INTEGRATED ANNUAL REPORT 2023
For the year ended 30 September 2023
For the year ended 30 September 2023
To realise our ambition of building a growth pipeline through best-in-class category, channel and customer strategies, we have been driving an innovation pipeline, optimising our product portfolio, winning at the point of purchase and pursuing growth in Africa.
Driving constant innovation in our products, packaging and processes is critical to delivering on our growth ambitions and to ensuring that we continue to meet the constantly evolving needs of the consumer. Although Tiger Brands has a recent history of some strong innovation, we recognise that there is significant scope to improve the quality and speed of execution of our innovation and R&D functions. We believe that our recent innovation activities – from ideation through commercialisation to execution – have not fully counterbalanced the increasing commoditisation of certain categories and that our speed-to-market falls short of benchmark.
Informed by internal and external feedback and a review of global innovation best practice, we are looking to address these challenges by creating a more streamlined two-track innovation process that balances the benefits of agility with more traditional linear product development. This approach ensures continued renovation of our core products, while encouraging experimentation with high-risk, high-reward innovations that are more appropriate in the context of rapidly emerging consumer preferences where speed-to-market is more important and where there are potential benefits in "failing forward".
This year, we completed 31 innovation projects, achieving a R1,4 billion in sales and an innovation rate of 3,7%, with a priority focus in our targeted growth areas: affordability, health and nutrition, and snackification. These include successful launches in Crosse & Blackwell's Kasi Magic sauces, Energade Zero and Boost, Jungle Crunchalots Fillows, Albany Wraps and Jungle Oats functional beverages.
In March this year, we launched a new state-of-the-art multi-purpose centre dedicated to nurturing a culture of innovation in the company. The Sensorium, based at our head office in Bryanston, features an analytical laboratory, a functional pantry, a development kitchen and a sensory room.
By providing a modern workspace facility for product demonstrations and training sessions, it offers an opportunity to inspire employees and encourage collaboration. This development forms part of a larger R42 million multi-year investment aimed at enhancing our R&D facilities, developing category pilot plants at our manufacturing sites, and deepening our technical innovation skills. We have recently completed upgrades to category pilot plants at our Home and Personal Care and our Baby manufacturing facilities, and we plan to upgrade a further three pilot plants and two new pilot plants over the next two years.
We have continued to work closely with select universities, science and technology laboratories, and expert third-party suppliers to address technology gaps and improve speed-to-market. We have also been working with the Tiger Venture Capital Fund to supplement our own internal pipeline by accessing external innovators and ideas that may not yet be scalable or easy for us to build internally. Post-year end, the fund concluded an investment in Rush Nutrition, a female-founded naked snacks and functional beverages company from the Western Cape. Rush Nutrition was established in 2013 and produces healthy and nutritious snack bars, snack balls and beverages for children and adults, which are made from botanical ingredients, are free from refined sugars, soy, gluten, dyes and preservatives. We remain committed to executing on the strong pipeline of both food and technology-enabled opportunities to future-proof our business.
We continually evaluate and optimise our product portfolio, using a structured approach to identify those product categories with high attractiveness and competitive strength that should be invested in and grown, those that present new opportunities for our portfolio of the future, and those to be targeted for possible exit.
In determining where Tiger Brands is best positioned to compete, we have analysed the current market dynamics in the South African FMCG sector, identifying specific categories that are the largest and/or fastest-growing in terms of volume and/or value. Informed by this analysis, we continue to see potential for further growth in groceries, baked goods, beverages, wheat flour, snacks and treats, breakfast cereals, rice and pasta, and baby food (jars and pouches). In these categories, we are investing in product and process innovation, driving further process efficiencies, and/or expanding our production capacity. We have also identified potential opportunities for entry in adjacent categories where we see valuable synergies, a growing market, and/or higher margin potential.
In rationalising our portfolio, we are reviewing the status of the following business units over the medium term: maize meal, sorghum-based beverages and breakfast, personal care, and baby wellbeing.
We have continued to make progress this year in our ambition to secure growth and win at the point of purchase by delivering against most of our success metrics in each of our three strategic focus areas:
These strategic commitments are underpinned by our activities aimed at strengthening the capabilities of our sales force and leveraging digital transformation opportunities to optimise and automate our sales processes, improve customer data accuracy, and equip our sales team with the necessary digital tools and training to sell more effectively to retailers.
