Tiger Brands Index
Business overview
Strategic vision
Segmental overview
Appendices
2 Disclaimer
Forward-looking statement
This document contains forward looking statements that, unless otherwise indicated, reflect the company’s expectations as at 12 March 2019. Actual results may differ materially from the company’s expectations if known and unknown risks or uncertainties affect the business, or if estimates or assumptions prove to be inaccurate. The company cannot guarantee that any forward looking statement will materialise and, accordingly, readers are cautioned not to place undue reliance on these forward looking statements. The company disclaims any intention and assumes no obligation to update or revise any forward looking statement even if new information becomes available as a result of future events or for any other reason, save as required to do so by legislation and/or regulation.
3 Business overview Tiger at a glance
Organisational structure FY18 ZARmm Consumer Exports & Key operating and financial metrics Grains brands international Associates* Market cap1 50 299 Revenue 28 474 Consolidated Equity accounted Gross profit 9 244 % of group 13 margin % 32.5% T/O 43 44 EBIT2 3 239 margin % 11.7%
Milling & Baking Groceries Balance sheet strength Sorghum beverages Snacks, treats & Cash generated from operations 3 284 and breakfast beverages RONA 26.6% Value added meat Rice products Net cash 590 Pasta HPC & Baby Exports Net interest cover 59x
Out of home
Notes: 1. As at 28 Feb 2018 | 2. From continuing operations before impairments, abnormal items & IFRS 2 charges | *Oceana to be unbundled by end April 2019
BUSINESS OVERVIEW 5 Performance impacted by VAMP closure & tough trading conditions
Ex-VAMP HEPS+ down 26% Group revenue+ Down 6% to R27.4 billion Down 11% excluding VAMP down 9% to R28.5 billion
-26% -11% Gross margins+ 2 500 Down 50bps to 33.5% 2 155 down 90bps to 32.5% 2 109 2 000 1 811 1 587 Group operating income+** Down 21% to R3.6 billion 1 500 down 28% to R3.3 billion 1 000 Group operating margin+** Down 260bps to 13.0% down 310bps to 11.7% 500
0 Total dividends Actual Ex-VAMP flat at 1 080 cents despite lower HEPS
+ From continuing operations | ** Group operating income from continuing operations before impairments, abnormal items & IFRS 2 charges
BUSINESS OVERVIEW 6 Balance sheet / capital strength
Sound capital structure
Ability to drive growth o Ability to invest in the existing business, brands & innovation
o Change in dividend policy supported by strong balance sheet Dividend policy o 1.75x cover, based on headline earnings per share
Cash generation o Tighter working capital management
Defensive characteristics with significant flexibility
BUSINESS OVERVIEW 7 Evolution of Tiger Brands – refocused and repositioned for growth
2016 2017 2018 Acquires controlling Disposes of controlling interest Develops strategy for sustainable profit growth Decides to unbundle Oceana interest in Dangote Flour 2013 in Dangote Flour Mills in Nigeria Disposes of non-core EATBI & Haco Tiger Brands Establishes Centre of Food Safety Mills in Nigeria and the Lowers dividend cover to 1.75x HEPS Mrs Ball’s trademark 2011 2009 Unbundles and separately lists Adcock Ingram Further African expansion by acquisition of interests in the East African Further expands Group of Ethiopia, Deli Foods of Nigeria and Davita, a South African branded portfolio by 2008 Extends African footprint by exporter of powdered seasoning and beverages acquisition of Crosse & acquisition of controlling stake Blackwell Tiger Oats renamed in Haco Industries of Kenya Tiger Brands 2001 2004 2006 2007 and Chococam of Cameroon
Adcock Ingram Tiger Brands unbundles and separately Tiger Brands unbundles Acquires the sugar Expands branded becomes a wholly 2000 lists its animal feed and poultry and separately lists Spar confectionery portfolio by acquiring owned subsidiary of operations into Astral Foods businesses of Nestlé, Bromor Foods, with key brands Tiger Brands and including Jelly Tots Oros, Energade and Rose’s delists from the JSE 1999 1998 1993 Acquires stake in Tiger Oats acquires ICS Holdings Barlow Rand (now Barloworld) Empresas Carozzi of Chile Limited (formerly the Imperial Cold acquires majority share in Tiger Storage and Supply Company) Oats through CG Smith Limited
1920 1925 1944 1982 Jacob Frankel Jungle Oats Listed on Johannesburg Stock Barlow Rand (now Barloworld) establishes business launched Exchange acquires majority share in Tiger in Newtown, Johannesburg Oats through CG Smith Limited
BUSINESS OVERVIEW 8 Brand loyalty remains strong
Marketing investment increases by 10% to 3% of revenue (2017: 2.5%)
TOP Sunday Times Grand Brand Prix 2018
Grand Prix 33% 29% 37% 54% #1 #1 #2 #1 #1 Tinned foods
#1 Fruit based drinks
#1 Condiments & sauces 75%* 42% 33% 58% #1 #1 #1 #1 #2 Condiments & sauces
#1 Essential foods
20% 43% 57% 88%* #1 #1 #1 #1 #2 Essential foods
Source: % = Nielsen 12mm volume share to September 2018 | * Cooking oats | Homogenised Food
BUSINESS OVERVIEW 9 Tiger services SSA’s largest consumer markets
SSA packaged food & soft drinks market (Total market size: $84bn RSV)
Bubble size represents size of the market 2018
16 500 15 500 14 500 Nigeria 13 500 12 500 11 500 10 500 9 500 South Africa 8 500
7 500 2022 in US$ constant 2018 prices US$ constant2018in 2022
- 6 500 5 500 4 500 Ghana Kenya Tiger Presence 3 500 Zimbabwe Ethiopia DRC Export Market 2 500 Angola Uganda
1 500 Tanzania Côte d'Ivoire Senegal Non-Presence Growth from2018 Growth 500 Mozambique Zambia Cameroon (500) 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16%
2018–2022 retail sales CAGR (%) Source: Euromonitor data Top 15 categories of packaged food & soft drinks by market size | All SSA countries | RSV – Retail Sales Value
BUSINESS OVERVIEW 10 Well positioned in large, attractive categories
Fastest growing SSA categories (Total market size: $84bn RSV)
Bubble size represents size of the market 2018
8 500 8 000
7 500 Bottled Water
7 000 Dairy 6 500 6 000 Carbonates 5 500 5 000 Baked Goods 4 500 Sauces, Dressings Rice, Pasta and Noodles
4 000 and Condiments 2022 in US$ constant 2018 prices US$ constant2018in 2022
- 3 500 3 000 2 500 Edible Oils Tiger Presence 2 000 Confectionery Sweet Biscuits, Snack Bars and Fruit Snacks Juice 1 500 Processed Meat and Seafood Concentrates Non-Presence Savoury Snacks 1 000 Processed Fruit and Vegetables Sport & Baby Food Growth from2018 Growth 500 Ready Meals energy drinks Spreads RTD Tea 0 Soup Ice Cream and Frozen Desserts Breakfast Cereals 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16%
2018–2022 retail sales CAGR (%) Source: Euromonitor data Top 15 categories of packaged food & soft drinks by market size | All SSA countries | RSV – Retail Sales Value
BUSINESS OVERVIEW 11 Portfolio growth & strategy
Focus on the core to achieve full potential
Focus on the core How to win o Target consumer – middle-income o Improve management of price, volume & margin, optimise pack sizes & formats, rationalise SKUs o Core category – food supported by relevant adjacencies o Enhance ‘big idea’ innovation o Africa strategy approved – builds on what we have & complements strategy in SA o Expand into new geographic & consumer segment adjacencies
o Raise marketing investment
o Reduce set of master & standalone brands, disproportionately investing behind power brands
o Fuel for growth via cost management
BUSINESS OVERVIEW 12 Strategic growth drivers
Grow the category & increase share
Growth drivers Penetration Consumption Increase share Availability & fair share of category 1 • Modern trade • General trade
2 Price
3 Pack size / format Penetration
Consumption 4 Unmet need states & trends
Grow the category 5 Brand trends
Adopt a hybrid model of Master and standalone brands o Singular, market-leading brands Master Brands o Easily extended to other categories/segments/adjacencies
Stand-alone brand o Serves a specific consumer need When focused, money spent is more impactful Source: Global Advisors
BUSINESS OVERVIEW 13 Core consumer
Middle-income consumer accounts for 70% of Tiger’s sales
100% 75% 50% 25% 0% Baby Beverages Bread C&I Confectionary Homecare Jungle Oats King Foods Maize Pasta Personal Rice Snacks & Spreads Care Treats
Core Imm. adjacency Imm. adjacency
LSM 5 LSM 6 LSM 7 LSM 8 LSM 9 LSM 10 LSM 1 LSM 2 LSM 3 LSM 4
Core represents a growing proportion of Greater Similar shopping Similar baskets Similar use of media the South African market brand loyalty destinations
Source: Company reports, Global Advisors
BUSINESS OVERVIEW 14 Consumer strategy
Focus on consumers
Focus on the consumer o Maintaining the number 1 or 2 position in our categories Consumers in South Africa spend o Investing in marketing support and innovation to drive growth 10% of their annual o Continually evaluating new or adjacent category opportunities total spend on Tiger Products o Keeping abreast of key consumer trends
o Continually striving to encourage healthier eating by our consumers
o In prevailing economic conditions, providing greater value for money through a portfolio strategy based on affordability
o Growth in Africa driven by a focused strategy & excellent execution
Source: Basket Study Q1 2017
BUSINESS OVERVIEW 15 Supply chain transformation
o Manufacturing optimisation Fuelling growth o Logistics & customer service 1. Higher gross margins o Reducing supply chain waste
o Inventory reduction 2. Unlock capacity to Unlock cash o Creditor terms support growth
o Procurement operations centre o Customer service excellence 3. Implement a standardised Dynamic supply chain o Standardised, simplified organisational blueprint processes
BUSINESS OVERVIEW 16 Environmental sustainability focus areas
Site & facilities Water Energy, emissions Waste Procurement & & transportation products To ensure that To be leaders of To limit dependency To decrease the To prioritise the existing & future water stewardship on non-renewable volume of organic usage of products buildings will adhere through energy resources and inorganic waste which are
to the principles of 1. Self-sufficiency produced on site environmentally & green building socially responsible 2. Water quality To divert from standards wherever landfill wherever possible 3. Promotion of water conservation possible
BUSINESS OVERVIEW 17 Environmental sustainability performance
FY18 FY17 Measure Intensity / ton Intensity / ton Energy (kWh) 132.61 128.19 Water (kl) 1.67 2.12 Packaging (tons) 0.28 0.31 Waste (tons) 0.02 0.005
Carbon emissions (CO2e) 0.23 0.24 Production outputs (tons) 2 378 278 2 395 809
Sites & facilities Water Energy & emissions Waste Packaging
All production units to Water reduction target for Energy saving & CO2 Waste to landfill down 24% 2021 packaging waste conduct ISO 14001 (2015 each unit in 2018 & 15% in emission-reduction targets by 2021 from 2018 level, reduced by 15% from 2018 standard) audits & retain total by 2021 for each unit in 2018 & with yearly targets baseline this certification 15% in total by 2021
Note: Waste impacted by VAMP product recall & incineration of products due to Listeria outbreak | Lower production volumes affect intensity measures.
BUSINESS OVERVIEW 18 Strategic vision Main objectives of strategic review
Developing a strategy for sustainable profitable growth
Portfolio growth Rejuvenate domestic operations to & strategy profitable growth Growth International strategy accretive to domestic performance Cost & investment strategy Build a capable & cost conscious culture with the capacity to grow Cost Capability
Winning through a high performance Operating model culture & organisational design
STRATEGIC VISION 20 Our strategy is sound and remains relevant
Purpose: We nourish and nurture more lives everyday
Drive growth Be efficient Great people Sustainable future
o Clear strategies to win o Efficiency in all we do, o A great place to work o Sustainable planet, in each category, cost effective & an o Winning culture communities and channel & customer advantaged integrated o Agile company supply chain o Consumer-obsessed
Focused execution
STRATEGIC VISION 21 Progress in FY18
Purpose: We nourish and nurture more lives everyday
Drive growth Be efficient Great people Sustainable future
o Consumer insights, media & o Integrated supply chain o Safety o Launched Centre for Food strategic pricing capabilities in implemented - LTIFR at 0.27 from 0.30 Safety place; innovation operating o Total continuous improvement o New operating model - Partnership with Stellenbosch model resourced savings of R707 million implemented University o Improved availability & optimal o Good progress on shop-floor o Savings in line with budget o Enterprise and Supplier pricing strategies in key development Development (ESD) Office categories o New capabilities appointed o First wave of shared services operational o Critical vacancies in o Distorted marketing investment (HR + finance) implemented o Community investment to key brands & focused working management filled o IT roadmap & capability in place; - 77 000 meals per day spend o Group-wide talent review IT investment prioritised - 558 participants in workplace o Innovation ahead of budget & process conducted experience programme tracking upward - 143 retained as employees o Improved customer relationships
Focused execution
STRATEGIC VISION 22 Progress on key growth drivers
Growth drivers Key measure Progress Availability and o Market share o Some wins but overall market shares challenged fair share o Availability o On shelf availability up 30bps to 97% o Weighted distribution o Weighted distribution improved in flour, maize & bread
Price o Price vs. competitors o Capability created & resourced o Price point / value and affordability o Elasticity insights used to develop price ladders/points in key segments o Challenges in “getting the price” due to competition
Pack / Size format o Pack format o Pack formats & sizes in pipeline o Pack sizes o New packs in Benny, Jungle, Morvite o SKU rationalisation o Oros RTD launched successfully
Unmet need states o Robust innovation pipeline o Innovation 5.3% of revenue & trends o Innovation rate (10% of revenue by 2022) o Structure & capability resourced o Medium term pipeline developed
Brand strength o MI 4.5% of revenue by 2022 o MI up to 3% of revenue o Disproportionate investment o Brands characterised into Master & Standalone – migration plans underway o Brand equity o Brand equity holding o Optimised advertising spend
STRATEGIC VISION 23 Challenges
Purpose: We nourish and nurture more lives everyday
Drive growth Be efficient Great people Sustainable future
o Managing volume, margin & o Drive supply chain efficiency & o Embed operating model o Employee safety & security market share unlock cash o Enhance speed of execution o Climate change o Meaningful innovation o Drive One Tiger culture o Adequate pipeline of critical o Growth of private label skills o Listeria crisis o Increased regulation o Policy on land expropriation o BBBEE compliance
Focused execution
STRATEGIC VISION 24 Priorities
Purpose: We nourish and nurture more lives everyday
Drive growth Be efficient Great people Sustainable future
o Availability & fair share o Agile & dynamic supply chain o Talent: embed standardized o BBBEE: level 4 by FY22 o Optimal pricing strategy o Continuous improvement framework with targeted o Enterprise supplier strategies o Optimal pack sizes / format savings development: increase o Leadership: develop executive procurement opportunities o o Significant IT investment Meet consumer needs & trends succession plan o Further improve group quality, o Socio-economic development: o Disproportionate investment in o Great place to work: align with national priorities key brands safety & security standards transformation, review rewards o Sustainability: ethical sourcing o Africa strategy approved o Prudent & diligent approach to strategy capex approvals & human rights policies approved; meet improvement targets for energy, water, waste, packaging
