Bread price war, strike hits Tiger Brands

Source: Supermarket & Retailer

Tiger Brands, South Africa’s biggest food manufacturer and owner of brands like All Gold, Black Cat and Koo, saw its revenue for the quarter to end-December fall by 1%. This was due in part to a strike at some of its divisions – which cost the company R120 million – and a price war among South Africa’s bread manufacturers.

Tiger Brands, which owns the Albany bread brand, says its bakeries division experienced significant volume losses due to intense price competition.

“With regards to bread, the immediate priority is to recover the significant market share losses, facilitated by optimal pricing and effective promotional activity. However, profitability in this category is likely to remain under pressure for the remainder of the year,” it said.

Its bakeries business was also hit by rising cost pressures and illegal strikes in October and November.

Its snacks and treats division suffered after an eight-week strike in November and December, compounded by low stocks of finished product because of the civil unrest in July 2021. The company will only have a full supply of products by July 2022.

In addition, its rice business saw prices slump due to a decline in international prices, and “unfavourable weather” conditions which impacted sales of its insect killers, including Doom.

Tiger Brands said the past quarter was a “poor start to the financial year”, with its profit margins coming under pressure due to big cost increases of inputs in the past quarter. To prop up profit, it is hiking prices in the current quarter.

“The impact of these price increases on volumes is being carefully managed.”

In July, Tiger Brands recalled about 20 million KOO and Hugo’s canned vegetable products over safety concerns due to potentially defective cans. This amounted to a recall of 9% of annual production. Some of the cans had a deficient side seam weld that could cause the cans to leak.

On Wednesday, Tiger Brands said its insurance claim related to the can recall is still being assessed, but it has received confirmation of an interim payment of R17 million – which represents approximately 30% of the total amount claimed. This would bring the total insurance claim to around R57 million.

Last year, the company said the final impact of the can recall was estimated to be up to R650 million. The company is also claiming money back from the can supplier.

Tiger Brands’ share price fell by a percent following the release of the trading update on Wednesday afternoon.

 

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