Tiger Brands Ltd
Annual Report 2021

Plain-text annual report

Integrated annual report for the year ended 30 September 2021 < > ABOUT THIS REPORT REPORT BOUNDARY AND AUDIENCE TIGER BRANDS’ 2021 INTEGRATED REPORTING SUITE Our 2021 integrated reporting process comprises the following reports: This integrated annual report reviews Tiger Brands’ business model and strategy, the risks and opportunities in our operating environment, and our operational and governance performance for the financial year ended 30 September 2021. This is our primary integrated annual report, written for investors and any other stakeholders who have an interest in our ability to create value over the short, medium and long term. This report should be read in conjunction with the supplementary sustainability report and our annual financial statements, published on our website: www.tigerbrands.com. COMBINED ASSURANCE MATERIALITY We use a combined assurance model comprising assurance obtained from management and from internal and external assurance providers: › Ernst & Young Inc. audited our consolidated annual financial statements, from which extracts have been included in this report. The auditor’s audit report does not necessarily report on all the information included in this integrated annual report › EmpowerLogic Proprietary Limited provided external verification of our BBBEE activities › Marsh South Africa conducted risk control audits at our manufacturing sites and warehouses covering health, safety, security, fire protection and readiness › The group’s internal audit team, overseen by the audit committee, provides annual assurance to the board on the execution of the combined assurance plan. REPORTING FRAMEWORKS Our reporting process has been guided by the principles and requirements contained in the International Financial Reporting Standards (IFRS), the Value Reporting Foundation’s recently updated International Framework, the King Code on Corporate Governance 2016 (King IV™*), the JSE Listings Requirements, the South African Companies Act, No 71 of 2008, and the GRI’s Sustainability Reporting Standards. * Copyright and trademarks are owned by the Institute of Directors in South Africa NPC and all of its rights are reserved. Our integrated annual report provides information to enable an informed assessment of Tiger Brands’ capacity to create value over time. We believe that all the information in this report is of material interest to report users wishing to make such an assessment, and is structured in a manner to enable them to do so: › Who we are: Our group profile (pages 10 to 12) and leadership team (pages 56 to 57 and 62 to 63) › How we create value: Our business model and business impacts (pages 20 to 23), key relationships (pages 27 to 29) › What impacts value: Our operating environment (pages 24 to 26), and material risks and opportunities (pages 30 to 33) › Our strategic response: Our strategy and performance (pages 34 to 47) › Our governance: Our governance activities (pages 56 to 63) and remuneration practices (pages 64 to 81). Additional information not material to this report, but of interest for other purposes, is provided in separate reports and on our website. Applying the principle of double materiality, our integrated report focuses on enterprise value, while our sustainability report focuses on our impacts on society and the environment, and our contribution to sustainable development. In assessing those issues that materially impact value creation we have looked beyond the conventional financial reporting boundary to provide for the relevant interests of key stakeholders. We have also considered the most significant risks, opportunities and impacts associated with our activities over the short term (less than 12 months), medium term (one to three years) and long term (beyond three years). BOARD APPROVAL As a board, we have applied our collective mind to the preparation and presentation of the information in this report. We believe that the report addresses all material matters and that it presents a balanced and fair account of Tiger Brands’ performance for the financial year ended 30 September 2021, as well as an accurate reflection of our strategic commitments. On the advice of the audit committee, the board approved the integrated annual report and the consolidated annual