Tiger Brands chief executive Noel Doyle says his company is working hard to limit the impact of the supply chain and inflation costs, but it is inevitable that some costs will be passed on to South Africans in the coming months.
Doyle spoke about the group’s financial results for the six months ending March 31, 2022 on Wednesday (May 25), a period he noted proved to be a “tough operating environment” for the company.
Tiger Brands cited a negative first quarter, driven by a significant decline in volumes in bakeries and a prolonged strike in the company’s snacks and sweets division. This was compounded by the inability to offset the unexpected cost push through sufficient price increases and availability issues on certain raw materials, ingredients and packaging.
The group said cost-saving and supply chain efficiency initiatives have been accelerated and are delivering ahead of schedule. However, these were not enough to counter the high level of input cost inflation, resulting in squeezing gross margin to 29.2% from 30.6% in the corresponding period last year.
“We are keenly feeling the full impact of global supply chain compression and related inflationary pressures on the level of incoming cost increases. We expect the challenging economic climate to continue with pressure on consumers likely to intensify“Doyle said.
“In this environment, we are increasing our efforts to reduce costs and further promote efficiency to minimize the need to increase sales prices. However, significant price increases are inevitable across most of the portfolio. Despite this challenging operating environment, we have continued to drive strategic priorities that aim to improve the long-term performance of our business, ”he said.
Price increase coming
Analysts have warned that rising food and food costs will be inevitable in the coming months as the impact of the war in Ukraine and inflation continues to be felt.
This will be further exacerbated by a gasoline price hike close to R4 / liter next week, Agbiz CEO Dr John Purchase told the radio station. CapeTalk.
“It is suggested that gasoline will increase by R4 per liter in the next month, (while) huge quantities of fertilizers are coming from Russia and Ukraine (and) those prices are going up by at least 30% to 50%. This is the price we pay for it. madness of war “.
He added that shipping costs have quadrupled since the start of the pandemic, while other countries are also grappling with the impact of inflation and rising food prices.