Tiger Brands, SA’s largest food producer, has experienced a bullish turnaround over the past year, driven largely by its revamped route-to-market strategy and leadership changes.
Under the stewardship of CEO Tjaart Kruger, Tiger Brands has had a robust recovery, with its market capitalisation soaring by about R11.6bn as its share price rose nearly 40%, highlighting investor confidence in the brand’s rejuvenation efforts.
A cornerstone of this revival has been the company’s route-to-market strategy, which has expanded its presence in informal and independent township stores.
The initiative, targeting 130,000 stores over five years, has already reached 71,000 outlets, up from 50,000 at the end of 2023, with a goal of hitting 90,000 by year-end.
This reflects Kruger’s strategy of focusing on increasing product availability and visibility in key markets.
The distribution and availability of Tiger Brands’ products in target stores have surged by more than 90%, with investments in point-of-sale marketing and branded coolers enhancing product presence.
Kruger’s appointment as CEO in November 2023 marked a shift for the group. Known for his previous successes, including leading Premier Foods’ expansion, Kruger was brought in to steer Tiger Brands through a challenging period.
His leadership has been credited with stabilising the company’s underlying operating profit and providing stakeholders with direction and certainty.
The recent restructuring of Tiger Brands’ leadership team further supports its turnaround efforts. The appointment of Thushen Govender as CFO on January 1 and the promotion of internal candidates to lead the company’s six business units signal a strategic push to drive growth and profitability.
These changes, coupled with a renewed focus on operational efficiencies and strategic priorities, are expected to yield more positive results, according to the company.
Despite these successes, the company has faced challenges. In May, it reported a 1% decline in interim continuing revenue to R19bn, with an 8% increase in selling prices, which was countered by a 9% drop in volumes.
This volume decline reflects a strategic shift to enhance price realisations and reduce promotional reliance. The bakery division, in particular, has been a focal point of improvement efforts, with Kruger addressing past operational inefficiencies and focusing on streamlining the division’s operations.
The company’s recent financial performance highlights both progress and areas that need attention.
While revenue from domestic operations fell by 4% in the six months to end-March, and grains were down 9%, consumer brands experienced 3% revenue growth and a notable 25% increase in operating income.
The international segment also performed well, with exports and international revenue surging by 22%. The company declared a 9% increase in its half-year dividend, which reflected its commitment to shareholder value despite ongoing macroeconomic pressures.
Looking ahead, Tiger Brands said it planned to further streamline its operations by reducing product variants and pack sizes by up to 20% over the next three years. This strategy aims to improve efficiency, cut costs and a stronger focus on marketing efforts on high-performing products.
While the full impact of Kruger’s strategic vision remains to be fully seen, early indicators suggest a positive trajectory for Tiger Brands as it continues to navigate a complex market landscape and strive for long-term growth and sustainability.
Nedbank Corporate and Investment Banking analyst Shaun Chauke has suggested that Tiger Brands should focus on creating a cost structure for sustainable growth and improving its sales mix to recover margins, while leveraging its strong balance sheet to manage high fixed costs.
“We believe that establishing a cost structure that enables sustainable growth will be important in the medium term, while in the short term enhancing its sales mix in the general trade is vital in the recovery of margins,” he said.
“We acknowledge that this is not a quick fix but appreciate that Tiger Brands has a strong balance sheet and room to reduce its higher fixed-cost component.”
The company’s share price closed up 0.27% at R224.91 on Friday, giving it a market capitalisation of R40.5bn.
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