financial statements on 18 November 2021. › Integrated annual report 2021: Provides a succinct review of our strategy and business model, operating context, operational performance, and governance. Aimed primarily at investors, it is written for all stakeholders who have an interest in Tiger Brands’ long-term performance. › Sustainability report 2021: Reviews our performance in managing significant environmental, social and governance (ESG) impacts and addressing sustainability issues of interest to a broad range of stakeholders. › Consolidated annual financial statements 2021: Comprehensive review of our financial results, with audited financial statements, prepared in accordance with IFRS. i T g e r B r a n d s L m i i t e d I n t e g r a t e d a n n u a l r e p o r t 2 0 2 1 Integrated annual report for the year ended 30 September 2021 i T g e r B r a n d s L m i i t e d S u s t a n a b i i l i t y r e p o r t 2 0 2 1 Eat Well Live Well Sustainability report: a review of Tiger Brands’ environmental, social and governance (ESG) performance (Supplement to the integrated annual report for the year ended 30 September 2021) i T g e r B r a n d s L m i i t e d I n t e g r a t e d a n n u a l r e p o r t 2 0 2 1 Integrated annual report for the year ended 30 September 2021 These are all available at www.tigerbrands.com NAVIGATION Further reading within this report Reference to further online disclosure Further reading in the sustainability report Jump to page within document UNITED NATIONS SUSTAINABLE DEVELOPMENT GOALS (SDGs) The UN SDGs set a long-term agenda to end poverty, protect the planet and ensure prosperity for all by 2030. In fulfilling our core purpose – to nourish and nurture more lives every day – Tiger Brands is committed to playing its role in delivering on these goals. As part of our strategic commitment to a sustainable future (page 38), we have developed a set of commitments and targets relating to three key focus areas: health and nutrition, enhanced livelihoods and environmental stewardship. In meeting these commitments and targets, we believe we will provide a meaningful contribution to the following 11 SDGs. Geraldine Fraser-Moleketi Chairman Noel Doyle Chief executive officer Cora Fernandez Chairman of audit committee Our approach to responding to these goals is reviewed in more detail in our accompanying sustainability report 2021, which reviews Tiger Brands’ material ESG impacts. CONTENTS OVERVIEW IFC About this report 2 Who we are 4 5 8 Our value contribution in 2021 Our investment case Celebrating our centenary OUR BUSINESS Group profile 10 13 16 20 22 Chairman’s review Chief executive officer’s review Our business model How we sustain value OUR OPERATING CONTEXT 24 Our operating environment 27 30 Our key relationships Material risks and opportunities OUR STRATEGY 34 Delivering on our purpose: our strategy 35 40 42 43 45 Meet the needs of the consumer Optimise our supply chain Be obsessed about cost savings and efficiency Build a growth pipeline Ignite our people OUR PERFORMANCE 48 Financial review 50 50 52 54 55 Operational review Grains Consumer Brands Home and Personal Care Exports and International OUR GOVERNANCE 56 Our board 62 64 Our executive committee Remuneration and performance ADMINISTRATION Shareholders’ diary 82 83 84 Declaration of final dividend Administration www.tigerbrands.com Tiger Brands Limited Integrated annual report 2021 1 < > WHO WE ARE OUR STRATEGY Our strategy for sustainable profitable growth is supported by five strategic pillars, underpinned by our core values. MEET THE NEEDS OF THE CONSUMER OPTIMISE OUR SUPPLY CHAIN BE OBSESSED ABOUT COST SAVINGS AND EFFICIENCIES BUILD A GROWTH PIPELINE IGNITE OUR PEOPLE Tiger Brands is one of Africa’s largest listed manufacturers of fast-moving consumer goods (FMCG). Our core business is the manufacture, marketing and distribution of everyday branded food and beverages. Our products are relevant across every meal occasion and are well positioned to grow. The portfolio also includes leading brands in the home and personal care segments and we have a growing presence in Africa. OUR VALUES OUR VISION To deliver top-tier financial results and be recognised by all stakeholders as the pre- eminent fast-moving consumer goods (FMCG) company in South Africa and most desirable growth company on the