/ 21 March 2024

Continuity is the recipe for success at Woolworths Food

Woolworths Food, Main St. Jhb
Woolworths Food CEO Zyda Rylands will leave the company in August.

Zyda Rylands will leave Woolworths Food better than she found it when she leaves in August, hence the market’s somewhat muted response to her official departure date.

She will be replaced by group chief operating officer Sam Ngumeni later this year, Woolworths announced last week. The retailer’s shares were down 1.6% on the morning of the news. 

On announcing the executive change, Woolworths thanked Rylands for the significant role she played in growing and positioning the company as an industry-leading food retailer. 

“Zyda Rylands basically built that business from scratch. You have to give her credit, she built it from nowhere,” veteran analyst Syd Vianello said.

Vianello called Rylands “the brains behind the food thing”.

The Cape Town-born chartered accountant has worked at Woolworths for 29 years after being recruited by the company as an audit manager. She climbed the ranks and was appointed managing director of foods in 2010.

In 2015, Rylands was appointed chief executive of Woolworths South Africa. This allowed Woolworths’ then chief executive Ian Moir to focus on the group’s disastrous Australian operation, David Jones.

In 2021, Roy Bagattini replaced Moir and Rylands’ position was done away with when some of the group’s Australian assets were sold off. At the time, Rylands was appointed at the helm of Woolworths Food, but she also announced that she would leave Woolworths in 2024 because of personal circumstances. 

While Woolworths was paying for the mistakes of Moir’s foray down under in 2014, the food division kept the group’s problems at bay. 

Moir’s purchase of Australian business David Jones for R21.4 billion disrupted the company; in just five years it lost R12 billion trying to make the clothing brand a viable business.

When the business was in the thick of things and Bagattini replaced Moir in 2021, annual results showed that the food business grew turnovers by 6.9% for the period, while the fashion, beauty and home departments increased by 3.5% and the ill-fated David Jones by 2.3%.  

Analysts have proposed that Woolworths separately list its food business, but the group has made it clear that will not happen.  

Casparus Treurnicht, research analyst and portfolio manager at Gryphon Asset Management, said Rylands had done phenomenally well at Woolworths Food and that the division has done considerably better than expected given the cost-of-living crisis.

Executive changes do pose a risk to profitability, hence the trepidation over Rylands’ departure. But the fact that her position is not being taken over by an outsider has calmed the market. 

Ill-considered executive changes were arguably the Pick n Pay’s undoing. 

When Pick n Pay chief executive Nick Badminton was replaced in 2013 it was the first time in 53 years that the grocer had gone with an external appointment. The Ackerman family brought in two outsiders — former Tesco chief executive Richard Brasher and, a while later, Dutch national Pieter Boone — but Pick n Pay has struggled to regain ground.

Boone was asked to step down with immediate effect because of concerns over the performance of the Pick n Pay core business.

Pick n Pay will not rebound any time soon before it solves its executive and leadership problems, Treurnicht said.

“Pick n Pay has massive issues. I don’t see any change in their stores, in fact it’s more of the same problems, if not worse. I’m not keeping my hopes up for Pick n Pay,” he said. 

Treurnicht noted that when a company is successfully run for a long time by the same person, that person instils a certain culture in the business, which is what will allow Woolworths to maintain its position.

“I think everybody in Woolworths knows pretty well what Woolworths Food stands for and what they are trying to do with it. I don’t think it’s going to change much with Rylands exiting,” he said. 

Vianello agreed, saying Rylands built a strong team around her with the intention that she would retire, as she told the board in 2021. “Woolworths Food will be just fine without Rylands.” 

Treurnicht said Ngumeni — who has been with Woolworths for 26 years and was previously the chief executive of the group’s financial services division — was the obvious choice for continuity’s sake. “The direction of Woolworths Food will still be Roy Bagattini’s call,” he said.