Tiger Brands: Integrated annual report 2019

Product and process innovation lies at the heart of our growth agenda. Robust innovations were launched in the second half of FY19. Successful examples of these product innovations include: Albany Best-of-Both Genius nutrient-enriched bread; extending Purity pouches variants, containing top-selling jar variants of Purity baby food; Purity instant cream of maize porridge in two flavour variants; our nutritionally enhanced maize meal (Ace + Fibre); new flavours in KOO beans in tomato sauce as well as a new range of KOO black beans and expanding our Oros range of flavours.

Building on the early success of these offerings we have an exciting product pipeline across a range of categories, including in health and nutrition, on-the-go, and value. Many of the anticipated product launches will extend into new categories and consumer spaces as we look to accelerate our overall innovation rate across the business.

In the context of the challenging market conditions, we have seen material growth in sales of private label products in South Africa, including in some of our priority product categories. We have developed a strategic response to the competitive threat of private label that builds explicitly on the strength of our existing brands. From a brand equity perspective, Tiger Brands is the category leader in more than half of the categories we operate in. Recent studies show that historically strong brands consistently outperform other brands over time, and that after tough times they return to growth faster².

We will be reinforcing the strength of our existing brands through world-class marketing, leveraging technology to measure our marketing effectiveness, ensuring that we become closer to individual consumers by focusing on their specific individual interests, and that our brands are more clearly imbued with purpose. In addition, we will realise opportunities to stretch our brands within and across product categories, as well as implementing price-ladder opportunities within specific brands and categories. To consolidate our leadership position, we will be aggressively driving continuous improvement of existing products and processes, by fostering a culture of “value improvement projects” within R&D, and fast-tracking these projects for priority categories, with the aim of reducing wastage, driving down costs and optimising packaging. Given the very constrained consumer environment, we are developing and will provide products explicitly for value-seeking consumers, using a bottom-up target-costing methodology to value engineer low-cost products and capture market share in identified priority categories.

During the year we made some progress in driving growth at the point of purchase in a very tough operating environment. We reviewed our sales structure, improved our category focus and customer relationships and optimised pricing capabilities. We have also embedded jointly developed business plans with our key customers, developed various shopper propositions, and rolled out our commercial analytics tool (CAT) across our activities.

Despite these various initiatives, we have continued to face internal and external challenges associated with the increasing competitive intensity and growing bargaining power of retailers. To address these challenges, we will be looking to deliver growth in our existing and new channels by: strengthening our route-to-market and expanding the reach of our portfolio in the general trade; building an enhanced online presence and leveraging other non-traditional shopping destinations, as well as developing a consolidated and focused approach to customer promotions. These activities will be supported by a strong focus on driving efficiencies and ROI on promotional activity, while using Big Data to deepen our understanding of in-store behaviour and enhance our ability to realise opportunities at store level. Finally, we will be deepening the skills set and diversity of our sales force, building people capability and developing a programme specifically to attract, develop and retain women.

We intend to deliver substantial organic growth in our Africa business by driving category growth through targeted brand investments, developing superior routes to markets, and investing in key capabilities. Our Africa growth strategy is defined by a clear approach to market segmentation, and a structured approach to winning in trade in the identified key markets:

• In terms of market segmentation, in our existing established markets, we will leverage our existing presence and capability, and invest to reach full potential and grow market share. In those countries where we currently have multi-category presence, we will invest in people, brands and infrastructure to increase our ability to win and grow market share. In currently untested markets that present attractive in-country and category opportunities, we will validate the opportunity and our ability to win, and we will develop a business case indicating the best market-entry approach.
• In looking to win trade in the identified key markets, we will be prioritising product categories to drive volume growth, invest in focus brands and develop new products. We have engaged selected partners to ensure an optimised and effective route-to-market, underpinned by clear standards processes and measurements with each partner. We plan to optimise our value chains to drive competitive responsible sourcing, where relevant and we will be appointing targeted marketing resources in key countries, to ensure a tailored approach to local market conditions as needed.

While our focus remains primarily on driving organic growth by driving the initiatives outlined above, we will also be exploring possible opportunities for mergers and acquisitions. These include opportunities that are core and/or near adjacencies to our current business, as well as opportunities that are aligned with our core activities in new markets where we do not currently have a local presence.