continent. OUR PURPOSE We nourish and nurture more lives every day. We treat each other with care and respect We deliver with passion and  excellence Safety and quality are non- negotiable for us We embrace diversity  and inclusivity We act with integrity and accountability in all we do WINNING BEHAVIOURS Consumer obsession Teamwork Empowered accountability Focused execution 2 Tiger Brands Limited Integrated annual report 2021 www.tigerbrands.com Tiger Brands Limited Integrated annual report 2021 3 OVERVIEW OUR BUSINESSOUR OPERATING CONTEXTOUR STRATEGYOUR PERFORMANCEOURGOVERNANCEADMINISTRATION < > OUR VALUE CONTRIBUTION IN 2021 The value created, preserved or eroded for our stakeholders in 2021. DELIVERY OF VALUE BY STAKEHOLDER GROUP PROVIDERS OF FINANCIAL CAPITAL R1,7 billion paid in dividends (2020: R740 million) Return on equity 12,7% (2020: 9,0%) Return on net assets 19,3% (2020: 21,1%) Cash generated from operations R4,0 billion (2020: R3,0 billion) FINANCIAL PERFORMANCE (FROM CONTINUING OPERATIONS) REVENUE R31,0 billion 2020: R29,8 billion CUSTOMERS (retailers, wholesalers and general trade) 97% on-shelf availability (2020: 96%) 90% order-fill (2020: 90%) › Improved promotional discipline › Prioritising customers’ perceptions through an action plan to further improve service levels and enhance engagements › Improved product availability and average basket size in the general trade GROUP OPERATING INCOME* R2,2 billion 2020: R2,5 billion EMPLOYEES GROUP OPERATING MARGIN* R4,0 billion paid in salaries and benefits to 10 158 permanent employees (2020: R4,1 billion to 11 188 employees) R94 million invested in employee training and development (2020: R97 million) Zero employee fatalities (2020: 2) 2021 Southern Africa Gender Mainstreaming Champion Women on Boards – recognising the deliberate and targeted steps we have taken to increase representation of women in senior leadership and decision- making roles. 7,2% 2020: 8,3% HEPS 46 innovation projects launched this year, 31% growth on FY20 Foundational work concluded to speed up innovation Launched the Tiger Brands Venture Capital Fund CONSUMERS Responded to growth in e-commerce with raised online presence Africa strategy re-invigorated and appropriately resourced Billion Rand Brands maintain or improve brand health 28,6% value share Tastic X Laduma Heritage Advert wins Kantar Best Liked Advert R14 billion spent with broad-based black economic empowerment (BBBEE) verified suppliers (2020: R13 billion) SUPPLIERS R6 billion spend with black-owned enterprises (2020: R5 billion) R4 billion spend with black women-owned enterprises (2020: R4 billion) COMMUNITIES AND ENVIRONMENT R23 million total socio-economic development (SED) spend (2020: R32 million) 99 million cumulative meals since 2011 Received the Empowerment of Women in the Community Award and the Economic Empowerment Award at the annual Gender Mainstreaming Awards 1 127 cents 2020: 1 196 cents TOTAL DIVIDEND 826 cents per share 2020: 670 cents per share * Before impairments and non-operational items OUR INVESTMENT CASE At the heart of Tiger Brands is the passion to produce quality, branded products that resonate with our consumers. This means we work hard to understand their diverse and changing needs to serve them better. LONG HISTORY OF PRODUCING QUALITY, BRANDED PRODUCTS THAT RESONATE WITH CONSUMERS We have a hundred years’ experience in producing quality, branded products that resonate with consumers. Many of our brands hold number one or number two positions in market share and equity in their respective categories and have celebrated many external awards for being South Africa’s most loved brands. Our Billion Rand Brands have stayed relevant through our ability to renovate and innovate. By monitoring consumer tastes and trends, and investing in product and process research and development, we maintain our leadership position. The year under review is no exception. We have focused innovation and renovation on meeting the needs of consumers. This includes the launch of a larger Albany Xtra loaf, Tinkies mini value pack, Purity Junior pouches, Jungle Cereal Bars and Doom value pack. We have innovated by adding two new flavours to our Rose’s Cordial range (ginger and blueberry), and demonstrated our ability to compete in categories that we see value in by launching KOO