Tiger Brands battling input cost inflation

South Africa's biggest food manufacturer, Tiger Brands, has reported a 3 per cent drop in earnings per share, indicating a challenging start to the year. The company's CEO, Noel Doyle, recently discussed the company's struggles to pass on cost increases to consumers while maintaining profitability in a competitive environment. The first six months of the year proved to be a tale of two quarters for Tiger Brands, with the unexpected wave of cost increases causing significant challenges. Despite efforts to recover these costs in the second quarter, the company faced operational issues exacerbated by factors such as supply chain disruptions due to lockdowns and natural disasters. Doyle highlighted the impact on the grains business, where soft commodity prices surged, and fuel price increases added to inflationary pressures. Across the portfolio, Tiger Brands experienced cost push in various segments, including grocery, edible oils, chemicals, and pesticide ingredients. As a result, inflation levels are expected to reach double digits, particularly in the grains business, with projections of 15 to 20 per cent. Managing Director of Tiger Brands expressed concerns about maintaining margins amidst high inflation, emphasizing the need to focus on margin per unit rather than percentages. Despite a slight decline in reported margins, the company aims to preserve and potentially enhance margins in the upcoming reporting period. The interview also touched on challenges faced by Becker, one of Tiger Brands divisions, prompting discussions about potential government interventions to cushion consumers from rising prices of basic commodities. While acknowledging the role of government support, Doyle expressed caution about market interference and the delicate balance needed to address consumer pressures without compromising demand. Tiger Brands remains committed to balancing social responsibility with financial sustainability, particularly in essential product categories like bread, where consumer demand is sensitive to price fluctuations. The company's strategic focus in the second half of the year will be to navigate inflationary pressures, operational challenges, and consumer dynamics to drive growth and profitability amidst a complex economic landscape.