Tiger Brands full-year revenue gains 12%, fueled by inflation

Tiger Brands, one of the largest food manufacturers in South Africa, has recently released its results for the 12 months ending on September 30, 2023, revealing a 12% increase in revenue. Despite this positive growth, the company faces a multitude of challenges in the current economic climate, including high food inflation, consumer cost consciousness, rent depreciation, and energy supply issues. Tjaart Kruger, the CEO of Tiger Brands, spoke to CNBC Africa about the various factors influencing the company's performance and the strategies they are implementing to navigate these hurdles. Kruger highlighted the growing concern around the affordability of food in South Africa and across the continent, emphasizing the need to balance pricing while maintaining profitability. The company is focused on restructuring its operating model to become more efficient, agile, and cost-effective. This includes streamlining processes, optimizing raw material sourcing, and simplifying the product portfolio to focus on key brands. One of the key challenges Tiger Brands faces is managing operating costs amidst a volatile raw material market and supply chain disruptions caused by factors like climate change and energy shortages. Kruger outlined the company's efforts to reduce complexity in operations by rationalizing product offerings and improving plant utilization to drive down unit costs. While the company saw a 10% increase in revenue, it failed to fully offset cost pressures, leading to a decrease in volumes. Kruger acknowledged specific challenges in the bakery, culinary, and grocery segments, where operational inefficiencies and product issues have hindered growth. Tiger Brands is investing in innovation and product redesign to align offerings with evolving consumer preferences and affordability. Addressing the issue of financing costs, Kruger explained that the company had incurred higher costs amounting to 238 million due to interest rates. However, he expressed confidence in Tiger Brands' capital structure and emphasized the importance of a robust capital allocation model to guide decisions on investments, dividends, share buybacks, and acquisitions. In conclusion, Tiger Brands continues to face a complex and challenging business environment marked by inflationary pressures and shifting consumer behaviors. The company's focus on operational efficiency, product innovation, and strategic capital management will be crucial in driving sustainable growth and profitability in the upcoming fiscal year.