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Tiger Brands Limited integrated annual report
2015
Q&A with the chief executive officer
As noted by the chairman, this is my last report as I will step
down as CEO on 31 December 2015. After careful
consideration, I believe this is the right time for new
leadership at Tiger Brands. I am proud of the progress we
have made since my appointment. Our business is more
resilient and disciplined on cost management and we have
introduced key strategies that will improve our position both
locally and on the rest of the continent. While the external
environment will remain challenging, I am confident the
group has the wherewithal to overcome these challenges
over time.
How would you summarise 2015 for Tiger Brands
?
On balance, the group has recorded a solid underlying
performance from the core business in South Africa while
our international operations presented some challenges.
These included a volatile macro-environment in Nigeria
with increased competition, the failure of a key distributor
affecting our exports business and irregularities in Kenya.
However, our performance in the 12 months to 30 September
2015 is the result of several years of hard work and focused
investment.
In South Africa, our strategic objective in recent years has
been to profitably defend and grow our market shares. To
achieve this, we initiated a multi-pronged action plan:
❍❍
Marketing and innovation:
Understanding that our
primary asset is our portfolio of high quality brands,
we continued to support our brands through increased
marketing investment and innovation. In the current
year, marketing investment increased by 12% to
R845 million while our rate of innovation increased
to 3,5% from 3,3%, helping to support the continued
leadership of our brands in core categories as
highlighted by the awards achieved during the year
(page 24).
❍❍
Manufacturing facilities:
We have continued to invest in
our facilities to improve efficiencies and support the drive
for innovation. In 2015, R882 million was spent on
various capital projects in execution of this objective and
to provide for expansionary growth.
❍❍
People:
Skills development is a key element to achieving
our strategic goals. We have invested in our existing
talent pool and brought on board new skills that have
enhanced the breadth and depth of our leadership
teams. Tiger Brands continues to perform favourably
against its peers in country-wide benchmarks, such as the
Top Employers survey.
❍❍
Supply chain and route-to-market:
In an intensely
competitive and evolving trading environment, building
an efficient and effective route-to-market and supply
chain capability is essential to ensuring that we continue
to win with our customers and consumers. Accordingly,
the group has streamlined its supply chain structures to
drive efficiencies and is on track to fully realise its target
of R500 million cost savings per annum, off the 2012
base, from changes to our manufacturing architecture
and the centralisation of procurement, finance and
various administrative functions. Customer-facing
structures have also been enhanced with the introduction
of technology to improve our market reach and
development of joint business planning initiatives to drive
category growth.
How would you characterise the external environment
in which you operated over the past year?
Our operating environment (page 22) was challenging
across many fronts, with more headwinds than tailwinds.
Given the slow growth in South Africa and on the balance
of the continent, I believe our progress in managing and
reducing costs was commendable. Equally, regaining
market share in key categories is testimony to the quality
of our brands, depth of management and determination of
our teams.
What pleased you most about the company’s
performance in 2015
?
On the financial side, results from our Grains, Groceries,
and Home and Personal Care divisions reflect solid
operational execution and the benefit of investing in our
manufacturing facilities and marketing support. The Grains
division remains a strong and well-run business. At the half
year, there were concerns about volume declines and
market share losses in the bread category. The recovery in
the second half to a market-leading position again highlights
the strength of our brands and the quality of management.
In the Groceries division, margins are gradually improving
towards our targeted levels of between 10% and 12%.
As part of the recovery of the performance of the Home
and Personal Care division, we focused on supporting the
long-term competitiveness of our brands with appropriate
investment in marketing, research and new product
development. The success of this collective effort is reflected
in the division’s results (page 44).
Success in the highly competitive Personal Care category is
dependent on continuous innovation to drive brand loyalty
and support brand extensions. Accordingly, we will continue
to pursue technical partnerships to enhance our innovation
funnel going forward.