Tiger Brands gains from cheaper choices

Profit from the company's grains business, which accounted for two-fifths of net income, rose 41% to R1,4bn from a year earlier, even as sales of Tastic and Aunt Caroline rice fell.

“We have seen very strong demand for maize products. We have seen consumers trading out of categories such as rice. Maize has benefited,” said Thabi Segoale, managing executive for the grains business.

Performance was muted in the groceries, snacks and drinks businesses as people spent less discretionary income.

Tiger, with a spread of products ranging from Ace maize meal to Tastic Rice, Purity baby food and Bio Classic laundry detergent, has, along with other food producers, done well to keep selling in a domestic economy in which household consumption spending has fallen for four successive quarters.

“The demand for maize and wheat products will continue to grow,” CEO Peter Matlare said.

Tiger is expanding its milling capacity, with a R561m wheat mill that will replace one at Hennenman in the Western Cape and is to be built over the next three years. A separate R200m expansion of its bakery at Pietermaritzburg is due to start boosting output in July.

Demand for cheaper food that benefited the company's grains business had the opposite effect in areas such as snacks and sweets. People bought less chocolate as they switched to cheaper sweets such as jellies.

“As you are aware, confectionary serves no real functional purpose,” said Neil Brimacombe, executive director in charge of consumer brands. “It's important that when you go to market … you go to market often.” The response was to change packaging and in some cases sell sweets in smaller quantities that made them cheaper and more attractive.

The same pressures were apparent in meat products such as Renown spreads, Enterprise crumbed pork and Like-it-Lean viennas, where sales fell 17% by volume, as people switched to cheaper forms of protein such as pilchards and beans.

While food-price and commodity inflation has eased from last year, there were signs it could come back, Segoale said. “There are a number of factors coming through that suggest you could see some inflationary pressure coming through in some of our commodities.”

Despite the lower sales in some areas, the company's core brands have “clearly demonstrated their defensive qualities,” Matlare said. The share price shows it.

Tiger's shares have risen more than 13% over the past two years, even as the JSE's all share index has fallen 11%.

The company, which last year bought Haco, a Kenyan household goods distributor, and Chococam, a Cameroonian chocolate maker, said it is looking for acquisitions in east, west and central Africa.

Source: Business Day

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