Tiger Brands CEO Peter Matlare believes that while turbulent times are here to stay for the foreseeable future, those businesses that are able to be flexible, innovate and adapt to changing conditions will ultimately succeed.
Matlare told a recent Forum at the Gordon Institute of Business Science (GIBS) in Johannesburg that political instability, global economic decline and the continually increasing cost of living are just some of the difficult conditions effecting today’s companies.
As a fast moving consumer goods company operating in seven countries on two continents, Tiger Brands has experienced global turbulence in all elements of its business cycle. Economic instability has made South African consumers more value conscious, while food security had been a real concern, creating a sense of crisis and shortage, Matlare said.
A consistent theme for the food and personal care company has been the constant pressure felt by consumers: “Consumers are taking things out of their baskets,” Matlare said. With increasing food, electricity, petrol and healthcare costs and a loss of a million jobs across the South African economy, the constraints are being experienced across income groups.
In such a competitive environment, Matlare said any sort of growth agenda for Tiger Brands will entail taking share from competitors, “Which is expensive business,” he added.
In order to retain margins, the company has had to focus on removing non-market facing costs without damaging its capability and ability to deliver. To this end, costs have been cut across manufacturing and a lot of effort has been put into achieving more efficient logistics, administration and finance operations.
Difficult economic conditions have served to magnify social disparity in South African society, and Matlare said the increase in social tension in the country was the most seen since democratisation in 1994. “We ignore the social degradation in our country at our peril,” he said.
Matlare believes that despite 18 years of democracy, a fundamental relationship of trust between corporate South Africa and other stakeholders hadn’t been developed: “Unless we can convince the state that we have the same outcome in mind, which is changing people’s quality of life, they will always look at the private sector with suspicion.
Devising a common growth agenda for the country was crucial to achieving long-term success, Matlare explained: “There is a danger of becoming entangled in a compliance culture without driving growth. As South Africa Inc., we truly are coming short. If we aren’t able to compete on a global scale, business will start to look elsewhere and we will see the same thing happen to our manufacturing sector as we saw happen to the garment industry, which is virtually non-existent today.”
The global economic decline has meant that Tiger Brands, like many other companies, has begun to search for opportunities for future growth north of South Africa’s borders.
Matlare named Nigeria, Ethiopia and Kenya as some of the company’s potential future growth markets on the African continent. While currently 75% of Tiger Brand’s revenue comes from domestic South African sales, he envisages that between 30% and 50% of revenue will be generated by operations in Africa within the course of his tenure as CEO.
The company recently completed its purchase of a 63,35% shareholding in Nigeria’s Dangote Flour Mills for R1,5bn, the group’s third and largest acquisition in West Africa.
Matlare said that while the promise offered by the Nigerian economy is not new, it is “an economy in transition. The government is serious about generating real growth, and there is an increasingly urbanised population and a growing middle class. Tiger’s Brand’s FMCG and personal care products play to the county’s sweet spot.”
In 2011 Tiger Brands acquired 51% of the food and consumer interests of the East African Group in Ethiopia and of biscuit manufacturer Deli Foods in Nigeria, and 49% of the Nigerian UAC Foods. Matlare called Ethiopia, with a stable government focused on economic growth “the jewel in Tiger’s crown” and added that he expects the company will develop greenfield investments in Angola over time.
“There is no such thing as normal for us,” he said, “We have to constantly look for new ways to innovate and to change our model quickly in order to remain competitive.” He added that he doesn’t anticipate that market conditions will ease for the next three to four years.
The new skills required by executives in order to thrive in the current business environment include being able to understand business fundamentals but also work in the world of ideas, and to manage uncertainty and risk while being open to being wrong but able to fix mistakes quickly.
Most importantly, he stressed developing a culture of learning within the organisation.
Matlare said that innovative ideas and ways to disrupt the category, which are crucial in today’s highly competitive environment, must come from middle management: “The top 20% of any organisation are risk averse and therefore not a source of innovation. Middle management must be encouraged to take risks and devise new product innovations and ways of adapting to changing conditions. You have to give them the opportunity or you will come up short.”
Matlare is no stranger to managing instability, and steered Tiger Brands through the bread and milling scandal and Adcock Ingram Critical Care scandal shortly after he joined the company in 2008.
“Nobody had taken the issue seriously enough, quickly enough, and we had to find a way to focus on the issues and fix our reputation,” he said of the period.
In order to restore the company’s integrity, the group embarked on an intensive programme to rebuild morale and focus on delivering solid financial results.
“We learnt that resilience is important: If we had given up at the time, we wouldn’t be where we are today.”
Earlier this year, the company was named as South Africa’s leading food manufacturer in the Mail & Guardian
Top Companies Reputation Index.
However, Matlare said some things are never forgotten: “We will always have to explain our history, and this is best done by just putting the facts on the table.”