Tiger Brands, whose margins were squeezed during the last financial year, said its baby products category was hit by affordability concerns as customers faced higher living costs.
Thushen Govender, the chief growth officer for consumers, said the group, South Africa’s largest food producer, was working to put cost-competitive baby products on the shelves from next year.
“Households and shoppers cannot afford to buy specific products for babies, they are buying general food and well-being solutions to meet the whole family’s needs. You see a lot of downgrading to private labeling in this category,” said Govender.
Tiger Brands, whose signature baby range is Purity, said its revenue in the infant food category had risen to R1.1bn, driven by price inflation of 5%, but this was offset by volume declines of 4%.
Other popular food brands in its stable include Koo, King Corn and Jungle Oats,
The company reported a 10% jump in total revenue to R37.4bn for the year ending September. Group operating income fell 9% to R3.1bn, and it paid out a final dividend of 671c per share. The overall gross margin declined to 27.7%, from 30.3% in the previous year, amid challenges in fully recovering higher input costs.
In South Africa, revenue increased 9% to R32.5bn and domestic operating income declined 16% to R2.5bn as significant improvements in second-half performances by beverages, home and personal care, food services and baby foods were insufficient to offset declines from grains, groceries, snacks and treats.
Despite the local operation facing headwinds, income from international and regional associates such as Carozzi in South America and Zimbabwe’s National Foods increased by 46% to R697m.
The group’s bakery business bore the brunt of load-shedding as mitigating costs increased to R69m in 2023
Yokesh Maharaj, growth officer for grains, said the group’s milling and bakery business bore the brunt of load-shedding as mitigating costs increased to R69m in 2023.
“Our milling and bakery business was affected by load-shedding to the tune of R69m, up R17.4m from last year. This is compounded by intermittent water shortages, which necessitate delivery of water, particularly to our outlying bakeries, and this further has an impact on the overall cost of production and conversion costs.”
Tiger Brands CEO Tjaart Kruger said cost inflation was a challenge. “I do not think we were able to push all the pricing of cost inflation.”
The organisation has a strong balance sheet. “We are not in a crisis from a balance sheet, structure and finance point of view, we have got enough in the business in terms of financial structure to get the business going.”
He said Tiger Brands was aiming to “renovate” its current product offering to cater to consumers buckling under rising living costs in a competitive trading environment.
Kruger said the company has much work to do to make its products more affordable to customers. It will focus on improving packaging and labelling, recipes and formulas to make the products better.
“We must not lose capability for breakthrough innovation; new stuff that we are not doing in Tiger Brands that will take us to the next level in terms of product offering to our customers, whether it is new stuff in our current businesses or new businesses, and completely new products.
“There is exciting work to do in all the types of food people talk about, like healthy food. There is a lot of work to be done in that area. The priority will be the renovation of our current range of products.”
In October Tiger Brands launched the ready-to-drink Jungle Oats range, a first of its kind in the local market.
Kruger, who succeeded Noel Doyle who left the company in October, said on Friday the group needed an operating model that spoke to consumers.
“We are getting our supply chain to work well. If we get things like challenges at the ports, Eskom, and water [working], we have to have a supply chain that can cope and deal with those challenges from a utility point of view.”