Given the growing importance and contribution of the informal market (general trade) to the total South African FMCG sector – contributing roughly 26% of the total R716 billion FMCG market, and with faster growth rates than the traditional retail market – we are pursuing various initiatives to expand our reach in general trade. Through our aggressive roll-out plan, we reached 50 000 general trade stores this financial year, and we aim to expand our presence to 130 000 stores over the next five years, as well as establishing 2 000 Perfect Outlets supported by innovative point-of-sale marketing execution.
We have prioritised the execution of more in-depth shopper-centric segmentation of trade channels to ensure more effective proposition development in a very saturated market. Deepening our insight and understanding of broad shopper profiles is informing our shopper activation and store execution plans, and contributing to more effective shopper messaging and campaigns, targeted pricing and promotions, and appropriate price and pack architecture.
We have continued to drive various initiatives to raise our online presence and become the preferred supplier to prioritised digital commerce partners. We have made further progress this year in our various targeted areas:
We have continued to leverage our revenue management practices to improve profitability, prioritising five specific levers to ensure that our product prices, placement and availability are properly aligned within each customer segment based on an informed understanding of customers' perception of product value, as well as a detailed review of price indexing, discount curves and brand health. Our recently implemented decision-making tool, that connects disparate data sets to enable detailed analysis at an SKU and customer level, is delivering results in improving the identification of profitable revenue growth opportunities, enabling us to eliminate margin dilution in various product categories and to target volume growth in more profitable customer groups. We have also seen the benefits this year of our recently revised trading terms that have clearer performance metrics aimed at incentivising strong customer performance aligned with our strategic growth drivers.
This year, we ran an independent trade perceptions survey, benchmarking how Tiger Brands is perceived in terms of the quality of our customer engagement against 26 leading manufacturers in the FMCG sector. The survey was conducted across eight of our most influential customers – with a mix of directors, senior managers, buyers and operational staff – and assessed our comparative performance across a range of key focus areas. We were rated fifth among the 26 manufacturers, with useful feedback on our perceived strengths and challenges. To address the identified challenges, we have been working on various initiatives to improve customers' perception of their relationship with Tiger Brands. We are intensifying our dedicated customer forums across all our customers to enhance our relationships, and we are continuing to work with them to ensure greater alignment between our category strategies and customers' strategies to find mutually beneficial win-win opportunities. To speed up reaction time, we have strengthened the delegation of authority to customer management teams, and we aim to ensure that every action or decision requested will be attended to within 24 hours. We remain committed to fair and competitive pricing, and to ensuring that our pricing policy is clearly communicated and strictly enforced.
The informal sector is a significant part of the South African economy, contributing at least 6% to GDP and accounting for one-third of local jobs in the country1. Informal independent traders, such as spaza shops and superettes, contribute roughly 26% of the total R716 billion FMCG market in the country, with more than 70% of South Africa's households purchasing from the informal trade and with faster growth rates than the modern market2.
To capture the significant growth opportunities in the informal sector, we are expanding our presence in the sector by implementing robust route-to-market support and solutions for our general trade customers. We expanded our reach to more than 50 000 outlets this year, and we aim to further expand our presence in 130 000 general trade stores over the next five years. We are working with our customers to create Perfect Outlets in the general trade, investing in point-of-sale marketing execution across the Tiger Brands basket and in branded coolers to improve the cold availability of Tiger Brands' ready-to-drink beverages. Our goal is to establish 2 000 Perfect Outlets over the next five years. Some of the key tactical initiatives we have implemented include:
Through our route-to-market strategy for general trade, together with our partners, we have created an estimated 272 local jobs in communities, with 198 local community jobs specifically for women.
1 Stats SA, 2021
2 Trade Intelligence, 2022
With a rapidly growing and increasingly urbanised population, Africa offers huge opportunities for volume and revenue growth as we seek to nourish and nurture consumers across our target markets. We believe that we are now well-positioned to grow at an accelerated pace, building on our established presence across the continent, our strong manufacturing assets and brands, and a more stabilised base.
This year, we delivered solid performance across our markets, with improved margins driven by robust demand off a low base, reflecting improved in-market execution and optimal pricing. Our Chococam operation in Cameroon and our Mozambique business have both continued to be our strongest markets, despite a challenging operating environment. We have also seen a pleasing turnaround in performance in our exports businesses off the back of improved operational efficiencies.
Building on this strengthened base, we are focusing on three strategy and growth clusters: