Tiger Brands:Tiger Brands: Africa ExpansionAfrica Expansion
22 March 201122 March 2011
Neil Neil BrimacombeBrimacombe: : Executive DirectorExecutive Director
2
1.
Drive SA volume growth2.
Step change expansion in emerging
markets
3.
Protect No. 1 & 2 category positions4.
Transform ‘go to market’
model 5.
Deliver efficiency gains for re‐investment
STRATEGIC THRUSTS
MISSION To deliver revenue growth that is 3% greater than
SA GDP plus inflation and achieve our
blended operating margin of 15%, thereby
achieving real earnings growth and a return
on investment which exceeds the company’s
cost of capital
1.
Our consumers are our business2.
We act with integrity in
everything we do
3.
We have a passion for excellence4.
We value our people and treat
them with dignity
5.
We continue to reinvest in our
society
OUR VALUES
DESIRED OUTCOME
Adding value to life for all the stakeholders of Tiger Brands
VISION To be the most admired branded FMCG company in emerging markets
It starts with a compelling vision and a clear strategy to achieIt starts with a compelling vision and a clear strategy to achieveve
SADC share of world reserves for selected metals & minerals (200SADC share of world reserves for selected metals & minerals (2009)9)
Africa will become the worldAfrica will become the world’’s largest markets largest market
Source: Department of Economic and Social Affairs, UNDP
Key developing regions exhibit resistance to recession & set to Key developing regions exhibit resistance to recession & set to grow at grow at high rateshigh rates
Source: World Bank
Africa Has Proven More Resilient out of the Downturn as Africa Has Proven More Resilient out of the Downturn as Macroeconomic Conditions ImproveMacroeconomic Conditions Improve
“In the light of positive policy in sub‐
Saharan Africa and an improving world
outlook, our growth forecast for Africa
in 2010 is just over 4 percent.”
— IMF, November 2009
“Signs of recovery are emerging in
trade and manufacturing. In addition,
hurt as it was by the crisis, the region
seems to have avoided the
macroeconomic instability that
accompanied previous slowdowns.
Stronger pre‐crisis positions—balanced
or in‐surplus budgets, current account
surpluses, and lower debt levels—
helped many countries absorb external
shocks.”
—Carnegie Endowment for
International Peace, January 2010
Source: Frontier Strategy Group Analysis, EIU
Africa Africa ––
Catching Up with the Catching Up with the BRICsBRICs??
Source: EIU, Euromonitor
Continental growth levels are attractiveContinental growth levels are attractive
Sources: Consensus Economics, EIU
Lower Growth Higher Growth
Forecasted 2010 GDP Growth Rates (%)
Angola 7.3Ethiopia 7.0Uganda 7.0Zambia 6.8Mozambique 6.1Tanzania 5.5Nigeria 5.4Ghana 5.4Sierra Leone 5.2Egypt 4.8Côte d'Ivoire 4.0Morocco 3.8Kenya 2.9South Africa 2.6Zimbabwe 2.5Cameroon 1.4
Africa 4.8
Tanzania
Ethiopia
Uganda
Sierra Leone
Côte d'Ivoire
Cameroon
Kenya
Nigeria
Ghana
South Africa
Angola
Egypt
Morocco
Tiger Brands International: BackgroundTiger Brands International: Background
International expansion remains a key priority
Opportunity zones well understood
Our engagement in the markets has built real competencies
We continue to resource appropriately
Built on experience gained over the last 3 years
Our Priority Zones Our Priority Zones ––
no changes and focus remainsno changes and focus remains
BackgroundBackground
TBI: Executive Director: N Brimacombe
W. AfricaRegional Managing
Executive
(G. Campbell)
ExportsManaging Executive
(M. Conway)
Business
Development &
Stakeholder
ManagementBusiness Development
Executive
(B. Ngarachu)
C. AfricaManaging
Executive
(M. Ndiaye)
E. AfricaManaging Executive
• Nigeria• WA Development‐
Ghana‐
Ivory Coast
‐
Senegal
• Projects
•Davitas • New Territories • Shareholder &
Stakeholder
Management
• Government &
regulatory
• Strategy
• Chococam• Gabon
• Haco (P. Igathe)• EAH
(M. GebreMedhin)
Resourcing: Structure To StrategyResourcing: Structure To Strategy
Tiger Brands: Africa Footprint* Our on shore presence * Our on shore presence ……
Ethiopia
Kenya
Nigeria
South Africa
Zimbabwe
Cameroon
Tiger Brands: Africa FootprintTiger Brands: Africa Footprint
* Complemented by our export footprint* Complemented by our export footprint
Tiger Brands: Africa FootprintTiger Brands: Africa Footprint
Further complemented by our recent Davita acquisition announcemFurther complemented by our recent Davita acquisition announcement ent **
Note:Davita has a presence in
28 countries across
Africa and the Middle
East
*
Subject to the fulfillment of a
number of conditions precedent
including the requisite approval in
terms of the South African
Competition Act
14
HACO Industries (Kenya)HACO Industries (Kenya)
Brands
•BIC•Miadi•Motions•SoSoft•Jeyes•Palmer’s•TCB Naturals
2010
•Sales:
R189.5m•EBIT:
R20.1m
•Margin:
11%
Categories
•Stationary•Hair Care•Skin Care•Fabric Softeners•Bleach•Toilet Cleaners
15
Chococam (Cameroon)Chococam (Cameroon)Brands
•Mambo•Kola•Matinal•Choconut•Tartina•Arina•Toutox•Big Gum
2010
•Sales:
R315.0m•EBIT:
R37.0m
•Margin:
12%
Categories
•Chocolate•Candies•Chocolate Powders•Chocolate Spreads•Gum
16
East Africa Tiger Brands Industries (Ethiopia)East Africa Tiger Brands Industries (Ethiopia)
Categories
•Biscuits•Laundry Soap•Detergent Soap•Pasta •Flour
17
Deli Foods (Nigeria)
*
EATBI & Deli Foods are expected to generate a combined annual turnover of c. 500m in the first year
Categories
•Biscuits•Crackers•Wafers
18
UAC / Tiger Brands (Nigeria)UAC / Tiger Brands (Nigeria)
Brands
•Gala•Funtime Cake•Coconut Chips•Snaps•Supreme•Funblast•Delite•Swan
Categories
•Water•Ice Cream•Fruit Juices•Snacks•Flavoured Milk•Carbonated Soft Drinks
2009
(31/12)
Sales: c.450m
19
Davita Trading (South AfricanDavita Trading (South African‐‐Based Export Company)Based Export Company)
Brands
•Jolly Jus•Benny •Davita
Categories
•Powdered Juices•Powdered Seasonings
2010
(28/2)Sales: R567m*
Enterprise Value:
R1. 625bn
* 99% Exports
Framing an Investment Case for AfricaFraming an Investment Case for Africa
• PESTEL Discontinuities ‐
Managing the Vagaries
• Appetite for Risk (Beta factor)
• Our defensive qualities – Brands and Categories
• Investment in enabling capabilities and competencies
• Balancing the Portfolio
• Investment horizons
Industry concentration levels remain substantially smaller than Industry concentration levels remain substantially smaller than RSARSA
Sources: Euromonitor
Market Share, Top 5 Players% Revenue, 2009
Top 5 Players
Industry Consolidation increasing: Limited windowIndustry Consolidation increasing: Limited window
Source: Euromonitor
Total m
arket sha
re
%
Increasing Focus on Scale over Margin ExpansionIncreasing Focus on Scale over Margin Expansion
• Emerging markets consumers cannot
often afford prices that leading FMCG
multinationals charge developed
world consumers
• Average disposable income per capita
in Nigeria is Rand 3,100, compared to
Rand 16,200 in South Africa
• Given this constraint, MNC’s are
focusing on large volumes and growth
over margin
Source: Euromonitor, Nestlé, Unilever
Leading Companies Are Accepting Lower Margins
in Exchange for Growth
Price‐Sensitive Consumers Push
Down Margins
The modern retail channel remains smallThe modern retail channel remains small
Source: Internal Data
A phased approach allows Target to build momentum as TBI reA phased approach allows Target to build momentum as TBI re‐‐engineers and engineers and strengthens the corestrengthens the core
We seek to balance scale and margin in the short term, and migraWe seek to balance scale and margin in the short term, and migrate the portfolio to te the portfolio to higher margins over timehigher margins over time……
• Tiger Brands built scale and market share in
South Africa with a strong commodities
portfolio, and then refined the product mix
over time to become a large scale, high
margin business
• Similarly, TBI will leverage the scale of
strategic acquisitions and grow margins
through brand renovation and the
introduction of value‐add and premium
offerings
MA
RG
IN
SCALE largesmall
low
high
Current
Acquisitions
Current
Acquisitions
Potential
acquisitions in
pasta, rice,
bread, etc.
Potential
acquisitions in
pasta, rice,
bread, etc.
