Tiger Brands may face higher prices on selected food products due to rising fuel, logistics and raw material costs. The company is shifting towards PET packaging and targeting changing consumer behaviour through the
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.
Tiger Brands' 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 company is keeping price increases to a minimum through its continuous improvement initiatives like tighter management of promotional spending. Tiger Brands is also shifting towards PET packaging for some products, such as Crosse & Blackwell mayonnaise, which management believes could enable more affordable product formats.
In the mayonnaise category, edible oils are a big input cost and a raw material, and there the company will have to pass on some of that cost-push inflation to consumers because it's such a material part of the product recipe. All Weather Capital equity analyst Lwando Ngwane said these pressures represented one of the biggest risks facing consumer-facing companies in the current environment.
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
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