Tiger Brands revenue rises by 1%

Food price inflation boosted revenue at Tiger Brands with revenue rising 1% to R37.7 billion, up from the previous year. But this was partially offset by a 6% decline in sales volumes.

The packed goods company says its turnaround strategy is on track following a difficult first half.  The group is working on expanding into the general dealer market which includes spaza shops, as food safety remains a top priority.

Tiger Brands has attributed the strengthened financial position to improved performance in the second half of the year, although the grain and bakeries divisions remained a challenge for the business.

Revenue for milling and baking declined by 10% to R8.2 billion, as the bakeries growth initiatives in the second half, were offset by aggressive competitor pricing within the retail channel.

Chief Executive Officer Tjaart Kruger noted, however, that despite the encouraging green shoots on the horizon, consumers remain under pressure.

“I do think we’ve got an economic environment going forward in the country, that is certainly better than the last couple of years. And if you look at some of the stats, consumer confidence is the highest it’s been in like 15 years. So, I do think we’ve got some positive things coming, but we still sit in an environment with 70 million consumers out there, that are under pressure from a food inflation point of view, from a poverty point of view, from an unemployment point of view, so it’s an environment that’s not necessarily conducive for premium products.”

General dealer market

Kruger says they have also made steady progress to expand into the general dealer market which includes spaza shops amid the ongoing food safety challenges.

“So, the challenge in the general trade is right at the moment, it’s the food safety issues with spaza stores being closed down. And obviously with that happening, there’s a bit of criminality creeping in. People are closing them down to steal the stock and so on, so that’s all happening. But from a Tiger point of view, to focus on all channels and you’re asking about general credit in particular, so in the bread business we should have significantly more than 50% of ourselves into the general trade. We don’t. We’re less than 50%. We were probably 40%. We’re closer to 50% now. To do that, you don’t just sell into the general trade, you must really be good at distribution. You must really be good at routing. You must really be good at and your drivers must be salespeople.”

The company has outlined plans to engage more actively with the government and producers of raw materials, to ensure food security following the recent challenges faced by the agriculture sector.

“I think something that we must give a lot of attention to in the future is sustainable agricultural sourcing. And I think you’ve heard  that we’ve run out of eggs. We’ve run out of tomatoes, the bean crop is small. We can’t find peanuts for our peanut butter and all those things were real. And it happens all the time. And we must just become better. And much closer to where that stuff comes from so that we can make sure we don’t run out and that the cost of those products stay within an affordable level for our consumers,” says Kruger.

 Listeriosis class action lawsuit

But despite the company’s positive results it continues to face uncertainty over the listeriosis class action lawsuit.

“The company may not get compensated by the insurance companies if certain kinds of negative verdicts (are ruled) against them. So, if they do have like punitive costs to put against them, which is, you know, reasonable in this case, I mean, you’re talking about people dying, you know, the food related products and you know when people die there needs to be some significant kind of pushback on that. In that scenario, I think they may not get the insurance compensation that they want,” says Portfolio Manager at Rand Swiss Viv Govender.

The company also noted changes to some products including the reformulation of the mayonnaise recipe following the egg shortage last year.