Tiger
Brands
RSA
Tiger
Brands
RSA
• Boost margins by renovating brands, adapting product mix, and bolt on acquisitions
• Grow scale by expanding geographic profile and reaching new consumers
• Grow margins by introducing value-add offerings
• Leverage scale to reach consumers with new, higher margin products
Future
TBI
Future
TBI
We unlock value by combining TBI and local competencies and capaWe unlock value by combining TBI and local competencies and capabilitiesbilities
Capability Contributor
IT and Manufacturing Technology Tiger Brands
Global and RSA Sourcing Platform Tiger Brands
Local and Regional Sourcing Acquisition
Local Manufacturing Acquisition
Local Sales and Distribution Acquisition
Competency Contributor
Marketing Expertise Tiger Brands
Local Brands and IP Acquisition
Local Market Knowledge Acquisition
General Management Acquisition
Create value through an integrated sourcing model
Retain local general management to capture local knowledge
Acquire these key criterion from acquisition targets
Brands that have regional appealBrands that have regional appeal
Tiger Brands Regional Brand Application
• Regional mother brands• Cross category evolution
Fix: Finished Goods WarehouseFix: Finished Goods WarehouseBefore
After
Fix: Fixed assets: KenyaFix: Fixed assets: Kenya
Fix: Power generation Fix: Power generation -- TransformersTransformers
NewOld
OldOld NewNew
Optimise Brand Renovation: Optimise Brand Renovation: MotionsMotions
Old New
Optimise Brand Migration: MamboOptimise Brand Migration: Mambo
Current
Tin Packaging
New
Plastic Container
with Shrink Sleeve
Optimise: Brand Renovation: MATINALOptimise: Brand Renovation: MATINAL
Purity Bill board – Nairobi
Engaging our consumers: Traditional mediaEngaging our consumers: Traditional media
Miadi promotion ‐
Uchumi North Rift road show
Engaging our consumers: NonEngaging our consumers: Non‐‐traditional mediatraditional media
Engaging our consumers: Kenya (Clinics)Engaging our consumers: Kenya (Clinics)
Beacon: In market samplingBeacon: In market sampling
Engaging our consumers: KenyaEngaging our consumers: Kenya
Engaging demand drivers: PaediatriciansEngaging demand drivers: Paediatricians
Annual Kenyan Paediatricians Conference
RTM Capability: CameroonRTM Capability: Cameroon
* Channel, occasion, format, pack* Channel, occasion, format, pack
Channel architecture and RTM capabilityChannel architecture and RTM capability
Strategic dealers
Streets Vendors
Boutiques or Convenience
Table TopKey Player in open market
Traditional trade, stores Traditional trade, stores and openand open--air marketsair markets
RTM Benefit AreasRTM Benefit AreasSales Growth Trade Spend optimisation Headcount Efficiency
Reduced Cost To Serve Margin Growth Total Business Benefit
Channel – Dedicated salesmen
Sales – Focus on ‘core’
and flexible’
resource
Effective Commercial Career Path
Grow Organisational Capacity
Manage Trade Terms Investment
Re‐invest in A&P to grow brand equity
Optimisation of sales and
distribution costs
Speed to Market improvement
Focus range mix channel &
customer
Improve our Mix from volume
growth
15‐25% Growth opportunity
More Distribution points
More volume per point of
Distribution
Value mix
Top and bottom line Business Growth
Re‐investment in channel Building
Activity
Efficient & Effective Organisation
RTM MODEL: P&L Impact AreasRTM MODEL: P&L Impact Areas
Gross Sales
Gross Sales
Net Sales
Naked /Gross Margin
Contribution Before marketing
Net Operating Profit
BUT BUT ……
it comes with some challengesit comes with some challenges
• Democratic institutions absent or still evolving• Currency instability• Lack of adequate infrastructure, particularly in energy, water &
transport• Acute skills shortages in management & technical areas• Low levels of per capita income• Prevalence of corruption• Demand constraints due to lack of access to credit• Competition from low cost imports• Prevalence of counterfeit products
What we do and will continue to doWhat we do and will continue to do
• Take a term view
• Expand geographically
• Invest for growth
• Drive for results
• Grow and Develop HR
• Look to maximise
synergies
Investment horizon
Desire for scale
Organic and acquisitive
Hurdle returns
Tiger Brands Academies
Fuel for growth
• Unrelated diversification
• Expand at any cost
• Operate outside our stringent governance parameters
What we donWhat we don’’t do / wont do / won’’t dot do
Dilute value add
Shareholder returns
Corporate citizenship
Thank youThank you
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