INTEGRATED ANNUAL REPORT 2024

for the year ended 30 September 2024

Material risks and opportunities

We believe that effective risk management practices generate additional benefits beyond the value protection outcomes typically associated with risk remediation activities.

Risk management arrangements

We manage our risks and opportunities to support the achievement of our strategic objectives by identifying opportunities to protect, create and capture value. Our risk management arrangements align with the principles of King IV™, ISO 31000:2018 and generally accepted good practice in a manner that is fit-for-purpose. Ultimate accountability for the adequacy of the risk management programme across Tiger Brands rests with the board. The board has assigned oversight responsibilities for risk governance and the development of appropriate organisational and cultural maturity to the risk and sustainability committee.

The group executive committee, supported by category-level executive committees, is tasked with the design, implementation and operation of the risk management system. Category-level management teams, supported by group operations, continuously monitor and manage their risk profiles, and are responsible for developing and maintaining an appropriate risk-aware culture.

Risk profiling and oversight

We adopt a comprehensive approach to identifying risks that includes a top-down as well as bottom-up analysis. The top-down approach starts with a group view of Tiger Brands, where consideration is given to the operating environment, the business model and the associated objectives and strategies defined by the group. Similarly, category leadership is required to analyse their operating environments, business models, products and strategies to identify category-specific risks; these are also reported at the group level for oversight. Common category-level risks are then identified, which may be escalated and managed at the group level as needed.

In addition to identifying risks that impact our ability to achieve our organisational objectives, management also considers factors that may develop into risks, even in those instances where our understanding of these factors is not sufficient to develop comprehensive mitigating strategies. These are termed “emerging risks” and are also tracked through the various oversight structures following a top-down and bottom-up identification process.

We believe that effective risk management practices generate additional benefits beyond the value protection outcomes typically associated with risk remediation activities. As part of its risk analysis process, management identifies and reviews opportunities to create or enhance competitive advantage, and/or increase our reputation, with a view to optimising value creation.

The group executive committee oversees the identification of group risks and responses. Business unit-level management oversees and manages category-specific risks and reports the material risks to the group executive committee through the operational risk management committee. A consolidated Tiger Brands risk profile is then compiled and reported to the board risk and sustainability committee before being submitted to the board. In addition to the analysis and remediation of top risks, we maintain a combined assurance programme that aims to provide stakeholders with comfort that the control measures deployed to shape risks are adequate and effective.

Risk appetite and tolerance

General risk appetite and tolerance ranges are defined by group executive management and annually approved by the board. These ranges are reflected in the heat maps and provide general guidance regarding expected responses to the mapped risks.

For each risk, group executive management determines a targeted residual risk level that represents risk-specific appetite levels. These targets are set against the backdrop of the approved risk appetite and tolerance ranges and more specifically define the nature and extent of each risk’s control improvement plan. This target and the associated control improvement plan is subject to management and non-executive director oversight in accordance with Tiger Brands’ risk management policy.

While the group will accept risk to achieve its ambitions of being a market-leading, international, diversified FMCG company, Tiger Brands has an aversion to risk in the areas of food safety, the delivery of quality products and loss of life.

Our top risks

Our material risks are those that exceed our residual risk tolerance level and are thus identified as having the most material implications for Tiger Brands and its stakeholders.

The inherent risk heat map presented alongside represents the inherent risk profile of our material risks. Without adequate remediation, the risks are potentially a threat to the group as a going concern and thus merit management attention. Following management’s intervention through various remediation programmes the material risk profile shows a marked improvement, albeit still in need of further remediation. This is outlined alongside in our residual risk heat map.

Inherent (with risk score)   Residual (with risk score)
1.1 Evolving trade environment (20)   1.1 Evolving trade environment (16)
1.3 Food safety (20)   1.2 Declining cost competitiveness (16)
1.6 Volatility of agricultural crop supply (20)   1.3 Food safety (16)
1.9 Cyber security threats (20)   1.4 Security of supply including third parties (16)
1.2 Declining cost competitiveness (16)   1.5 Inadequate services (electricity, water, fuel) (16)
1.4 Security of supply including third parties (16)   1.6 Volatility of agricultural crop supply (16)
1.5 Inadequate services (electricity, water, fuel) (16)   1.7 Volatility and geopolitical instability in rest of Africa (16)
1.7 Volatility and geopolitical instability in rest of Africa (16)   1.8 Digital transformation execution pace (12)
1.8 Digital transformation execution pace (16)   1.9 Cyber security threats (12)
1.10 Changing consumer preferences (16)   1.10 Changing consumer preferences (12)

The following table reviews the implications, mitigation measures and year-on-year trend in the risk rating for each of our top seven risks in terms of their residual risk score. In addition to the risks listed below, we recognise that climate-related risks are becoming increasingly significant, not only directly to our business model but also at a broader economy-wide level. Given the growing materiality of this issue, we are maturing our processes to identify, assess and remediate the climate-related risks across our value chain.

Material risks

 

1.1 Evolving trading environment

Responsiveness to an evolving trade environment, blurring of channels and trade concentration.

Risk trend: 
2023 Ranking (Joint 1)

Context and value impact

Meeting and exceeding customer and consumer needs and wants is the lifeblood of our business.

With depressed levels of consumer spending and strong competitive pressure, this challenge remains material and threatens our market share, brand strength, profitability and penetration.

Increasing strength of retailers across modern trade and wholesale market.

Mitigating actions

Our mitigation actions revolve around the following key themes:

  • Collaborating with customers and researchers to improve our understanding of market needs and wants, while leveraging insights garnered by our own consumer insights division
  • Maximising service levels through joint forecasting with customers to enhance product availability at locations
  • Optimising our product and customer mix
  • Deploying promotions and price-pack tiering to meet evolving shopper needs
  • Creating differentiated value propositions
  • Reviewing pricing strategies to enhance competitiveness
  • Expanding our availability and visibility in general trade, and continuing to identify and realise opportunities in e-commerce and alternative channels

1.2 Declining cost competitiveness

Decline in competitiveness due to higher input costs across the value chain, specifically in procurement, manufacturing, packaging and logistics, and corporate costs.

Risk trend: 
2023 Ranking (Joint 1)

Context and value impact

Our supply chain and product formulations remain a central component of our ability to remain cost competitive. Due to ongoing instances of short supply globally, as well as the impact of inflation locally on consumers, we need to continuously manage cost competitiveness while maintaining our relative brand-premium, ensuring our products are relevant to the majority of our consumers.

The physical and transition risks of climate change are also increasingly being felt across the supply chain, resulting in cost escalations and disruptions in procurement and logistics.

Mitigating actions

Our initiatives are predominantly focused on improving efficiency and effectiveness in four areas:

  • Value engineering
  • Procurement optimisation
  • SKU-complexity reduction
  • Process innovation and automation
  • Manufacturing footprint
  • Supply chain optimisation

Our various cost leadership activities are reviewed in more detail from pages XX.

1.3 Food safety

Harm to the consumer caused either by foodborne illnesses relevant to our food products, or undesired skin/body reactions relevant to our personal and home care products.

Risk trend: 
2023 Ranking (Joint 2)

Context and value impact

Food products have inherent potential to lead to health concerns for consumers and thus remain at the forefront of management’s attention given our strong risk averse stance on issues relating to public health and safety. There is empirical evidence globally of the increase in salmonella and aflatoxin.

Mitigating actions

The nature of food safety demands that we approach it in a scientific and systematic manner to ensure consistent and repeatable results. To this end we have implemented:

  • Quality risk assessment and management protocols, including the roll-out of a technology-enabled quality system, phased over three years
  • Industry hygiene and quality standards, including the development and roll out of 60 new internal Tiger Brands Group Quality and Food Safety Standards, including standards for salmonella and aflatoxin
  • External certifications of all our manufacturing facilities
  • A pathogen and environmental monitoring programme at high risk sites
  • Extensive ongoing employee training programmes

1.4 Security of supply including third-party manufacturers

Failing to adequately manage risks associated with outsourced manufacturing and in-bound supply.

Risk trend: 
2023 Ranking (Joint 2)

Context and value impact

Tiger Brands collaborates with various supply chain partners to deliver on its strategies. These suppliers provide raw materials, ingredients and packaging, and in some instances finished goods, that are subject to quality control processes outside of our protocols. Failure to ensure adherence to Tiger Brands’ specifications and standards may erode consumer satisfaction, profitability and brand equity. Currently, 75% of our supply for our top 1 000 line-items is single source supply, presenting risks should these suppliers fail to deliver.

Mitigating actions

Our mitigation programme is centred around the following key activities:

  • Identifying all high-risk single source suppliers and adopting appropriate mitigation plans for these suppliers
  • Contracting our relationships with third-party suppliers and manufacturers to maintain Tiger Brands’ quality requirements and allow for effective performance management
  • Applying a rigorous assessment and onboarding programme for all potential suppliers to ensure their alignment with Tiger Brands’ quality standards throughout the product life cycle
  • Implementing physical inspections upon delivery and, where appropriate, obtaining certificates of analysis
  • Rolling out our supply quality assurance (SQA) audit programmes to provide necessary assurances
  • Closely monitoring consumer complaints and investigating where necessary

1.5 Inadequate services (electricity, water and fuel)

Insufficient availability, or inadequate quality of supplied electricity and other services.

Risk trend: 
2023 Ranking (Joint 2)

Context and value impact

South Africa’s electricity and water infrastructure is increasingly under pressure due to insufficient investment and maintenance. Insecurity of electricity and water supply negatively impacts our production capability and costs, while all our manufacturing facilities are reliant on the availability of water especially the Beverages business.

Mitigating actions

Our mitigation programme is centred around the following key activities:

  • Business continuity plans in place for all high risk sites, with identified key actions
  • Generating electricity onsite through mobile generator capacity and renewable sources such a solar and increasing diesel storage capacity at various plants
  • Increasing water storage capacity and water quality at key manufacturing plants
  • Continuing to identify opportunities for energy and water efficiency

1.6 Volatility of agricultural crop supply

Climate-related impacts are increasingly affecting our supply chain, putting at risk the security of ongoing production of food.

Risk trend: 
2023 Ranking (Joint 2)

Context and value impact

Our global and local supply chain is increasingly affected by climatic conditions that impact not only the location, availability, accessibility, and price of our raw materials, but also downstream factors such as logistics and regional legal requirements. This year, either the quality or quantity of supply of the following agricultural products has been particularly affected by weather patterns: sorghum, wheat, maize, small white beans, ground nuts, tomatoes, canola and soya beans.

Mitigating actions

Our mitigation response targets the following:

  • Ongoing identification of alternative source markets for raw materials, and/or researching the use of substitutes for raw materials
  • Reformulating products to use more readily available, accessible, and price viable ingredients, and/or optimising our manufacturing processes to accommodate reformulated products
  • Stockpiling of raw materials to protect against shortages inaccessibility or price volatility
  • Application of technology or alternative processes to improve production of raw material or substitutes, and enhance forecasting of key aspects such as planting dates and precipitation patterns
  • Enterprise development initiatives to develop and promote sustainable farming of desired raw materials

1.7 Volatility and geopolitical instability in rest of Africa

Social and political factors on the continent continue to remain unpredictable with recent developments potentially creating further disruption.

Risk trend: 
2023 Ranking (new)

Context and value impact

The dynamic socio-political context in our African markets creates significant market uncertainty. Recent challenges include a lack of forex availability in certain markets impacting our collection of debt and sell out rate, numerous elections across the continent and political leadership changes impacting policy certainty.

Mitigating actions

Our mitigation response includes the following:

  • Concluding contracts with key distributors in each country, as a means of cushioning impacts
  • Holding CGIC cover across our debtors book including higher risk offshore debtors

1.8 Digital transformation execution pace

Risk trend: 
2023 Ranking (new)

Context and value impact

Delivering digital transformation in a sufficiently timely manner is essential to remaining competitive to ensuring deeper market penetration of our products.

Mitigating actions

We are executing our recently approved digital strategy that aims to stimulate business growth, reduce costs and drive productivity efficiencies across the group.

1.9 Cyber security threats

Any risk of financial loss, disruption or damage to Tiger Brands’ reputation due to failures of its information technology systems because of large-scale cyber security attacks.

