At HelloFresh, a meal kit startup that reported record revenue of $2 billion in the second quarter of 2022, chief executive and co-founder Dominik Richter is defying dire predictions for ecommerce. He said that his teams across the globe have had to navigate constantly changing operating environments in their efforts to grow the business. Richter now has his sights set on becoming “the world’s leading integrated food solutions group” — supplying not just dinner for its customers, but breakfast, lunch, and snacks in between. “During these unpredictable times it’s difficult to know exactly what lies ahead of us and no one can know for sure. Therefore, it’s less about what actually happens but more about how one responds as a company, as a leaderk and as a team,” Richter said. For HelloFresh that means the pursuit of constant growth, adding one or two new markets every year through acquisitions of ready-to-eat companies like Factor in the U.S. and YouFoodz in Australia, while trying to protect its customers from price increases from food inflation.
Then there are those business leaders who seek diversification at moments of crisis. “You can call Poste Italiane an anti-fragile market player,” said Matteo Del Fante, chief executive officer of the Italian postal services provider since 2017, who was voted best CEO in the speciality and other finance category of the Developed Europe survey. “When we faced the pandemic two years ago, we managed not only to withstand the shock but actually improved our business by harnessing evolving market trends and refocusing our attention to the areas of growth.” Del Fante is eyeing two areas of potential growth during the coming recession: cash payments, which still are still by far the main method of payment in Italy, leaving a large area of opportunity for Poste Italiane, and capital guaranteed products, which make up the majority of the business’s asset allocation — an area where the nature of the product means market volatility is mitigated.
But even those who plan to diversify and grow through the downturn are still planning to hedge some bets. Del Fante said hedging strategies for jet fuel and energy costs will support the company in a recessionary cycle he sees as inevitable. “The pandemic has been a tough experience from which we have learnt to adapt to changing conditions while preserving the continuity of our businesses, leveraging on our resilience and flexibility,” he said. “We are still crossing uncharted territories.”
Cenk Alper, chief executive of the Turkish industrial and financial conglomerate Sabancı Holding, warned that climate goals are at risk of being lost as companies face such a complex set of problems. Alper, who was voted top chief executive in the Emerging EMEA industrials sector, says that no matter how gloomy the problems may look, everyone has a duty to put sustainability at the center of their vision. “All these negative scenarios due to the pandemic and the energy crisis could distract us from our sustainability goals and lead us to ignore the climate emergency. We are currently at the point of no return. If we fail, there is no planet B for us to inhabit.”
Cenk Alper, Sabancı Holding
What are you most proud of from the last year?
We have left behind a very successful year financially but the one thing that makes me incredibly proud is our determination to realize our group’s purpose without leaving anyone behind or deviating from our strategic path, despite the pandemic and all kinds of macroeconomic difficulties. I realize that one essential element in maintaining our determination is the exceptional ability of our group employees in embracing strategic priorities. Sustainability and digitalization constitute the backbone of all our business lines, which are at the heart of our group’s purpose that we have redefined as: “We unite Turkey and the World for a sustainable life with leading enterprises.” Unfortunately, we have seen that vital sustainable approaches can sometimes lose their priority status and slip during such periods of global uncertainty brought on by the pandemic.
At this point, on the way to realizing our vision of a Global Sabancı, we have actively assumed a pioneering role in sustainability through the initiatives and commitments we have undertaken, in Turkey and every region we operate in. This represents a great source of pride not only for me but for the entire Sabancı Group of 60,000 people. Increasing our ratings by 2 notches in both the MSCI ESG and CDP Climate Change assessments, reaching the A level by getting the highest score among holding companies in the Refinitiv ESG assessment, our inclusion in Bloomberg Gender Equality Index, and being the first Turkish company to be in Forbes’ “World’s Top Female-friendly Companies” list are among the achievements that encourage us.
What are you most worried about in the coming year?
There is no doubt that we are going through highly challenging times. Today we may be experiencing the most profound socio-economic crisis since the Second World War. While experiencing the world’s first global energy crisis, we are simultaneously struggling with raw material shortages, supply chain problems, food problems, a high inflationary environment, geopolitical concerns, and the continuing consequences of the pandemic. These problems can potentially have negative impacts worldwide, both economically and socially; this is perhaps the first time we are facing such a complex set of problems. Yet, no matter how gloomy all these problems may look, our duty is to participate in creating a shared global vision. In order to create a better world, sustainability must be placed at the center of this vision, as well as mobilizing technology and innovation. Worrying may not be the right term, but I can see that the most significant risk to humanity is unfolding right now. All these negative scenarios due to the pandemic and the energy crisis could distract us from our sustainability goals and lead us to ignore the climate emergency. We are currently at the point of no return. If we fail, there is no planet B for us to inhabit.
How do you change the way you lead your business during a recession?
