Our business impacts

Investing in the capital stocks

 

SOCIAL AND RELATIONSHIP CAPITAL

Our actions to sustain value

  • Product and process innovation including on health, convenience, e-commerce and value
  • Active engagement with suppliers
  • Trading terms that are fair, equal and available to all customers
  • Regular investor communication
  • Structured engagement with regulators; continued focus on compliance and societal contributions
  • Increased food support to communities most in need during the National Disaster period

Capital trade-offs

  • Our success as a business depends ultimately on the quality of our relationships with key stakeholders. These stakeholders have different and sometimes conflicting priority interests (see Our key relationships); balancing these competing interests requires trade-offs as we prioritise certain outcomes over others.
  • Investing in social and relationship capital also often requires short- and medium-term financial capital inputs, placing heightened pressure on margins in the short term, but generally generating positive return across most capitals over the longer term. This trade-off between delivering short-term results – to enhance investor sentiment and attracting necessary financial capital – against the need to deliver longer-term sustainable growth, is one of the more challenging trade-offs affecting businesses generally.

Outcomes of our activities

Generally positive relations across key stakeholder groups:

  • 25% reduction in market-place incidents
  • 5% reduction in consumer complaints
  • R13 billion BBBEE supplier spend
  • Recognised role in ensuring stability of food supplies during initial panic buying with lockdown
  • Increased investment in community food and nutrition programme during pandemic, with additional nutritional support to frontline healthcare workers

Continuing concerns in certain areas

  • Pending listeria Class Action lawsuit and ongoing associated reputational concerns
  • Some investor uncertainty on long-term results in tough market

Material inputs

  • Committed workforce
  • Investor confidence
  • Constructive relationship with government and regulators
  • Positive supplier and customer relations
  • Trusted brand and reputation with consumers and society
  • Stable operating context contributing to sustained market demand

See Sustainable future and sustainability report.

OUR PEOPLE (Human capital)

Our actions to sustain value

  • Three-pillar people strategy focusing on building a diverse talent base, developing leadership capacity, and creating a great place to work
  • Employee reward and personal development opportunities
  • Sustained focus on promoting diversity and employment equity
  • Identified as an essential service, prioritised employee health and safety during the lockdown period
  • Implemented an incentive scheme for the initial lockdown period to reward those employees at essential site level bravely ensuring continuity of supply and production

Capital trade-offs

  • Labour remains one of our most significant costs. In the context of tough operating conditions there has been a strong drive to identify opportunities for further labour efficiencies and productivity gains across our operations. While reducing labour costs has benefits in terms of financial capital, it has potentially significant negative implications in human and social capital.
  • Investing, attracting, retaining and developing executive talent is a material cost, depleting financial capital in the short term, but resulting in returns in most capital stocks in the longer term.
  • We made significant financial investments this year in protecting the safety and wellbeing of our employees in response to Covid-19, reorganising some areas of the business for remote working, introducing robust testing and hygiene protocols at our essential services facilities, and providing additional staff wellness and support facilities, all of which contributed to enhanced social capital.

Outcomes of our activities

Improving employee motivation in a more challenging Covid-19 context

  • During the initial lockdown phase, 100% attendance at all essential manufacturing and distribution sites and almost 90% attendance of our outsourced merchandising service provider, Tiger Brands Field Services
  • Voted number 1 employer of choice in manufacturing sector by graduates
  • Recognised as a Top Employer 2020

Enhanced board diversity

  • 60% black and 47% female on board
  • Recent appointments bring extensive FMCG knowledge as well as global experience and contemporary skills in digital concepts and innovation

Enhanced employee diversity

  • African employees comprised 95% of internal appointments

Managed impacts on employee safety

  • Two route-to-market fatalities (2019: 1) and one contractor fatality
  • 0,34 lost-time injury frequency rate (2019: 0,38)

Material inputs

  • Strong and diverse board
  • Experienced executive team
  • 11 188 permanent employees (2019: 10 543 permanent)
  • Enabling environment
  • Adequate governance structures
  • Improved reward and personal development opportunities

See Great people.

OUR BRAND AND REPUTATION (Intellectual capital)

Our actions to sustain value

  • Drive innovation and renovation for value specific consumer needs
  • Deploy marketing best practice toolkit across the business
  • In response to Covid-19, provided meal tips and showed versatility of products such as Crosse & Blackwell reimagining food
  • Drive relevance in value segment by building the clear benefits of our current brands

Capital trade-offs

  • Tiger Brands’ legacy is built on the strength of our brands and the quality of our products, which in turn depends on our proprietary product recipes, our capacity to innovate in response to changing consumer preferences, our robust food quality and safety systems, and our innovative marketing and consumer engagement. Maintaining our leadership in these areas is key to long-term growth, but often has short-term implications on financial capital.

