BUSINESS MAVERICK INTERVIEW
Tiger Brands’ Noel Doyle: Janu-worry will be harsher than ever for consumers
An interview with the CEO of South Africa’s largest food manufacturer.
Walk into any SA household and you’ll probably find food items produced by Tiger Brands on the shelves, such as Albany bread, Tastic rice, Purity baby food, Koo canned beans, Jungle Oats, Oros juice, Black Cat peanut butter and All Gold jam.
By being the largest food manufacturer, the financial performance of Tiger is a barometer of the SA economy and consumer spending. Its annual results for the year to September 2020 point to an economy deep in the doldrums; profit fell 73.2% to R1.03-billion, revenue from continuing operations climbed 4% to R29.8-billion and profit margins withered. In this interview, Tiger CEO Noel Doyle talks about the impact of Covid-19 on consumers and how he’ll turn the fortunes of Tiger around.
Q. Since Tiger’s results reporting period, lockdown regulations have been substantially eased. Has there been an increase in sales of Tiger’s products?
A. The trading environment has been okay in the first seven weeks after reporting results. We have had some feedback about the bottom end of the consumer market. There has been a slowdown in spending as debt payment holiday programmes have come to an end and retrenchment packages are starting to run out. We are quite apprehensive about where the consumer is going to be after Christmas. The reality of 2 million people that don’t have jobs is going to bite in January, and that’s why we are focusing on getting the pricing of our products right.
Q. The pricing of your products is regulated by the government. What is your approach to passing price increases on to consumers?
A. The regulations allow us to pass price increases and they are not intended to lock us in a lossmaking financial position. We can, if the consumer allows it, increase our prices. We are very clear that we have to get efficient in our pricing. We are engaging extensively with regulators, but the greater constraint on price increases will come from the weak consumer environment and not regulators.
Q. Does Tiger have the scope to invest in price with a view of reducing prices?
A. If we hit our target in terms of cost and efficiency reductions in the business, that would give us about 1.5% of our turnover that we would be able to invest back in getting the price point right. We don’t have a huge amount of scope to invest in price, but we cannot continue to lose market share to competitors.
Q. SA and the rest of Africa’s economic environments are constrained. Where do you think growth will come from?
A. We will have to bring new products to the consumer. We have a very strong presence in the breakfast food category, but it is more in the hot cereals. We don’t have a Weet-Bix-type of product. We have to look at growth by taking some market share from competitors in categories we are not already in. We have a great balance sheet with low debt. We have the ability to buy distressed assets in the market.
Q. What acquisition opportunities are you seeing in the market?
A. We still see opportunities outside of SA, mainly in the rest of Africa. We have appointed a dedicated growth officer, who will sit on the Tiger executive committee and be based in Nairobi. This officer will help us find opportunities. A lot of our previous acquisitions were done without an in-depth understanding of the consumer and route to market strategy. Acquisitions in the rest of Africa are probably a three-year and not a one-year journey.
Q. When will there be signs of a financial turnaround in Tiger?
A. We expect to reverse the trend of declining profit, but we are not bold enough to say when. We will be disappointed in ourselves if we don’t show growth in continuing operations in the next 12 months. This depends on not having a catastrophic second wave of Covid-19 infections and the lockdown that comes with it. DM/BM