We are passing through a conjuncture characterized by very low predictability. We should avoid excuses and adjust ourselves to doing business amid uncertainty. As Sabancı Group, we plan our roadmap to succeed across four main global trends. Firstly, “Technology is invading our lives.” We aim to be a pioneer in all four aspects of this theme – rapid innovation, hyper-connected world, tech-driven urbanization, and redefinition of the business environment. “Sustainability has become an imperative.” If we continue to grow at this rate, continue to pollute at this rate, and continue to fuel inequalities across the world, we will lose all together. Therefore, sustainability should be at the center of every business, embedded in the DNA of all companies. We should walk the talk now. “Near-term headwinds in the global economy.” In addition to the dreadful humanitarian tragedy, the Russia-Ukraine war has deeply shaken the economy worldwide, impacting energy, food, and commodity prices. Furthermore, supply chain problems and financial tightening have harmed global economic growth. All these issues create a turbulent atmosphere in the global economy, and these instabilities will be present in our lives for a long time. “We are all in the same boat.” The problems in the world today are so complex and intertwined; the solution to none of these problems is the responsibility of solely one country. To fix these problems, we must act together with common sense. We are now testing flexibility and agility which have been referred to frequently in the last decade. It is now time we put words in action. And this is precisely what we are aiming for — as the late Sakıp Sabancı said, running without limits is a very important part of Sabancı Group’s vision.
Matteo Del Fante, Poste Italiane
What are you most proud of from the last year?
The transformation journey started in 2017 has reached significant results, benefitting all our stakeholders: our community, our shareholders, and our people. In the first half of 2022 we reached a record high EBIT in our history, which is a tangible result of the success of our transformation. At the same time, Poste Italiane has consolidated its role of strategic pillar for the country. Just some examples: We are here for our communities, delivering some 30 million vaccine doses and enabling the vaccine-booking platform for a third of Italians. We are here supporting the country’s digitalization through our more then 23 million digital identities, which enable citizens to access a growing number of services leveraging on our state-of-the-art IT and digital properties. We are an omnichannel distribution platform, with a strong integration of physical and remote channels with our app being the most downloaded financial app in 2021, with 23 million digital identities and almost 10 million e-wallets, while ensuring that 94 percent of Italians live within 5 minutes from our physical premises.
What are you most worried about in the coming year?
The macro and geopolitical outlook remains complex and uncertain. It’s against this backdrop that I’m proud of the results we have delivered to date, as we execute on our strategy and transformation. We are navigating a challenging environment with cool heads and warm hearts, keeping recurring revenues and cost discipline at the core of our strategy. Poste Italiane has a richly diversified business model including mail and parcels logistics, a financial services division, Italy’s largest life insurance company, a mobile and fibre telephone division and retail energy supplier too. We have successfully repositioned the company to benefit from emerging business-trends. Five years ago, the company was overexposed to declining markets like mail and payments slips which accounted for over 30 percent of revenues, while growing markets were under-represented. Our strategic efforts deployed over the last five years allowed us to overturn the situation, with expanding markets now providing 34 percent of our revenues and declining markets 23 percent. And, if we look at the revenue stream, you can see that the recurring components not directly relying on commercial efforts are increasing from 43 to 48 percent, thanks to, for example, running management fees as opposed to up-front fees. In March we updated our “24 Sustain & Innovate” strategic plan in a very well received virtual event. While we are taking a stance on higher prices and interest rates scenarios, we have proven to be very resilient in times of uncertainty. We are still crossing uncharted territories. The pandemic has been a tough experience from which we have learnt to adapt to changing conditions while preserving the continuity of our businesses, leveraging on our resilience and flexibility. I am proud too that we have maintained the key promises made to our stakeholders.
How do you change the way you lead your business during a recession?
Although nobody is immune in a very complex contest, we shall consider the strength of Poste Italiane. Our plan is based on leveraging structural trends (payments, parcels, assets under management). Our organization is the key driver for the execution of our strategic view. We have a perfect structure in place to successfully implement our plan, with an experienced management team ensuring the deployment of a strategic view that they have contributed to define in the first place, and which they are, therefore, fully committed to. The centralized operational and technology brain will lead the execution of the plan across all business units, which are enabled by distribution networks and dedicated channels.
You can call Poste Italiane an anti-fragile market player. When we faced the pandemic two years ago, we managed not only to withstand the shock but actually improved our business by harnessing evolving market trends and refocusing our attention to the areas of growth.
Even in today’s geopolitical turmoil, our business structure allows us to continue our work along our strategic directions. For example, in the payments sector, cash payments are still largely dominating the space in Italy, leaving us with untapped opportunities. Our customer asset allocation is biased towards capital guaranteed products. During this crisis it comes as an advantage because they are less affected by market turbulence, with 93 percent of our customer’s TFAs [tangible fixed assets] not exposed to market volatility.
