Tiger Brands is adding more spaza shops to its network and has set a target of supplying its products to 150,000 more stores by the end of next year.
Since 2021, the maker of Crosse & Blackwell mayonnaise, Black Cat peanut butter and All Gold tomato sauce has embarked on what it describes as a route-to-market programme that aims to increase the visibility and sales of its products into spaza shops by working with wholesalers and distributors that sell to mid-sized township shops. It is also hiring sales representatives work closely with spaza shops to ensure orders and deliveries are processed within a short period of time.
Tiger Brands CEO Tjaart Kruger said the group was already working with 91,000 spaza shops in urban areas. He said sales of Tiger Brands products have increased to about 50% from 40%, and the target is to get to 60% in 18 months.
There has been a clampdown on spaza shops in recent weeks following the deaths of children allegedly from ingesting pesticides found in products bought at some spaza shops. President Cyril Ramaphosa called for all spaza shop owners to register their businesses with their local municipalities before this coming Friday.
Kruger said food safety and counterfeit goods were a major concern. However, he said measures taken by the government would not impact the company’s general trade programme.
“We don’t think that the market [spaza shops] will disappear. A bit of regulation probably wont be a bad thing for us, because we’ve had lots of programmes in place ourselves and through the Consumer Goods Council, where we want to ensure food safety in that market. We have had lots of problems with counterfeit products and people selling products that expired. So we would love all that stuff to end and we also think that would be good for us as a business, because a lot of that trading happens outside our network, and then it impacts on our business.”
With the uproar around spaza shops, and some looted by communities, Kruger said that while there has not been a significant impact on Tiger Brands, the company’s customers or independent wholesalers “were down quite a bit as a result of the activity. It’s not so much spaza stores being closed, but spaza stores don’t want to carry stock, so they don’t buy and they run much lower stock levels because they are too scared of stock being confiscated. I think the issue will resolve itself and we should be back on track.”
Tiger Bands has an established network in the general trade market for its Albany bread, though the bakery operation follows a different distribution process to other products. General sales trade volumes for its bakeries were lower than anticipated, partly as a result of the company’s deliberate strategy of not participating in promotional activities to protect margins. The food maker has implemented a turnaround programme that includes extensive maintenance across its bakery portfolio, and improving bread and supply chain quality. It will build two super-bakeries with advanced technologies and processes in Gauteng, which are expected to open in two years.
“I think we have cracked the next level of what big bakeries are,” Kruger said.
He said increasing the company's presence in general trade, with the activation of additional stores and the Albany recovery, remains an immediate priority.
Tiger Brands will spend about R1.5bn on its operations and new bakeries as it fights to claw back lost volumes, which declined by 6% in the financial year ending September. It wants to achieve volume growth of between 1% to 3% in the next year. The company lost market share in some areas.
Most of those were by design. We had to cut the unprofitable business. And a big area for us was in bread, and then in some of the grains businesses, in rice, we’ve lost market share by design, because we pulled out of unprofitable business deals. But our ambition going forward is to grow volumes
“Most of those were by design. We had to cut the unprofitable business. And a big area for us was in bread, and then in some of the grains businesses, in rice, we’ve lost market share by design, because we pulled out of unprofitable business deals. But our ambition going forward is to grow volumes,” Kruger said.
The company will also relook at the pricing of some of its premier products as it battles competition from supermarket chains’ private labels.
Kruger said the company will also spend money on “consumer-facing activities to convince consumers to buy our products”.
Tiger Brands’ revenue for the full year to September grew 1% to R37.7bn. Revenue in the wheat milling and bakeries operation was down 10% to R8.2bn due to aggressive competitor pricing in the retail channel. This negatively affected the internally launched initiatives that had put in place for growth. Profitability in this business remains below that of competitors, said Luresha Chetty, senior equity analyst at Ashburton Investments.
With the company completing its restructuring programme, which includes discontinuing some products and selling non-core businesses including Bio Classic, Crystal, Kair, Fiesta, Eulactol and Black Silk, Kruger said the focus would be on getting “Tiger to roar again”.
Shaun Chauke, senior equity research analyst at Nedbank Commercial Banking, said Tiger Brands “is simply on a winning streak, an overall good set of results, with the business gaining momentum on its strategy. We believe that the Tiger is now out of the kitchen and getting ready for the jungle given that some of its wounds have recovered while in the kitchen.”
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