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Tiger Brands Limited integrated annual report
2015 43
Grattan Kirk
Business executive: Consumer Brands – foods
In 2015, Beacon chocolates underwent a successful
product reformulation and brand relaunch which is being
supported by further marketing investment and innovation.
Capital expenditure of R70 million has been committed to
upgrade the chocolate facility in 2016.
As the price sensitivity of this category requires continuous
innovation, we commissioned a new R150 million gums
and jellies plant in Durban during the year which has
increased capacity and enhanced innovation. We will
continue to invest in 2016 to enhance our capability in the
hard-boiled sweets category.
During the year, a procurement fraud was uncovered in the
Snacks and Treats business which had been perpetrated
over a number of years. Criminal proceedings have been
instituted against the individuals involved and corrective
action taken where appropriate.
Beverages
The focus on innovation in this highly competitive category,
particularly new variants for brands such as Oros, Energade,
Rose’s and Hall’s, is reflected in excellent growth and further
cost benefits after commissioning the consolidated beverages
facility in 2014.
Turnover rose 5% to R1,2 billion (2014: R1,1 billion),
while operating income grew by 9% to R138 million
(2014: R127 million). The operating margin increased
from 11,4% to 11,8%.
Capital expenditure in 2016 and 2017 will enhance our
ability to further penetrate this market while expanding our
presence in specific categories.
Value-added meat products
Valued-added meat products (primarily the market leader,
Enterprise) continued to gain market share, despite a
subdued category and ongoing raw material cost increases.
Turnover increased by 10% to R2,1 billion (2014:
R1,9 billion) and operating income by 12% to
R146 million (2014: R131 million). Volumes were
maintained by managing costs and further improving
operational efficiencies. The division achieved an operating
margin of 7%.
As affordability is key in this segment, the business has
recently added value through a number of innovations,
including resealable packaging and no-pork products,
an important benefit for many consumers.
Out of home
This business posted reasonable results for the year,
increasing turnover by 2% to R444 million (2014:
R437 million) while operating income declined by 4%
to R86 million (2014: R90 million). Out of home sells all
Tiger Brands’ products to food services customers such as
caterers and restaurants, and is uniquely able to tailor
solutions for these customers. This is a distinct competitive
advantage in difficult trading conditions where customers
face immense cost pressures.
Outlook
Trading conditions are expected to remain challenging in
the year ahead, given the low economic growth scenario
and widespread pressure on consumer spending.
Accordingly, we will focus on maintaining market share,
driving cost savings and efficiencies and prioritising
marketing efforts. In a highly competitive market, where it is
not always possible to pass through cost increases, we will
continue to focus on innovation across all categories
to reinforce our core brands.