Finally, given the current inflationary pressures, our non-HR cost-base is partially protected against increasing inflation expectations until the end of 2022 by hedging strategies for jet fuel and energy costs. I think that our success in managing our diversified business model will support us in an eventual recessionary cycle. Poste has always been a safe haven for Italians and has been an anchor of communities for 160 years.
Markus Krebber, RWE
What are you most proud of from the last year?
RWE is massively stepping up the pace to support the energy transition, focusing on our goal to become climate neutral by 2040. At our Capital Market Day in November 2021, we presented our investment and growth program “Growing Green”: By 2030, we are investing €50 billion gross in the energy transition. As a consequence, RWE is becoming greener, bigger, and more valuable. Moreover, where we as a company can help in face of the energy crisis to improve short-term resilience in the energy supply system, we do so directly: in building up LNG infrastructure, in diversifying gas supply, and in bringing back power generation capacities. All this without losing sight on forging ahead with our investments in green technologies and our carbon emission reduction targets.
What are you most worried about in the coming year?
Clearly, it is the war in Ukraine. I hope that it will end soon and that the Ukrainian people can return to a life of peace and freedom. The war has also led to a global energy crisis which is obviously on top of our agenda. The Russian backlash on the European sanctions leads to massive gas supply shortfalls and consequently also to distortions on the electricity market. To overcome the energy crisis whilst addressing the challenges imposed by climate change, massive investments are needed: in renewables, storage technology, and ramping-up the hydrogen economy, as well as additional flexible power generation capacity and LNG/gas infrastructure. We urgently needed to make the energy supply system more independent and climate-neutral. Furthermore, as a society, we need to sustain cohesion and support vulnerable groups. Massive amounts of social welfare are needed and governments will look at how to finance these. However, any measures introduced by policy-makers must be designed in such a way that the functioning of the market and the ability of companies to deliver large-scale investments are maintained at all costs.
How do you change the way you lead your business during a recession?
In uncertain times, when the future is even less predictable, our key focus is on keeping RWE a robust and financially strong company. A special focus is on risk management. Projecting extreme scenarios and their impact on our business is one of the most important tasks. In these times risk mitigation is more important than maximizing revenues. In this regard, two things are crucial when managing a diverse and international company: ensure maximum transparency and information flow across all relevant businesses, markets and regions and have the ability to take far reaching decisions quickly.
Dominik Richter, HelloFresh
What are you most proud of from the last year?
I am incredibly proud of our teams across the globe who have shown passion, resilience, and an eagerness to continuously improve and expand our product, while navigating constantly changing operating environments. Over the course of 2021 and 2022 we made significant progress in ramping up our production capacity and infrastructure globally, while launching a number of new markets, internationalizing our portfolio of brands and acquiring new businesses. Not only are our teams working tirelessly to provide our customers with delicious meals, an amazing experience, and an increasing amount of choice, they are laying the foundations for reaching our mid-term targets and charging towards becoming the world’s leading integrated food solutions group.
What are you most worried about in the coming year?
We’re thinking a lot about making our processes, supplier relationships and our overall business logic more resilient, in order to be adaptive to whatever may come. During these unpredictable times it’s difficult to know exactly what lies ahead of us and no one can know for sure. Therefore, it’s less about what actually happens but more about how one responds as a company, as a leader and as a team. What I do know is that HelloFresh has many opportunities ahead and it is up to us to capture that growth trajectory — independent of the macroeconomic environment.
How do you change the way you lead your business during a recession?
The ultimate goal as a leader is to build a better organization and company every year — which is something that we have full control of, regardless of the macroeconomic environment. Having a resilient DNA in place that resonates with everybody in the company is key to navigating challenging environments. Luckily, being able to quickly adapt to new situations, operating egolessly, and basing all decisions on data are key to our company culture and DNA. Personally, I’ll be paying a lot of attention to how much we improve as an organization.
Mark Schneider, Nestlé
What are you most proud of from the last year?
I think we truly performed and transformed at the same time. We overcame extraordinary supply chain issues and input cost inflation and found a reasonable balance between maintaining growth momentum and protecting the bottom line. At the same time, we acted responsibly towards our consumers and continued to deliver for them while also further progressing on our key strategic initiatives.
What are you most worried about in the coming year?
A recession and even a period of stagflation are likely. Geopolitical tensions are making the situation more challenging. But thanks to our product mix and strong brands, Nestlé is well-positioned to sustain growth. We also want to support our consumers during such challenging times and are increasing our focus on affordable, nutritious products.
How do you change the way you lead your business during a recession?
Recession or not, the world is highly volatile. The 2020s feel like a modern-era version of the 1970s so far. This is the time for hands-on operating management. Fast-paced decisions and tight performance controls take preference over 50,000-foot strategic thoughts in this environment.
