In recent years the markets have witnessed several listed entities, including retailers and consumer goods companies, falter amid aggressive missteps that led to financial distress.
However one company, Tiger Brands, has outpaced expectations by achieving a recovery sooner than expected. According to portfolio managers at Ninety One, Tiger Brands’ turnaround offers a valuable playbook for those still grappling with operational and strategic challenges.
Several retailers have turned a corner in recent years. Pick n Pay faced heavy losses and debt, prompting leadership changes and a rights issue, while its Boxer subsidiary drove growth. Spar recovered by refocusing locally after struggling abroad, while Woolworths stabilised by returning to core operations after Australian challenges. Edgars, under Retailability, continues its recovery through store downsizing and streamlined offerings.
These examples illustrate a broader trend on the JSE, in which distressed firms typically require years of strategic repositioning and strong leadership before regaining their footing.
Tiger Brands stands out. After a decade marked by a failed African expansion, a devastating listeriosis outbreak and operational difficulties compounded by the Covid-19 pandemic, the company has shifted its focus back to domestic markets under CEO Tjaart Kruger.
“Under the stewardship of new management and with a more grounded operating philosophy, Tiger Brands is attempting something few firms in its position have successfully done before: a quiet but credible reset and turnaround. Early results suggest it may be succeeding, with investors in our SA 4Factor Equity and Multi-Asset portfolios already benefiting from our recently acquired overweight exposure,” the portfolio managers said.
Kruger’s approach, they said, included decentralising decision-making, enforcing capital discipline and pruning underperforming assets. The company has invested in plant automation and supply chain improvements while divesting noncore businesses to improve margins and operational focus.
“At the heart of Kruger’s turnaround strategy was the introduction of a federated operating model that shifted accountability to business unit heads, an overdue response to years of top-heavy governance. Empowered managers answered the call, responding with improved pricing execution, more agile supply chains and a noticeable uptick in innovation velocity.
“Instead of seeking growth through acquisitions, a playbook that had failed Tiger Brands in the past, Kruger focused inwardly by improving productivity across the firm’s existing assets.”
The results are showing, the portfolio managers said. Tiger Brands reported a 30% year-on-year rise in group operating profit in its most recent period, with earnings before interest and tax expanding from 7.5% to 9.6%. Core food margins are approaching the 10% mark set as a medium-term target.
Ninety One said Tiger Brands’ recovery was “quality-driven rather than sentiment-based”, with price and mix improvements outpacing volume growth. Investors have responded positively, with the company’s share price trading above its five-year forward price-to-earnings average, reflecting expectations of sustained recovery.
“Even more encouraging is the improving return on equity, a signal of operational quality that had long eluded the previous leadership. Management has also left the door open for targeted, earnings-accretive bolt-on acquisitions, offering further support towards the company’s equity rating.”
In May Kruger told Business Day the company planned to continue rewarding shareholders with special dividends after strong interim results and a growing cash position. At the time, it declared a special dividend of 1,216c per share, with an interim dividend of 415c, returning R1.8bn to shareholders.
“We feel that we are back on the growth path. We’re probably going to pay special dividends for a while now,” he said.
While risks such as legacy legal issues and environmental, social and governance (ESG) disclosure gaps remain, Ninety One said the company’s disciplined approach offered a clear example of how strong leadership and a focused strategy could accelerate recovery in a challenging sector.
“And as always, execution, especially in volatile macro conditions, remains the decisive variable. But the direction of travel is unmistakable. From the missteps of the past, Tiger Brands is now fashioning a leaner, more credible version of itself.
“No longer considered merely as a deep value thesis, the company is becoming a structurally improving consumer staples name, with optionality. With improving operational quality, disciplined capital allocation, and balance sheet flexibility, we believe that this is a recovery narrative worth watching.”
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