pilchards. BRAND EQUITY VOLUME SHARE VALUE SHARE #1 #1 #3 #2 #2 #1 #1 #1 #1 #1 #3 #2 #1 #2 #2 #1 #1 #1 #1 #1 #2 #3 #1 #1 #2 #2 #1 #1 #1 #1 #1 #2 #3 4 Tiger Brands Limited Integrated annual report 2021 www.tigerbrands.com Tiger Brands Limited Integrated annual report 2021 5 OVERVIEW OUR BUSINESSOUR OPERATING CONTEXTOUR STRATEGYOUR PERFORMANCEOURGOVERNANCEADMINISTRATION < > Our investment case continued ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) PERFORMANCE We recognise the significant increase in investor interest and engagement on environmental, social and governance (ESG) issues. Tiger Brands has made significant progress in delivering on its sustainable future strategy, and on its commitments in each of its three strategic focus areas: health and nutrition; enhanced livelihoods; and environmental stewardship. Tiger Brands has launched several new healthy and affordable products and improved its labelling to accommodate more nutrition information. Significant further strides have been taken in promoting economic inclusion and food security through the company’s enterprise and supplier development fund, preferential procurement activities, and ongoing investments in socio-economic development. In addressing some of the more immediate food security challenges in poor communities, the Tiger Brands Foundation has continued to make a meaningful impact on the nutritional needs of learners, students and vulnerable families across the country. We continue to explore opportunities to design inclusive circular economy initiatives with our current focus on minimisation. Our key initiatives focus on reducing waste-to-landfill, recycling packaging material, reducing food waste and loss, and diverting food waste and loss towards new value-creation opportunities. We recognise that we have a significant responsibility to continue addressing our material ESG impacts and continue to fully integrate this responsibility across the organisation. For more information on sustainability see our sustainability report. STRONG BALANCE SHEET AND CASH FLOW GENERATION We have a strong, ungeared balance sheet and the business consistently generates attractive cash flows. In 2021 cash generated from operations increased 34% to R4,0 billion while we ended the year with a strong net cash position of R2,2 billion (FY20: R1,8 billion). This sound capital structure provides us with the ability to drive growth through investment in the existing business, brands and innovation, as well as returning cash to shareholders. It also allows us flexibility to be able to invest in potential acquisitions, while our ability to convert earnings into cash means we are able to self-fund many initiatives, including the recently launched Venture Capital Fund. The launch of the fund led to the receipt of over 500 expressions of interest. We are in the final stages of making an offer for a business, which is closely aligned to our health and nutrition strategy, while a further nine opportunities are being assessed. FUTURE-FIT STRUCTURE MEANS WELL- POSITIONED FOR LONG-TERM GROWTH Last year, we revised our operating model with the aim of providing the individual business units with the benefits of Tiger’s scale, but with sufficient autonomy, accountability and flexibility so that this benefit is not eroded by the inertia of command and control from the centre. In addition, we have embarked on a future-fit campaign, a project that aims to make the group more agile through cost containment and factory efficiencies. With cumulative cost savings in excess of R900 million over the last two years (R474 million in 2020 and R498 million in 2021), these initiatives are well-established to gain momentum. In addition, we have made significant improvements in material usage variances, reducing waste, improving factory performances and ensuring procurement savings. Factories operating optimally will restore competitiveness and improve service levels. CLEAR ACCOUNTABILITY MATRIX DRIVES CONSISTENT COST MANAGEMENT IN LINE WITH GUIDANCE (R’million) NEW MANAGEMENT TEAM; REFRESHED BOARD Tiger Brands’ management has seen some significant changes to its executive management and the board over the last few years. With Noel Doyle taking the helm as CEO – after 11 years as CFO and in other areas across the group – this created an opportunity to bring