finweek

Tiger on the prowl for new ideas

Tiger Brands CEO Lawrence MacDougall
Tiger Brands CEO Lawrence MacDougall

It would be unfair to assign too much responsibility or credit to Tiger Brands CEO Lawrence MacDougall for the group’s results for the year to September.  

Tiger Brands has been going since 1921 and his time in the CEO’s office since mid-May is just a momentary flash in its long history. It will take longer than that to make his mark on brands like Albany, Tastic, Jungle Oats, KOO, Black Cat and All Gold, which have taken nearly a century to build and maintain, or for him to find solutions to some more recent errors of judgment, particularly in the group’s Africa strategy.   

Yet, by all accounts, he has made his presence felt.   

Chief financial officer Noel Doyle, who acted as CEO since January following the resignation of Peter Matlare late last year, says MacDougall’s immersion in the group has been swift and noticeable.

“What he has brought is an intensity around short interval measurement of performance, making sure we are not letting a day or week go past without improvements, otherwise competitors take the opportunities we open up.”   

This is exactly what the group needs. Its biggest mistake in Africa, the investment in the Dangote Flour Mills in Nigeria, which resulted in a R2.8bn write-off (a heavy price for a R1.5bn acquisition some three years earlier), is behind it. It has also disposed of other investments in Africa, reducing MacDougall’s challenges on the rest of the continent.

The group’s brands are ubiquitous, but their growth and development unexciting, and what the group needs, really, is some “intensity” and the injection of some energy and focus on performance.   

Strategic review

It also desperately needs new ideas. Analysts have not been happy with its levels of innovation, feeling it has been resting on its laurels as a market leader in so many of its brand categories.

Innovations mentioned in its latest results include Fatti’s & Moni’s launching instant noodles and Jungle adding single-serve Jungle cups, moves which appear to reflect it following already established trends rather than innovating itself. MacDougall says there have been small innovations but the group will work on big innovation projects.  

Its promised strategic review, announced earlier this year, is not yet concluded but is aimed at rejuvenating the domestic business, establishing a strong and profitable growth trend in the rest of Africa, restructuring and re-engineering the business to achieve a competitive cost base and provide savings for reinvestment and creating a competitive organisational structure. 

It is all a bit business jargon-heavy, but one gets the point. For frustrated shareholders, the review’s progress may seem a bit slow, but they may be comforted to know that MacDougall is not sitting around waiting for the outcome of the review before he acts.   

The review, says MacDougall, looks at the portfolio, costs and supply chain strategy, procurement and manufacturing and the operating model and organisational design – “and whether the group has the capability to execute its strategy correctly”.  

In the meantime, he has honed in on understanding the growth opportunities of each brand, has met investors and key customers and “tried to immerse myself as much as possible and get as wide an understanding as possible”.   

Challenges

He has learnt as much as possible about areas of the business he has no experience with – like baking – and spoken to employees to ascertain what motivates them and what energy there is in the group. 

Doyle says MacDougall recognises the value and resilience of the brands and there is a renewed focus on the “power brands” and making sure the group extracts maximum value from them.  

His biggest challenge, perhaps, is to restore Tiger Brands to its former glory as the undisputed leader of South Africa’s food and consumer goods manufacturing industry. Rivals like Pioneer, RCL, AVI and Rhodes have capitalised on the energy Tiger Brands has lacked. 

The experience MacDougall brings in operating world-class businesses through his career at global consumer goods group Mondelez will enable the group to tackle its future head on, says Doyle. 

Looking at the base on which he will build this future, in the year to September continuing operations increased turnover by 11% to R31.7bn (on domestic volume growth of 2%), while operating income rose 5% and headline earnings rose 2%.

The drought and currency volatility put pressure on raw material costs and prices. While cost management is improving, with savings of R380m, it was not enough to counter the inflation in soft commodities, so the domestic operating margin declined. 

Not exactly exciting results, but not bad given the drought, economic malaise and increasing impoverishment of many South African and African consumers. 

International footprint

The international division, which includes exports, performed strongly with a 19% rise in operating income, including excellent results from deciduous fruit company Langeberg and Ashton Foods, a recovery at the problem-ridden Haco Tiger Brands (now profit-making from a loss last year), and “exceptional” results from Chococam (turnover up 25% and operating income 25%, in rand terms), all indicating some serious potential for growth in exports and markets outside of SA. 

There are, however, issues with other exports and foreign exchange liquidity in Zimbabwe, Nigeria and Mozambique.  

Income from associates Oceana Group and Chilean-based Empresas Carozzí rose 43%, although this largely reflects asset disposals.   

Tiger Brands is selling its 51% stake in the poor-performing EATBI to its Ethiopian partner. With this and Dangote Flour Mills out of the picture, the bulk of the group’s problems in the rest of Africa have been dealt with.   

The loss-making Deli Foods in Nigeria will require MacDougall’s immediate attention, though.

MacDougall says the immediate focus, across the group, will be on a “high performance culture”, on optimising margins without sacrificing market share, cost-saving, innovation and targeted investment in brands.  

Apart from his appointment, there have also been board changes to bring in new energy. Andre Parker makes way for Khotso Mokhele as chairman and CA Emma Mashilwane and Famous Brands’ Kevin Hedderwick join the board as non-executive directors, filling some skills gaps, says MacDougall. 

Despite recent problems for the group on the rest of the continent, MacDougall says he is an “Africa optimist, and the long-term potential to expand our footprint remains. There are short-term challenges creating some short-term headwinds … and we will work our way through those.”

This is a shortened version of an article that originally appeared in the 15 December edition of finweek. Buy and download the magazine here.

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