South Africa’s largest food producer Tiger Brands is close to clinching a deal with a business closely aligned with its health and nutrition strategy, as the company also warned on price increases.
Tiger Brands, like many of its peers, is tapping into emerging consumer trends and is plugging holes in its portfolio by diversifying into health, nutrition and plant-based meat products.
The potential investment would be via its recently launched venture capital fund, which it said had received over 500 expressions of interest and is expected to provide inorganic growth opportunities over the medium and long term.
It is in the final stages of making an offer for a business, while a further nine opportunities are being assessed, the maker of Jungle Oats and Tastic rice said without giving further details.
“In terms of the investment that we’re currently looking at, it is in the food industry. It is a product that we are not necessarily currently trading in,” Chief Financial Officer Deepa Sita told investors.
Tiger Brands and its rivals are facing soaring prices of raw materials such as energy, grains and packaging, as well as higher transport costs as economies recover from the pandemic.
Battling to offset the costs, Tiger Brands increased prices in its 2021 financial year, which ended on Sept. 30, with sales price inflation of 7%, but still could not fully recover those cost increases.
“Our first quarter for FY 2022 is already showing significant signs of cost push pressures coming through,” Sita told Reuters, “while we’ll continue to look for cost saving opportunities and factory efficiencies to try and mitigate as much of that, we will have no option but to take further price increases across the board.”
She said price inflation will be on similar levels as 2021 but will depend on foreign exchange fluctuations and level of rising costs.
By Nqobile Dludla