in some fresh thinking into the CFO position with the appointment of Deepa Sita in October 2020, combining the stability of institutional memory with the energy of new perspective. The board has benefited from newly appointed members with strong global and FMCG expertise. Together with a new chairman, Geraldine Fraser-Moleketi, this has helped deepen a culture of execution and accountability at the highest level. “I believe that we have a highly engaged board, that brings differing individual strengths and that is robust in ensuring accountability of the management team.” Geraldine Fraser-Moleketi, Chairman NET DEBT TO EBITDA (X) Cash has exceeded debt since FY17 0,0 (0,1) (0,2) (0,3) (0,4) (0,5) (0,1) (0,2) (0,4) (0,6) (0,7) FY17 FY18 FY19 FY20 FY21 For more information, see CFO report, page 48. 183 79 2 478 236 3 000 2 500 2 000 1 500 1 000 500 0 2 236 (732) (8) For more information, see the governance section, page 56. Group operating income FY20* OEE and factory efficiencies Material usage variance Procure- ment savings Costs relating to civil unrest and product recall Operational perfor- mance Group operating income FY21* * Group operating income from continuing operations before impairments and non-operational items. We have concluded a review of our technology requirements to ensure we are future-fit with investment planned to expand our technology and digital capabilities. ADDITIONAL STRENGTHS GROWTH AREAS › Scale: We are one of Africa’s largest FMCG companies. This allows for greater brand recognition and economies of scale. In addition, our scale provides us with opportunities to generate valuable consumer data through our customer relationship channels › Inherently defensive categories: From Bread to Personal Care, our products address consumer needs at every occasion across each part of the day and our portfolio is well placed to grow presence in most occasions › Supply base in South Africa is concentrated: This reduces supply risk and increases supplier responsiveness and innovation. › Africa: We aspire to be a pan-African business with a South African head office. The company has ambitious growth targets for the next five years, building on its established presence across the continent, targeting consumer-led category growth through carefully chosen brand investments and innovations, developing superior routes-to-markets and investing in developing supply chain capacity › Informal market: According to Trade Intelligence, the informal market in South Africa, which ranges from spaza shops to tuck shops, is valued at approximately R150 billion per year. We are developing product offerings and improving distribution strategies to expand our reach in the fast- growing informal market (general trade). For more information, see build a growth pipeline, page 43. 6 Tiger Brands Limited Integrated annual report 2021 www.tigerbrands.com Tiger Brands Limited Integrated annual report 2021 7 OVERVIEW OUR BUSINESSOUR OPERATING CONTEXTOUR STRATEGYOUR PERFORMANCEOURGOVERNANCEADMINISTRATION CELEBRATING OUR CENTENARY Founded by Jacob Frankel in 1921, with some help from business entrepreneur Joffe Marks, Tiger Brands is built on the strength of family businesses and the spirit of entrepreneurship. SA’s #1 squash 2015 1899 Oros which has now become a staple in South African households with various flavours available has been around since 1899, when Charles Brookes founded the brand. 1917 Mrs H.S. Ball’s Chutney™ was created with the Ball family crest on the top of the label. The Woodstock factory opened in 1917 to meet escalating demand of the most loved chutney in South Africa. 1819 Loved by South Africans for many generations, Crosse & Blackwell is one of South Africa’s most recognised brands, renowned for its superior quality and taste. The brand’s British roots go as far back as 1706, but the familiar name was only adopted in 1830. 1867 Rose’s lime juice was the world’s first commercially produced fruit concentrate which was patented in 1867. From 1795, due to the higher vitamin C content than any other citrus fruits, it was normal practice within the Royal Navy for sailors to receive a daily ration of lemon or lime juice. 