Defending the brand
In business as in sports, the competition is always looking to unseat last year’s No. 1, and within its markets, that usually means a Fortune Brands’ operation.
"In golf several years ago, we were faced with new competitors — Nike and Callaway coming into the golf ball business," Wesley says. "We told people it’s in the best interest of everyone for us to defend that share. We’re going to put some additional money into R&D, product development and into advertising to defend our share, which, in the short run, will either reduce slightly or certainly flatten our growth and profits in golf.
"But in the long run, it will allow us to protect our share and even grow our share. And that is better for the shareholder."
Wesley says the moves paid off, and today, "our shares are up about five points in golf balls. That gives us a much higher share price."
Deciding whether to put more money into a brand is based on numerous factors, Wesley says.
"It wasn’t a lot of capital allocation," he says. "It was basically philosophically what we wanted to do with the business and how we were going to defend our share. We were going to step up our level of spending and expenses to defend our business. Strategically, we sit down and review our different categories with our board annually, and talk them through where we see the business, how we performed, what the external markets look like and either revalidate and/or tweak a strategy.
"That’s part of the education process. Our board would have been aware of that, but it would have been management coming forth telling the board what we are doing."
Fortune Brands also faced challenges with one of its office products divisions, Acco World Corp. The division delivered a number of unproductive product lines and declining shareholder value. The situation was so bad that Wesley considered divesting the business.
But paring the chaff left Acco more competitive. The company realigned and streamlined its North American operations, focused on its profitable core products, divested or discontinued several product categories and reduced overhead expenses and excess capacity through consolidation.
"We were confident about what we could do to the business," Wesley says. "In the long run, we’ve had phenomenal growth and profits in that business and have really recovered it. We’re always looking for, not the easy out, but what we believe will deliver value. In hindsight, things sometimes look simple. At the front end of a decision, there’s judgment about what you can or can’t do, your ability to execute, so you make your best informed decision and go with it."
Wesley doesn’t dwell on the past. It’s his thoughts about the future that drive him forward.
"I feel great," he says. "If you look at our track record, it’s been good. If you look at how our shares have appreciated, it’s been good, but we sort of like to think are best days are ahead, not behind us."
HOW TO REACH: Fortune Brands, (847) 484-4400 or www.fortunebrands.com