Outcomes of our activities

Sustained a strong brand presence

  • Completed purpose journeys on majority of the billion rand brands with evident impact
  • Ingram’s “Your Skin, Your Brave” campaign had a positive impact on spontaneous awareness in a category dominated by large global competitors and helped modernise brand perceptions

Innovation launches, including:

  • Value: Launched extra value packs e.g. Jungle 1kg + 100g free, Induna maize, specific packs for discount channels and Brookes Crush
  • Price pack architecture: Jungle plus 500g refills

Material inputs

  • Strong brand and reputation
  • Unique product formulations and trusted recipes
  • Research and development capacity
  • Governance and business systems

See Drive growth

MANUFACTURED CAPITAL

Our actions to sustain value

  • R937 capital expenditure in manufacturing capability and technology
  • Prioritised key value items during Covid-19 lockdown phases
  • Initiated a new capex approval process

Capital trade-offs

  • Investing in plant and equipment is beneficial for longer-term growth, and often leads to cost-efficiency and reduced environmental impacts, but can impair short-term financial performance.
  • Modernising facilities may lead to job losses, negatively impacting social and human capital. Any job losses generally contribute to reduced consumer spend and undermine market growth.

Outcomes of our activities

  • Ensured availability of our products and sustained food security throughout the Covid-19 lockdown phases
  • 96% on-shelf availability

Some challenges remain

  • Overall gross margin compression
  • Supply chain challenges in Groceries
  • Growth in private label penetration

Material inputs

  • 40 manufacturing facilities
  • 29 sites
  • Logistics and distribution

See Be efficient

FINANCIAL CAPITAL

Our actions to sustain value

  • Implementation of fit-for-future operating model with clear lines of accountability
  • Continued drive on operational efficiency
  • Strong corporate governance structures
  • Acceleration of portfolio optimisation initiatives
  • Clear guiding principles in response to the growth of private label

Capital trade-offs

  • Ensuring sustainable growth in financial capital sometimes involves making significant capital investments in the short term – for example to maintain and optimise plant and equipment, invest in R&D, and develop employee talent – or alternatively involves divesting from certain businesses and/or closing plant. Some of these activities to optimise financial capital may be more efficient and have positive benefits in terms of safety and the environment, but come at the cost of employment opportunities, undermining social capital and contributing to broader downward trends in consumer spend.
  • Our strategic direction informs the allocation of capital to balance the short-term interests of certain stakeholders with long-term growth objectives.

Outcomes of our activities

  • Disposal of VAMP
  • 21,6% return on net assets (RONA) (2019: 26,1%)
  • R97 million paid in net interest (2019: R0,2 million net interest received)
  • R3,0 billion cash generated from operations (2019: R3,5 billion)
  • Savings of R474 million (2019: R616 million)
  • Total dividend per share declared: 670 cents (2019: 1 061)
  • 10,5% return on equity (2019: 13,9%)
  • ROIC 11% < weighted average cost of capital (WACC) 12,7% (2019: 14,2% > 12,5%)
  • Cost of equity of 14,2% (2019: 11,7%)

Material inputs

  • Equity
  • Borrowings
  • Cash generated from operations

See Financial review

NATURAL RESOURCES CAPITAL

Our actions to sustain value

  • Continued energy and water efficiency measures, with supporting mitigating plans to ensure continuity of production
  • Investment in innovations to optimise packaging and reduce waste
  • Partnerships to reduce food waste and packaging waste

Capital trade-offs

  • Although natural capital is a critical input for all of our activities, our means of generating value across the other capitals often involves some negative impact on natural capital which is sometimes only apparent in the longer term. The global food system is recognised as having a significant impact on biodiversity and habitat loss, climate change and packaging pollution, placing direct pressure on some of the resources we depend on, and heightening consumer and regulatory pressure for more sustainable practices.
  • Given our dependency on natural capital, as well as the potential impact on reputational capital, we strive to minimise environmental impacts across our value chain by investing in mitigating measures in our processes, products and packaging. These measures may themselves have trade-offs – for example using more packaging to reduce food waste, or investing in carbon-efficient technologies that reduce jobs. Balancing these trade-offs is an important challenge affecting all businesses in resource-related sectors, and increasingly requires collaboration and innovation.

Outcomes of our activities

Some progress in mitigating impacts

  • Absolute water use down 8,84%; water intensity down 5,86%
  • 8,23% reduction in emissions intensity
  • Absolute energy use down 5,34%; energy intensity down 5,69%

Challenges remain in certain areas

  • Although we have improved our environmental governance and legislative adherence through key industry partnerships, monitoring and responding to community concerns continues to be an important factor for Tiger Brands
  • Reliability of electricity and water supply
  • Adverse weather conditions impacting the supply, cost and quality of raw materials

Material inputs

  • Local and imported raw materials and ingredients
  • Water and energy for production
  • Fuel (diesel and petrol) for distribution as well as manufacture
  • Fertile soil and conducive agricultural conditions

See Sustainable future and sustainability report.