1915 The Moni brothers started producing pasta in 1915 in Johannesburg. United Macaroni Factories was born out of a peace treaty signed between the Italian Fatti’s and Moni’s families in 1925. In 1982 Tiger Brands took over the controlling interest and became known as Fatti’s & Moni’s. 1925 Jungle Oats (originally known as Tiger Oats) was launched and produced in Moorreesburg as Tiger Brands’ first product. 1982 Barlow Rand (now Barloworld) acquires majority share in Tiger Oats through CG Smith Limited. 1998 Tiger Oats acquires ICS Holdings Limited (formerly Imperial Cold Storage and Supply Company). 2001 Tiger Brands unbundles and separately lists its animal feed and poultry operations into Astral Foods. 2006 Acquires the sugar confectionery businesses from Nestlé, including Jelly Tots. ... 1921 Founded in 1921 by Jacob Frankel, with help from Joffe Marks, Tiger Brands Limited, formerly known as Tiger Oats Limited, begins as a family business in Newtown, Johannesburg. Frankel originally started his small family business in Newtown, a thriving hub of cultural, industrial, and economic activity in a young and growing Johannesburg. In 1925 the company, then known as Tiger Oats Limited, launched a breakfast oatmeal brand called Jungle Oats which featured the iconic Tiger in the grass logo that remains a firm favourite on breakfast tables across South Africa. Two decades later, Tiger Oats Limited and National Milling Company Limited, founded by Frederick John Collier, incorporated and listed on The Johannesburg Stock Exchange in 1944, where the company retains its primary listing. In 2000, Tiger Oats was renamed Tiger Brands. Over the course of a century, our brands have been part of the moments that matter in the lives of millions of South Africans. Many have a rich and interesting history, born from the efforts of enterprising men and women, with several homegrown South African success stories. From these modest beginnings and many others, Tiger Brands grew through acquisitions and clustering of businesses that cover Food, Beverages as well as Home and Personal Care brands to become one of Africa’s largest listed manufacturers of FMCG. Our history is rich and varied, and from these stories of belief, ingenuity and perseverance we draw our inspiration as we work to nourish and nurture more lives, every day. SA’s Overall Favourite Brand 2012 and 2015 1926 Manufactured in South Africa since 1926, Black Cat peanut butter was first produced under the name Alderton Limited in Potgietersrus before it became part of the Tiger Oats Company. 1940 Established in 1940 by the Langeberg Cooperative, KOO initially produced canned fruit. Innovation has been a brand strength from the early days. A year after being established, KOO introduced canned vegetables and soon followed with the launch of tomato paste and baked beans. #1 spot for over 20 years – The Sunday Times Top Brands 1961 Tastic is an iconic staple in South African kitchens. It has held the number 1 spot in The Sunday Times Top Brands Essential Foods category for over 20 years. 1937 First formulated in 1937 for Ingram’s Pharmacy in Johannesburg by German immigrant Hans Rose, Ingram’s Camphor Cream was initially marketed by sending complimentary jars to Johannesburg Hospital, with demand soon outstripping supply. No.1 Iconic Food Brand by TGI SA 1959 Originally launched in 1908, All GOLD, South Africa’s most iconic tomato sauce, was first made by lowering muslin bags filled with herbs and spices into pots of ripe, freshly crushed tomatoes at a jam manufacturing company in Paarl, Western Cape. By 1959 demand for ALL GOLD Tomato Sauce increased countrywide and mass production began in Paarl and Langlaagte. 1970 Albany Bakeries have been dedicated to baking the freshest and most delicious products since 1970, offering superior quality and nutrition to our consumers. 2016 Disposes of TBCG. 2019 Unbundles investment in Oceana. 2008 Unbundles and separately lists Adcock Ingram. Extends African footprint by acquiring controlling stake in Haco Industries of Kenya and Chococam of Cameroon. 2011 Expands African footprint by acquiring interests in the East African Group of Ethiopia, Deli Foods of Nigeria and Davita, a South African exporter of powdered seasoning (Benny) and beverages (Jolly Jus). 