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Consumers may face higher prices on selected food products in the coming months as rising fuel, logistics and raw material costs continue to squeeze manufacturers despite efforts by producers to shield households from the full impact of inflation.Speaking after Tiger Brands’ interim results this week, CFO Thushen Govender said the group would not be able to absorb all cost pressures indefinitely, particularly in categories where key raw materials have experienced significant inflation.“The increase wouldn’t be as significant as the full extent of the input cost inflation we’ve seen on fuel and diesel,” he said, noting that the company is keeping price increases to a minimum through its continuous improvement initiatives like tighter management of promotional spending. The company is also shifting towards PET packaging for some products, such as Crosse & Blackwell mayonnaise, which management believes could enable more affordable product formats.Govender warned, however, that certain categories would be more exposed than others.“In our mayonnaise category, edible oils are a big input cost and a big input raw material, and there we’ll have to pass on some of that cost-push inflation to our consumer because it’s such a material part of the product recipe,” he said.All Weather Capital equity analyst Lwando Ngwane said these pressures represented one of the biggest risks facing consumer-facing companies in the current environment.“The biggest risks currently are risks that all consumer-led companies face around inflationary pressures coming through from rising fuel costs, which are expected to dampen consumer spend,” she said.Tiger Brands reported strong volume growth for the six months to March, which management attributed to efforts aimed at making its products more accessible to consumers amid strained household budgets. The company reported revenue of R17.9bn, up 1.3%, with volume growth of 2.6% offsetting price deflation of 1.3%. All major business units reported growth in operating income, with the grains and culinary divisions leading the pack. Grains revenue of R3.5bn was driven by volume growth of 6.9%, offset by price deflation of 10.8% in soft commodities. Operating income increased by 91.7% to R441m. Revenue in the culinary division, which houses the Black Cat, Purity and All Gold brands, increased by 8.7% to R5.7bn, driven by 6.0% volume growth and 2.7% price inflation. Operating income was R562m, 26.9% higher than the prior year. Ngwane described the group’s first-half performance as “without doubt a good quality set of numbers”, pointing to substantial improvements in operating efficiency across key business units.“The issue Tiger Brands struggled with before Tjaart Kruger took office as CEO was the negative operating leverage, while peers like AVI and Premier Group had the opposite,” she said.“This was driven mainly by its grains, milling and baking assets that were broadly inefficient. Since Tjaart took over as Group CEO, we have seen good portfolio rationalisation, selling of non-performing assets and getting the business back to focus on cost leadership. This print was proof that the strategy has started to bear fruit.”Tiger Brands is expanding its presence in informal trade channels, where it now services more than 110,000 spaza and general trade outlets nationwide. According to Govender, the channel has delivered double-digit revenue growth, driven by an expanding store footprint and increased basket penetration.Beyond its core categories, Tiger Brands is also targeting changing consumer behaviour through what it calls the “snackification” trend. Govender said consumers are increasingly looking for convenient, on-the-go meal and snack options as lifestyles become busier and health-conscious purchasing becomes more prevalent. “We’ve got some great brands that we could utilise and leverage in order to meet the snackification consumer trend that we see, which is a growth platform that we can capture,” he said. The company is also exploring innovation in portable snack formats and convenience offerings across categories, including baby nutrition products.Another growth avenue lies in its pest-control business, where the company is looking to reduce reliance on South Africa’s seasonal mosquito market.Govender said the group has registered its Doom products in neighbouring markets including Botswana, Namibia, Eswatini, Zambia and Mozambique, where warmer climates support year-round demand. It also plans to broaden consumer awareness of the Doom range beyond mosquitoes to include ants, cockroaches and other household pests.“It’s a two-pronged strategy to grow outside of the mosquito season,” Govender said, combining regional expansion with deeper penetration of the domestic market.
