Tiger brands

Tiger Brands: pressure on consumers not letting up

Consumer goods group Tiger Brands said this week it expected consumer spending to remain tight in the next financial year on the back of limited disposable incomes due to rising inflation and higher unemployment.

Announcing its annual results, Tiger CEO, Peter Matlare, said competition was therefore fierce as local and multi-national competitors and retailers battle for market share. He added cost inflation had re-emerged due to global soft commodity prices, which would impact on the company’s input costs.

“The rapidly changing customer environment places demands on our go-to-market approach where we need to adapt in order to succeed,” Matlare said.

SA’s branded food, homecare and personal care group posted a 6% increase in turnover to R20.4 billion in the year to September 2011. Operating income increased by 7.6% to R3.2 billion. Excluding the impact of acquisitions, operating income grew by 4% to R3.1 billion and the operating margin improved by 10 basis points to 15.7%.

“The results are satisfactory given the tough trading environment we have been facing. This year we have been able to lay the key strategic platforms for expansion into Africa. Our aim is to further expand our African footprint,” he said.

This year Tiger added to its interests in Africa, four new acquisitions at a total cost of R2.1 billion. The acquisitions were financed out of the R3.6 billion cash generated from operations. 

In June the group acquired Davita Trading, an SA-based export company. It acquired 51% of the food and consumer interests of East Africa Group of Companies in Ethiopia and of biscuit manufacturer Deli Foods in Nigeria, and 49% of UAC Foods, also in Nigeria.

Apart from these acquisitions, In Kenya Haco Tiger Brands Industries saw “excellent” growth with volumes increasing by 21% and margins being held at 10%.

Tiger Brands’ confectionary interest in Cameroon, Chococam, increased volumes by 5% in 2011.

The group’s grains division maintained existing market share in the face of fierce competition this year, Tiger said.

“The grains division performed commendably despite price and volume decreases.

At the end of the financial year, the Albany and Tastic brands maintained their leading market shares while the Jungle brand continued to perform well,” it said.

In the consumer brands division, groceries saw an 8% increase in turnover, driven by a 6% increase in sales volume and a 2% increase in pricing. Growth was the strongest in the vegetables and spreads categories which experienced double digit sales growth, with the Koo and Black Cat brands performing particularly strongly.

Snacks and treats, a largely discretionary spend category, was hit hard by the downturn in the macroeconomic environment. Industrial action, especially in September, also limited production levels leading to an overall loss that month.

In the beverages division, the Energade brand strengthened its number one market share in the sports category while Oros grew its market share, the company said.

While the market saw strong growth in the dairy fruit blend category, Hall’s and Super 7 were unable to gain ground.

The group’s value added meat business lost market share this year as a result of strong competition and the arrival of new competitors in the polony market (which accounts for 55% of processed meat volumes in SA), with the overall operating margin declining from 10.6% last year to 8.5% this year.

Source: Business Report