Risk trend: 
2023 Ranking (Joint 2)

Context and value impact

The increasing interconnectivity, globalisation and commercialisation of cybercrime is driving greater frequency and severity of cyber incidents, including data breaches. This can compromise the confidentiality, integrity and availability of information and technology resources, lead to disclosure of commercially sensitive information and intellectual property and disrupt our operations. In addition to non-compliance risks, the release of personal information has negative reputational and brand implications. The rate of ransomware attacks across South Africa has significantly increased, with almost one company every two weeks reporting breaches through a cyber attack.

Mitigating actions

We are mitigating this risk through various initiatives:

  • To enhance our resilience against cyber security threats, we have successfully implemented a fast-tracked cyber security roadmap
  • We have added relevant skills to the team and established strong vendor partnerships
  • We undertake monthly monitoring of our perimeter and network protection, attack surface management, access management, critical data management, incident management and compliance and IT service continuity
  • We partner with service providers who provide deep cyber security expertise and who are accessible to us should an attack occur

1.10 Changing consumer preferences

Failure to understand and respond effectively to changing consumer demographics and spend, as well as consumption behaviour and patterns.

Risk trend: 
2023 Ranking (Joint 2)

Context and value impact

The challenging economic environment has significantly impacted consumer and shopper behaviours; this is likely to accelerate particularly in relation to premium brands and non-essential categories that are substitutable. Disposable income remains highly challenged across income groups and ages; this has been exacerbated recently by high levels of inflation, particularly in food, utilities and transport.

Mitigating actions

We are mitigating this risk through various initiatives:

  • Our insights team shares details on current and projected macro-economic dynamics with business units on a monthly basis
  • We use our brand performance scorecard to track the performance of our 10 power brands and 6 specialists brands in terms of the brand proposition, promotion, place, price, product and pack. This is shared with our BUs to agree on the proposed action plan, and forms part of the Exco and board reporting to ensure right corrective actions in line with the corporate strategy.

Climate change: A particular risk type

We do not classify climate change as a single risk. It is too wide a risk definition to effectively respond to all its drivers and consequences in a single mitigating strategy. Consequently, we refer to climate change as a “risk type” to ensure that it receives due consideration when emerging and active risks are identified across our value chain. Climate-related risks are identified, managed and reported on through the established Tiger Brands risk methodology and structures to ensure that it is not a standalone consideration but fully integrated with our business oversight and management practices.

The table below provides a generalised overview of the climate-related risks, opportunities and impacts of greatest significance for our business.

Risks
Supply chain disruptions Extreme weather events and climate change, aggravated by local water scarcity and energy instability, could lead to significant disruptions in the supply of commodities and raw materials, and the distribution of products.
Regulatory and legal risks New legislative requirements, including new taxes and stricter regulation on environment and health, present legal and compliance risks.
Reputational risk Failure to address economic transformation, public health, food security and climate change issues could damage Tiger Brands’ reputation and market share, especially with rising social and shareholder activism.
Opportunities
Resource efficiency By implementing water-efficient processes, energy-saving technologies and renewable energy sources, we can help mitigate resource scarcity, lower costs and reduce environmental impact (see sustainability report).
Sustainable and resilient supply chains By developing more local, diversified, sustainable and resilient supply chains, we can support local economies, reduce vulnerability to geopolitical or climate-induced disruptions, and strengthen our ability to partner with suppliers to address social and environmental impacts and risks in the supply chain (see sustainability report).
Waste reduction and circular economy initiatives Reducing packaging and food waste, as well as developing innovative new packaging solutions, service models and circular material flows, offers the potential to reduce costs and to develop new income streams and business models that reduce resource consumption and environmental impact, and that support enterprise development initiatives that address social inequality and economic exclusion (see sustainability report).
Impacts
Greenhouse gas (GHG) emissions GHG emissions from our direct operations and manufacturing plants, purchased electricity, upstream manufacturing and agriculture (land conversion) and manufacturing, and downstream transport contribute to climate change. Organic waste that we send to landfill contributes to climate change through the release of methane.
Resource use Water scarcity and energy security are acute issues in South Africa. We use energy and water in our operations, and the efficiency and circularity of our use of these resources in our operations directly impact the general availability of these resources for communities and ecosystems (water). Our use of borehole water potentially impacts groundwater quality and availability.