Abraxas Group recently designed and led the successful turnaround of a family owned company during the COVID-19 pandemic. The success of this turnaround offers valuable lessons.

1. Turnaround of a Family-owned CPG
Company
October 2021
Abraxas Group LLC

2. “The legitimate object of war is a
more perfect peace”
‒ WilliamT. Sherman
Abraxas Group LLC 2
Abraxas Group LLC 2

3. Table of Contents
• Situation Overview……..…………………………….………………………....4
• Developing a Thesis……………………..………………….………………….10
• Executing the Plan……………………………..……………………………….14
• Results……..…………………………………………………………………………19
• About the Author…………….….……………………………………………..22
Abraxas Group LLC 3
Abraxas Group LLC 3

4. SITUATION OVERVIEW
Abraxas Group LLC 4

5. Overview
• The client: a 2nd generation family-owned manufacturer of ethnic haircare
products.
• The company had experienced a decade of declining sales and falling
market share, leading to persistent and unsustainable losses.
• Poor financial controls and a lack of strategic direction had left the
company unable to successfully chart a change of course internally.
• The owners and their trusted advisors, facing another year of substantial
losses, chose to retain a turnaround professional in order to design and
implement a strategic business transformation.
Abraxas Group LLC 5
Abraxas Group LLC 5

6. Steep Revenue Declines
Abraxas Group LLC 6
Abraxas Group LLC 6
100.0
87.4
86.0
83.3
74.6
Dec-15 Dec-16 Dec-17 Dec-18 Dec-19
Period Ending

7. Market Share Erosion
Abraxas Group LLC 7
Abraxas Group LLC 7
100.0
89.7
80.8
73.1
62.8
53.8
43.6
37.2 33.3

8. Persistent, Unsustainable Losses
Abraxas Group LLC 8
Abraxas Group LLC 8
-0.8%
-6.0%
-5.7%
-4.7%
-3.0%
2015
2016
2017
2018
2019

9. Competitors Enjoying Rapid Growth
Abraxas Group LLC 9
Abraxas Group LLC 9
0.0
300.0
600.0
900.0
Competitor A Competitor B

10. DEVELOPING ATHESIS
Abraxas Group LLC 10

11. Assessment
Strategy
The company was pursuing a strategy that called for a return to growth as the
primary driver of improvement. History suggested a reassessment was needed.
Team
As a family-owned company, there had been a reluctance to undertake a clear-eyed
review of the strengths and weaknesses of management team members.
Morale
Repeated cost cutting efforts had failed to restore profitability and led to a growing
sense of fatalism among staff and members of the management team.
Levers
It was essential to identify a small number of levers that could be optimized in
order to improve company performance.
Abraxas Group LLC 11
Abraxas Group LLC 11
An objective assessment of the client laid the groundwork for a successful turnaround
by investigating four key areas

12. Interviews
Abraxas Group LLC 12
Abraxas Group LLC 12
In person one-on-one interviews were conducted with 52 employees of the company.
These interviews provided invaluable context in developing a transformation plan.
While the interviews were largely
unstructured, each interviewee was
asked three questions:
1) What are the company’s greatest
strengths?
2) What are the company’s greatest
weaknesses?
3) What does an outsider need to
know about the company?
Greatest Strengths
Family business 28.8%
Products 24.2%
All Other 47.0%
Total 100.0%
Greatest Weaknesses
Communication 20.5%
Fear of change 15.4%
All Other 64.1%
Total 100.0%
Need to Know
Family business 40.3%
Resistant to change 33.9%
All Other 25.8%
Total 100.0%

13. Employee Survey
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Abraxas Group LLC 13
The results of the employee survey suggested a troubling level of apathy, with
openness to change the most positive indicator.
Structure
Category Questions
Communication 2
Company character 2
Competition 2
Fairness 4
Management 5
Morale 3
Need for change 5
Openness to change 3
Organization 7
Ownership 2
Strategy 5
Total 40
85.0%
% of Questions with a Negative
Average Sentiment Score

14. EXECUTINGTHE PLAN
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15. A Mandate for Change
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Abraxas Group LLC 15
On January 13, 2020, the company retained an Interim COO with a mandate to
validate the thesis of the assessment report and turnaround the organization.
Assessment
Develop a Thesis
Turnaround
3 weeks 9 months
Refine the Plan and Execute
Strategic Reset
Varies
Set a New Vision for the
Future

16. Efficient Operations
Continuous
Improvement
Communicate &
Collaborate
BusinessTransformation Elements
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Abraxas Group LLC 16
Following validation of the initial turnaround thesis, modified plan presented and
approved for implementation (three weeks from the start date).

17. Initiatives
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Abraxas Group LLC 17
The company was able to implement substantial organization change by employing a
disciplined approach focused on implementing discrete strategic initiatives.
Identify
Opportunity
Create Working
Group
Develop
Implementation
Plan
Implement
Monitor
Performance
13
7
4
3
2
Continuous Improvement
Governance
Coronavirus Response
Efficient Operations
Collaborate & Communicate

18. Interim CFO
A set of temporary layoffs were
implemented by the end of
April 2020.
Interim COO Contact Tracing
A skeleton crew staffing
modeling was developed for a
shutdown scenario.
A contact tracing and staff
notification protocol was
created and put into effect.
COVID-19 Response
Abraxas Group LLC 18
Abraxas Group LLC 18
The company was in the third month of its business transformation when the COVID-
19 pandemic began in earnest. The response consisted of a set of four initiatives.
Cost Structure Staffing Matrix
PPP Loan
The company was able to quickly work with its long-time banking partner to apply for and receive the a
round 1 PPP loan, which provided valuable liquidity during a period of uncertainty.

19. RESULTS
Abraxas Group LLC 19

20. • Revenue. 1st year of positive growth in over a
decade (1.5%)
• Gross Profit. Up 6.6% on revenue increase and
margin expansion.
• Breakeven Point. Down 11.7% on cost controls.
• Revenue per case. Up 5.2% due to portfolio
rationalization.
• Order Fill Rate. Up 34% peak to trough.
• Backorder Rate. Down 80% peak to trough.
Broad, Objective Improvement
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Abraxas Group LLC 20
The business transformation of the company was a success, with the company in a
stronger position based on financial, operational, strategic, and value creation metrics.

21. 2020 marked a year of
historic value creation for
Luster Products, as the
company transitioned from a
distressed (NOLV) value
framework to a more typical
(EBITDA multiple) framework.
Preliminary analysis indicates
that 2020 may well have been
the year of greatest value
creation in the history of the
company.
Dramatic Profitability Improvement
2019
EBITDA
Change in
Revenue
Change in
G&A
Other
Adjustments
2020
EBITDA
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Abraxas Group LLC 21
Values shown are % of revenue
-0.8%
9.2%

22. ABOUTTHE AUTHOR
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23. David Johnson
Email: david@abraxasgp.com
Ph: 312-505-7238
Twitter: @TurnaroundDavid
David Johnson, founder and managing partner of Abraxas
Group, has a 20-year track record of driving organizational
change. David has served as interim executive or financial
advisor to dozens of middle market companies in transition.
Throughout his career, David has demonstrated a
commitment to thought leadership, with numerous speaking
engagements and articles on the topics of business
transformation, change management, performance
improvement, restructuring, turnaround and value creation
to his credit.
David received his MBA from the University of Chicago and
completed his undergraduate studies at Fairleigh Dickinson
University.
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Abraxas Group LLC 23

24. Thought Leadership
• “Business Transformation”, June 2021.
City of Chicago.
• “Failure is Only an Illusion”, October 2020.
FEI 2020 Leadership Summit Roundtable.
• “Restructuring Small and Mid-Sized
Businesses”, July 2020. University of
Chicago.
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Abraxas Group LLC 24
• “Strategies for Mid-Market Success Post
COVID-19”, February 2021. CFO.com.
• “Self-Sustaining Change”, September
2019. Change Management Review.
• “Factors Driving Success in Middle Market
Restructuring”, October 2018. ABF
Journal.
Speaking Engagements Articles
David Johnson is not only an accomplished practitioner; he is also a speaker and writer
on topics related to business transformation and turnaround.