The recall of baby powder products could not have come at a worse time for Tiger Brands.
Last week the Bryanston-headquartered R28bn consumer goods giant announced a recall of a talc-based baby powder that may have been contaminated by traces of toxic asbestos, saying the batch did not meet the company’s strict quality and safety standards.
The product range makes an insignificant contribution to Tiger Brands’ R30bn-plus annual revenue but carries the potential to throw the company into another messy public relations nightmare, at the least.
Even so, one could argue market reaction to the news was out of kilter with the real and theoretical dangers posed by the product recall. Shares in Tiger Brands slumped as much as 10% shortly after the announcement, before recouping some of the losses to close just over 6% lower and wiping off R2bn of shareholder equity.
Such an “extra” reaction is justified for Tiger Brands. The reasons for that are summed up by Graeme Körner, director and portfolio manager at Körner Perspective, who told this newspaper last week that the share price reaction is “more a reflection of the culture and leadership that is not sufficiently diligent on quality and safety standards”.
Körner is not alone in his assessment, the fairness of which has by and large been validated by Tiger Brands CEO Noel Doyle, who told Business Day’s sister publication, Financial Mail, last week that it is “hard to say ‘that’s unfair’” when the company regularly put out fires related to product safety.
“We have been, and are, moving heaven and earth to ensure we don’t have incidents of this nature,” Doyle said. “Clearly it isn’t good enough, though I’m not sure I would say it’s gross management incompetence. But when people make those comments, it’s hard to say, ‘that’s unfair’.”
The recall comes at a vulnerable time for Doyle, who faced triple challenges when he took the reins in 2020. It is not unreasonable to imagine that top on the list of his priorities at the time and now must be to help the company navigate a class-action lawsuit brought by victims of the listeriosis outbreak, which was traced to the company’s processed meats factory. It killed more than 200 people and left more than 1,000 sick.
The 2018 outbreak, the worst the world had seen, and the subsequent response by Tiger Brands tarnished its image, hit it operationally and fast-tracked its previously stated goal of selling the business it deemed noncore to its non-perishable product offering.
True, the legal crisis is more in the hands of lawyers and indemnity insurers, but investors are looking to Doyle to contain the public relations disaster stemming from it, not for him to discover new product safety issues that only serve to sustain the narrative that management has a blasé approach to product safety.
Sadly, that is exactly what has happened. The announcement that a batch of Purity Essentials baby powder should be returned to the stores came just over a year after Tiger Brands recalled 20-million cans of vegetable products after tests of nearly 300,000 cans found two developed leaks on side seams that could introduce bacteria into canned food.
These repeated product safety questions distract Tiger Brands from reviving its fortunes, which took a knock after an ill-fated expansion strategy into the rest of Africa where it trashed billions of rand in shareholder capital — including $200m (or roughly R3.5bn in today’s money) on a flour business, which was sold back to its previous owner for a nominal $1.
And the result is that investors have been turning their backs on Tiger Brands: its shares have plunged nearly 20% since Doyle entered the CEO suite, underperforming both the JSE all share index, which has gained almost 20%, and the good producers index, which has slipped just over 10%.
Aside from being a relative disappointment for investors over the past few years, it is unforgivable for the maker of pantry staples such as Tastic rice, All Gold tomato sauce and Oros juice concentrate to have to fend off uncomfortable questions about product safety.
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