Financial Reporting

From Pepsi to Sun Products: A CFO’s Odyssey

Al Drewes describes his move from publicly held Pepsi Bottling Group to private-equity-owned Sun Products.
David KatzDecember 8, 2014

Five years can seem like an eternity in the career of a finance chief. In March 2009, Al Drewes was featured in CFO and depicted in a photo as appropriately quaffing a bottle of Diet Pepsi. At the time, he was head of finance at the $18 billion Pepsi Bottling Group, which had been spun off from PepsiCo a decade earlier.

Al Drewes, CFO, Sun Products

Al Drewes, CFO, Sun Products

Less than a year later, Drewes’ nine-year tenure as CFO at PBG ended when PepsiCo bought the company. In all, he had spent 28 years working for various units associated with Pepsi-Cola.

Flash forward a half-decade, and today he’s the finance chief of Sun Products, a provider of laundry detergent, fabric softeners and other household products, with annual sales of about $2 billion. Owned by Vestar Capital Partners, a venerable private-equity firm, its portfolio of brands includes: all, Snuggle, Wisk, Surf, Sun, Cuddlesoft and Sunlight.

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To Drewes, who joined Sun in 2012 and is also in charge of the company’s supply-chain organization, the move from a public company to one owned by private-equity investors has meant freedom from the burdens of regulatory compliance and a chance to build an organization from the ground up. Late last month, he spoke with CFO about the differences between working for the two companies. An edited version of that discussion follows.

From a career perspective, what has it been like to move from a public company to a private equity-owned one?
I was very excited about doing this. I’d done the public company CFO role for nine years, and that was a great run. We nearly quadrupled our investors’ money with PBG. But after nine years of that, I was ready to do something different and get out of the public environment. This was an opportunity to be hands-on in running a business and not have a lot of the external rigmarole.

What part of your job was taken up with financial reporting at Pepsi, and what’s the situation now?
We have owners and bond holders, so it’s not like we don’t have financial reporting and a very high level of rigor around it. We do. And we have a board of directors with an audit committee that’s chaired by an independent director who isn’t part of Vestar.

It’s just that the extra topspin of all that happens in a public company isn’t here. When you’re a public company CFO, every quarter you have to do an earnings call and have an audit committee meeting to review your earnings. You have to review your 10-Q and [at the end of the fiscal year] 10-K, and you have to do a Sarbanes-Oxley certification. You’re doing that every 90 days.

Here we have earnings releases every quarter, but they’re much more modest. We have an earnings call, and we’re very rigorous about preparing for it, but my boss and I might spend 10 hours on it as opposed to the three or four weeks that you would spend at a public company.

How did Sun Products’ recent debt offering differ from financings at Pepsi?
We refinanced the entire balance sheet in a $1.6 billion bond offering in the spring of 2013. That’s high-yield debt; we’re not investment grade here. Doing a bond offering when you’re below investment grade is very different than from doing it at a Pepsi company, where you have an A credit rating.

When you’re an A credit, it’s relatively straightforward. You get some banks together. You get them to propose. You play them off against each other and you try to get your cost down as much as possible. And they do an underwriting, and it just sort of happens. I’m not minimizing the work – there’s a lot of work involved with it. But the last time we did a bond offering at Pepsi, it went off in a day. There was no road show involved and it was pretty straightforward.

You don’t have to sell who you are.
Exactly. You’re not selling your track record. People are comfortable with your debt. You want a proposal and you’re only going to negotiate the best deal between the one or two banks that actually can do it.

[For Sun Products’ recent bond offering] we needed to go on a week-long road show. We went across the country, working 8 to 5 every day, doing half-hour meetings with different investors to get people to know who we were — the story of our company — and to get them comfortable with management.

What are your main tasks as the head of the company’s supply-chain function?
Much of it has involved the significant changes to our infrastructure we’ve made, including taking our warehouse infrastructure from 22 warehouses down to nine. We closed a major plant in Baltimore last year. And we’ve been reconfiguring our supply network. We’ve been able to take our cost structure down dramatically over the last three years. A big piece of the success of the company is taking the cost structure down.

How did you transform the supply-chain-finance function when you joined the company?
Well, we didn’t have a supply-chain finance organization. For example, we had five manufacturing facilities, some of them large — our largest has a thousand people in it. And there was no finance presence in the plants and no headquarters team that reviewed and analyzed performance of the plants, such as [calculating] return on investment for capital investments.

We also have a procurement organization that buys $800 million dollars or so of raw materials a year. And there was really no finance support for that. The job was basically putting in finance people to support procurement and the plants and to put in appropriate cost accounting.

Under private-equity ownership, your company will likely be sold. How does that affect your career outlook?
When you’re in a private-equity company, you’re looking a few years down the road and thinking: How do I create enough value so that the company can be sold and that the investors can get the returns?

That’s fine because that’s what the deal is. Most people — especially the senior folks — come here because they’re attracted to that idea: I’m going to build a company and it’s going to get sold in a few years. They’re thinking,  “I’ve got an equity position, and there should be a good financial return for me from that.”

How does that time horizon affect your work as the CFO within the company?
If we’re looking at doing a manufacturing investment or product innovation, we’re not going to sit around and spend a lot of time talking about what the world is going to look like 20 years from now. What we’re going to say is: what’s the return over the next few years? In the next three to five years is this something that enhances the value of the company for a prospective buyer?

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