Tiger Brands intends to restructure its portfolio within the South African grocery sector, aiming to bolster revenue growth by prioritizing health, nutrition, and snacks as key focal points.
The owner of the Beacon confectionery and Oros drinks brand disclosed a 10% rise in revenue, reaching R37.4 billion ($2 billion) for the 12 months ending on 30 September. However, the company highlighted expectations of “low to no growth” in the upcoming fiscal year.
Tiger Brands stated that forthcoming additions to the portfolio will emphasize higher-margin products, as earnings per share dipped to a loss at the lower end of the range the company had indicated in October.
A new finance chief is set to assume the role starting January 1, as Thushen Govender rises through the ranks to take over from Deepa Sita as CFO. This transition aims to bring in a fresh perspective to oversee the organization’s objectives.
“Given the anticipated low-to-no-growth environment, and in response to the recent shifts in consumer and shopper behaviour”, Tiger Brands outlined its outlook and plans “aimed at regaining lost momentum and delivering a step change in trajectory”.
The details of the plans were presented in the results commentary by the recently appointed CEO, Tjaart Kruger. He took over from Noel Doyle on November 1, signing a 26-month contract.
“Reshaping to a desired portfolio of the future,” is one priority. “We are looking to deliver some changes to our current portfolio by exploring identified opportunities for entry in adjacent categories – where we see valuable synergies, a growing market, and/or higher margin potential – as well as exiting certain categories,” Tiger Brands noted.
Tiger Brands, a publicly-listed company, has pinpointed three “growth platforms” designed to underpin its objectives, focusing on enhancing consumer and shopper relevance and boosting market success. These platforms revolve around promoting affordability, democratizing health and nutrition, and placing a significant emphasis on snackification.
Tiger Brands stated that it plans to reduce SKUs in “product ranges that are no longer considered future-fit.” This initiative aligns with the company’s efforts to decrease costs, aiming to achieve specific targets based on expense type and category.
The company explained its plan to “rejuvenate” brands, “We will be further simplifying, rationalising and stretching our brands with a thorough analysis of marketing investment to ensure that our brands talk to the relevant consumer and demand spaces, with progress measured both in terms of brand profitability and brand equity.”
In the fiscal year ending on September 30, Tiger Brands’ operating profit declined by the anticipated 9% to R3.1 billion, as previously indicated in October.
The earnings per share experienced a 2% decrease, reaching 1,725 South African cents, aligning with the previously indicated range of 2-9% lower figures highlighted in October.
Headline earnings per share exceeded expectations, registering a 2% increase at 1,735 cents, contrary to the October warning of a potential 2-5% decrease.
“The immediate market outlook remains challenging. Consumer confidence is likely to remain under pressure given elevated interest rates and high food inflation,” the Albany bakery brand owner explained.
“While there has been a recent softening in global food prices, this has been offset in South Africa by a weakening rand, as well as load-shedding that has disrupted food production and distribution and significantly increased costs for manufacturers and food retailers.”
South Africa has grappled with frequent power outages, known as load-shedding, throughout the year, attributed to insufficient investments in the nation’s electricity infrastructure. This has led to a series of profit warnings, with companies like Tiger Brands, Astral Foods, and Libstar being among those affected.
Tiger Brands highlighted the additional challenge of “double-digit inflation,” attributing the revenue growth to an 11% increase in pricing during the reporting period. Conversely, there was a 2% decline in volumes.
While there was an increase in export volumes, the volumes for groceries like baking and baby food experienced a decline, which was balanced out by gains in rice, beverages, and Tiger Brands’ foodservice business.
“Although some projections suggest food inflation in the country will abate, this assumes a further slowdown in global food inflation, an easing in electricity outages, an improvement in our summer crop production, and a stable rand, none of which is guaranteed,” the company concluded.