Jo Taylor knew her jump from Caltex HR boss to spearheading its retail turnaround would invariably spark questions from investors.
But a brutal August earnings call laid out in stark detail the market’s scepticism about whether the fuels giant would ever deliver on the promise of its convenience store strategy.
“In retail it seems to be a strategy that you’re making it up as you go along,” BAML analyst David Errington told Caltex boss Julian Segal at its half-year results. “I don’t mean to be disrespectful saying that but do you need to really boost your talent in your retail team?”
Listening at the other end of the line was Taylor and the rest of Caltex’s executive team. Errington’s attack was hardly a surprise after he’d accused the group’s convenience business of going backwards earlier in the year.
But just five months into her role as the company’s new convenience retail boss, Taylor concedes the strategy was fair game.
“There’s been a view expressed which I understand and I think it’s simply recognising the amount of change Caltex has undergone in the past two or three years,” Taylor tells The Weekend Australian. “There’s clearly a view that’s been expressed on convenience strategy as to is it fast enough and is it good enough. We know the strategy is right but really since I’ve been in the role it’s about making sure we’re executing the strategy correctly.”
By any measure, the evolution of Caltex’s retail ambitions over recent years has tested the patience of investors.
Its fuels and infrastructure division provides about three-quarters of Caltex’s business but customer-facing retail offerings are seen as a huge growth opportunity for the company.
Caltex launched its Foodary brand in 2017 as part of a “freedom of convenience” plan to expand its service stations into upmarket convenience stores where customers could grab a barista coffee and buy fresh food for dinner. While the concept has been generally well supported, concerns about its execution won’t go away with returns from the store reboot underwhelming the market.
Caltex conceded in August a target outlined just six months prior of a $120m to $150m earnings uplift by 2024 from its convenience retail stores would not be met, based on “learnings” from the past two years and the results of an ongoing review.
Add in ongoing work to bring franchisee sites back into the company fold, the unexpected exit of Taylor’s predecessor Richard Pearson in February and the decision by Caltex’s chief executive Segal to step down has unsettled some investors.
Still, the 41-year-old shrugs off any concern over the scale of the battle ahead.
After opening its 65th Foodary this month and the imminent launch of its Woolworths Metro stories, Taylor is confident the strategy is right with execution now the key.
Investors will receive a briefing on December 5 at Caltex’s annual investor day outlining the retail performance and the way it has managed on some sites to roll out a Foodary store at half the cost of other outlets.
With Segal outlining a $100m-a-year cost-cutting drive at its interim results, it’s clear the challenge for Taylor is to deliver on budget with stores targeted in the right locations.
Prior to joining Caltex, Taylor rose through the ranks at McDonald’s where she learnt valuable lessons from the fast-food retailer about execution.
“McDonald’s is a business that’s focused on the consumer at the heart. So what is it that the consumer wants and what is it the consumer doesn’t even know it wants — but it will need,” Taylor says in an interview at Caltex’s Sydney CBD headquarters.
“The second thing from my time at McDonald’s is the point of operational excellence. So when you think about a business employing over 100,000 people, its ability to execute a product and service platform exceptionally in every store is something that they’ve done well.”
A network review of Caltex’s retail sites around Australia and how different stores have performed means Taylor and her team are putting more thought into the next phase of the retail rollout.
Again, Taylor recalls a lesson from her time at McDonald’s as helping to inform her view.
“I remember a boss said to me when we were about to launch, something she quite clearly said, ‘Jo your ability to be successful with this is ultimately up to you’,” Taylor says. “It won’t be the store’s fault if it doesn’t work. It will be yours because you haven’t created it in a way that it can be executed perfectly. So I think that’s an important part of the McDonald’s piece. You have to have good systems capability because you need to make sure you can execute brilliantly in every store in every transaction.”
The Sydney-raised executive has drawn on her experience with McDonald’s to help boost the fuel company’s retail ranks. Caltex hired Kate Thomson as head of retail excellence earlier in the year after a 22-year stint at the chain while David Bridger has taken on the chief development officer in charge of retail network planning and real estate after a 14-year career with McDonald’s. A Woolworths veteran, Martine Cooper also started in June and reports to Taylor with oversight of merchandise and the retailer’s supply chain.
Taylor has also been spending time with the investor community to explain her vision — including a meeting late last month with BAML analyst Errington who has been among the fiercest critics of the retail strategy.
“It was a good meeting. And you can call him to double-check if you like,” she jokes.
Taylor emphasises she’s in for the long run on the retail journey and recounts her experience decades earlier when working as a teenager at the family-run coffee roasting business Elbon in Double Bay, which is now run by her brother Andrew.
“We all worked there as kids growing up,” Taylor says. “It was a grounding for me because it teaches you all about the customer and the importance of service and quality of product you provide. And as a small business if you don’t do that well, they just don’t come back again. Equally it teaches you about how to make the best use of money and get the right return.”
While the scale of business might have changed, that focus on the bottom line learnt 25 years ago in the family coffee shop will be critical to the success of Caltex’s retail boss.
“I’ve come from a small business where every dollar you spend has to be counted for and has to have a return. And McDonald’s is very similar in that respect,” Taylor says. “It’s about the right time in Caltex for us to all speak the same language on how much we spend and what’s the right return. I have no doubt Julian (Segal) and (CFO) Matt Halliday have brought that discipline to making sure we invest in the right place. That’s a reflection of returns — not that it all has to be lower — but let’s invest where we are going to get the right bang for our buck.”
And could she see herself filling Segal’s shoes when he eventually departs?
“I can answer that simply no. I’m very fortunate to have the role I do. I love it and it’s been a very exciting six months. There is a lot we are doing in retail and a lot we want to do and I’m committed to this role and demonstrating Caltex is a genuine retailer.”
Extracted from The Australian