Focused execution
STRATEGIC VISION 25 Measure of success
Key performance indicators 2022 target disclosed FY18 FY17 FY16 Progress
Net sales (R billion) Category growth +1-2% 28.5 31.3 30.6
Gross margin (%) +150-180bps 32.5 33.4 31.8
Marketing investment (% of net sales) +100-160bps 3.0 2.5 2.5
Operating margin (before IFRS 2 changes) (%) +100-160bps 11.7 14.8 13.7
Return on average net assets (%) >35% 26.6 35.3 30.4
Partially met Not met
STRATEGIC VISION 26 Africa strategy
Building on what we have
Purpose: We nourish and nurture more lives everyday
Drive growth Be efficient Great people
o Categories & brands o Best partners in-country o Africa national graduate o Drive sustainable o Agreed standards, programme volume growth processes & measures o Sharpen & refocus o Invest in key brands o Optimise value chain customer capability o Innovate to meet o Local manufacture or o Africa-based trade consumer needs packaging marketing team o Consumer conscious
Focused execution
STRATEGIC VISION 27 Strategic decisions in line with guidance
Oceana to be unbundled o Tied to strategy
o Review of associates
o Fit with Tiger Brands core
o Approximate implementation date of April 2019
o Details of unbundling to be published shortly before implementation
STRATEGIC VISION 28 Our 2019 business priorities
Clear strategies to Efficiency in all we A great place to Sustainable planet, win in each do, cost effective work with community and category, channel and an Advantaged distinctive company and customer Integrated Supply capabilities and a Chain winning mindset
We nourish and nurture more lives everyday
STRATEGIC VISION 29 Segmental overview Grains
Revenue R12.8bn* | Operating income R1.9bn*
Market share 45% Grains 29% Maize 12% Revenue Flour 31% 57% Operating income Bread 33% Pasta 37% Breakfast 37% Rice 43% 0% 20% 40% 60% # 1 brands Milling & Baking Other grains Bread Pasta Milling Breakfast Flour Rice Maize Sorghum** # 2 brand
* From continuing operations ** Includes breakfast & beverages | Market share: Nielsen volume share 12 month moving as at September 2018
SEGMENTAL OVERVIEW 31 Consumer brands – food
Revenue R9.7bn* | Operating income R828m*
34% Market share Consumer Brands – food 46% Spreads 40% Condiments 46% 25% Revenue Operating income Canned veg 55% Snacks & Treats 23% Chocolate 14% Sugar 43% 0% 20% 40% 60% # 1 brands Value Added Meat Groceries Snacks & treats Beverages Products (VAMP) Ingredients Sugar Concentrates Ready-to-cook Condiments Chocolate Sports drinks Ready-to-eat Spreads Ready-to-drink Canned Processed meat # 2 brand
* From continuing operations | Market share: Nielsen volume share 12 month moving as at September 2018
SEGMENTAL OVERVIEW 32 Home, Personal Care & Baby (HPCB)
Revenue R2.2bn* | Operating income R341m*
8% Market share Home care 42% Pest 73% 10% Personal care 6% Revenue Camphor cream & lotions 85% Operating income Baby 29% Wellbeing 12% Nutrition 59% Homogenised baby food 88% 0% 20% 40% 60% 80% 100% # 1 brands Home care Personal care Baby Sanitary cleaners Camphor cream & Nutrition Camphor Insecticides lotions Baby wellbeing Hair care
* From continuing operations | Market share: Nielsen volume share 12 month moving as at September 2018
SEGMENTAL OVERVIEW 33 Exports & International
Revenue R3.8bn* | Operating income R270m*
13%
8% Revenue Operating income
Exports International Davita Chococam Jolly Jus Deli Benny Other Tiger Brands products
* From continuing operations
SEGMENTAL OVERVIEW 34 Contribution to revenue & operating income
9% 13% 10% 2018 - outside 13% 9% 2017 - inside 31% 8% 30% 4% 12% 8% Operating 40%47% 2% -8% 2% 3% income 4% Revenue 2% 7% 3% before 6% 4% IFRS 2 4% 7% 12% 7% 7% 9% 14% 13% 11% 16% 13% 10% 17%
Milling and Baking Other Grains Groceries Snacks & Treats Beverages Value Added Meat Products Out of Home Home, Personal Care and Baby (HPCB) Exports and International
SEGMENTAL OVERVIEW 35 Appendices Top 10 shareholders as at December 2018
Issued share capital 189 818 926 Top 10 institutional investors
34% 2.1% 1.8% 11.5% 2.2%
48% 3.2%
3.4%
3.5% 8.8%
3.7% 7.5%
18% PIC Colonial First State Janus Henderson Investors BlackRock Coronation Sprucegrove Top 10 15 - 25 Other The Vanguard Group Somerset Capital Sanlam State Street Global
APPENDICES 37 Tiger Brands Nikki Catrakilis-Wagner Group Investor Relations Director [email protected] T: +27 11 840 4841