Tiger Brands gets ready for extreme water shortages

• Group to bolster storage at plants to five days’ supply or sink boreholes

Tiger Brands is preparing its factories for worsening water shortages. CEO Tjaart Kruger says that in a year or two South Africans will be talking about water-shedding.

The owner of All Gold tomato sauce, Koo canned goods, Jungle Oats and Beacon has enough generators and solar installations for its factories and can withstand stage 10 load-shedding.

Tiger Brands will now increase plants’ water storage capacity to keep up to five days’ water or sink boreholes.

“It’s coming,” Kruger said of water shortages. “We must have mitigation plans.”

Other food producers have reported water shortages when load-shedding is severe, with many adding storage tanks so that outages do not lead to manufacturing shut downs.

SA’s largest chicken producer, Astral, recently won a lengthy court battle, allowing it to erect a pipeline from the Vaal River directly to its Standerton chicken farm that often runs out of water. This will cost it R100m but allow it to bypass the dysfunctional

Lekwa municipality that does not reliably provide water.

Yokesh Maharaj, growth officer for grains, said in the Friday results presentation that Tiger Brands has already had to deliver water to some of its Albany bakeries to keep them functioning, at a high cost.

The group saw an increase in expenses and sold reduced volumes in the year to endSeptember as it put up prices to recover higher food input costs.

Total revenue for the year increased 10%, due to price inflation of 11%, favourable foreign exchange gains of 1%, but it sold 2% fewer products, it said.

It saw increased sales in the home and personal care category that includes Ingram’s skin cream but sold less brown bread and less Purity baby food among other products.

Many of its brands such as Tastic rice, Black Cat peanut butter and Mrs Balls chutney are premium, with cash-strapped consumers opting to buy cheaper private label or competitor brands.

Smaller rival RFG, which produces pies, spices, jams and canned fruit had a much better performance in its financial year to end-October with operating profit up 32%.

Kruger, who replaced CEO Noel Doyle, says he wants to simplify the number of ranges on sale as Tiger Brands produces more than 300 different items, which increases the likelihood of stock outs and inefficiencies.

At the same time, the company wants consumers to feel they have sufficient choice and new products to keep interest high. To keep prices competitive it has been working at reformulating recipes.

The company is now selling its mayonnaise and chutney brands in plastic bottles, which is at least 35% cheaper for the factory than glass and is proving popular.

The group said problems at the ports delayed its exports of canned fruit and also means it must import larger quantities of goods such as rice.

This has affected working capital as it uses more cash for bigger upfront orders. Kruger said: “We decided to increase our working capital so if ships get delayed we don’t run out of stock.”

SA food inflation hit a high of 14% in March, but the company does not think food inflation will stabilise and thinks it will remain high in single digits.

Tiger Brands is paying almost 50% more for rice than a year ago as India had limited its exports, pushing up prices globally. Most of Tiger Brands rice comes from Thailand but it is still more expensive.

Mitigating this means promoting smaller pack sizes to consumers or selling goods in combos such as rice, canned goods and maize together.

Tiger Brands’ Langeberg and Ashton canning factory, 180km from Cape Town, was earmarked for closure in 2021 which would have left fruit farmers in the Karoo, Ashton, Robertson, Ceres and the Breede River areas out of business. It resolved to sell it after an outcry by the communities that would have been left destitute.

The price of canned vegetables and fruit has risen globally making it more attractive as a category. Certain interested parties are doing due diligence, but have signed non-disclosure agreements, so Kruger said many wouldn’t give away much information about whether a potential deal could be expected.

OTHER FOOD PRODUCERS HAVE REPORTED WATER SHORTAGES WHEN LOAD-SHEDDING IS SEVERE