1944 Tiger Oats and National Milling Company Limited are incorporated and list on the JSE. 1993 CG Smith unbundles from Barlow Rand. 2000 Tiger Oats renames to Tiger Brands. Adcock Ingram becomes wholly owned subsidiary and delists from the JSE. 2004 Tiger Brands unbundles and separately lists Spar. 2007 Expands branded portfolio further into beverages by acquiring Bromor Foods, with key brands Oros, Energade and Rose’s. 2009 Expands branded portfolio by acquiring Crosse & Blackwell. 2012 Acquires controlling interest in Dangote Flour Mills in Nigeria (Tiger Branded Consumer Goods plc – TBCG) and the Mrs Ball’s trademark. 2017 Disposes of non-core EATBI and Haco Tiger Brands. 2021 100 years of bringing brands that have made moments matter. 8 Tiger Brands Limited Integrated annual report 2021 www.tigerbrands.com Tiger Brands Limited Integrated annual report 2021 9 > GROUP PROFILE Excludes product recall and civil unrest Our core business is providing everyday branded food products to large and growing markets. We target best-in-class profitability, underpinned by a cost-conscious culture, and ESG principles to create and share value. We have leading positions in most categories and our iconic brands are well-entrenched with consumers in South Africa, as illustrated by the percentage share of market. GRAINS CONSUMER BRANDS HOME AND PERSONAL CARE EXPORTS AND INTERNATIONAL +5% +11% +4% +20% REVENUE OPERATING INCOME REVENUE OPERATING INCOME R14,6bn 2020: R13,9 billion R1,4bn 2020: R1,2 billion R11,1bn 2020: R10,7 billion R1,1bn 2020: R941 million +6% +8% +7% -7% REVENUE OPERATING INCOME REVENUE OPERATING INCOME R2,0bn 2020: R1,8 billion R433m 2020: R400 million R3,6bn 2020: R3,4 billion R96m 2020: R103 million MILLING AND BAKING › Baking MILLING › Flour › Maize › Sorghum TOP BRANDS OTHER GRAINS › Pasta › Oat-based breakfast (Jungle) › Rice GROCERIES › Condiments and ingredients › Spreads › Canned fruit and vegetables BEVERAGES › Concentrates › Sports drinks › Ready-to-drink SNACKS & TREATS › Sugar › Chocolate BABY › Nutrition and wellbeing HOME CARE › Sanitary cleaners › Pesticides PERSONAL CARE › Camphor cream and lotions › Hair care EXPORTS INTERNATIONAL OPERATIONS › Central Africa (Chococam) DECIDUOUS FRUIT › Langeberg & Ashton Food (LAF) TOP BRANDS TOP BRANDS REVENUE REVENUE OPERATING INCOME OPERATING INCOME MARKET SHARE (%)* MARKET SHARE (%)* Grains Mazie Flour Cereals Rice Dry pasta Bread * Market share limited to South Africa Source: IRi. 27 12 24 20 42 42 33 Groceries Spreads Condiments Canned fruit & vegetables Snacks & Treats Chocolate Candy Beverages Dilutables Sports drinks Ready-to-drink Baby nutrition * Market share limited to South Africa Source: IRi. 40 36 44 54 21 12 44 47 53 45 18 62 Campho r MARKET SHARE (%)* Home Care (Pest) Personal Care ● 47% ● 36% ● 6% ● 11% ● 47% ● 36% ● 6% ● 11% 47% 2019: 47% 2020: 47% 2019: 36% 2019: 6% 36% 2019: 11% 2020: 36% 2019: 47% 2019: 36% 2019: 6% 2019: 11% Grains Grains Consumer Brands – Food Grains Consumer Brands – Food HPCB Consumer Brands HPCB Exports and International Exports and International ● 45% ● 37% ● 14% ● 3% 46% ● 45% 2020: 46% ● 37% ● 14% 37% ● 3% 2020: 35% 2019: 46% 2019: 35% 2019: 15% 2019: 4% 2019: 46% 2019: 35% 2019: 15% 2019: 4% 6% 2020: 6% 11% 2020: 11% Home and Personal Care Exports and International 14% 2020: 15% 3% 2020: 4% 60 9 10 Tiger Brands Limited Integrated annual report 2021 www.tigerbrands.com Tiger Brands Limited Integrated annual report 2021 11 OVERVIEW OUR BUSINESSOUR OPERATING CONTEXTOUR STRATEGYOUR PERFORMANCEOURGOVERNANCEADMINISTRATION < Group profile continued WE CURRENTLY EXPORT OUR PRODUCTS TO 33 MARKETS IN AFRICA Own and operate 41 manufacturing sites in South Africa and Cameroon and export to 33 markets in Africa, with almost 80% of total export sales from Guinea 5 Sierra Leone Liberia priority markets: Mozambique, Zimbabwe, Zambia, Nigeria and Cameroon Manufacture Current exports Out of scope* * Botswana, Namibia, Lesotho and Swaziland are serviced by the domestic business. Tiger Brands is dedicated to growing its footprint by continuing to explore new opportunities to bring quality brands to consumers across Africa. Mali Burkina Faso Ghana Chad Sudan Niger Nigeria Central African Republic Cameroon Equatorial Guinea Congo Gabon Rwanda Democratic Republic of the Congo Uganda Kenya Tanzania Seychelles Angola Malawi Zambia Mozambique Zimbabwe Madagascar Namibia Botswana Mauritius Reunion Swaziland Lesotho South Africa 154 quality brands and products within 21 categories CHAIRMAN’S REVIEW > “ In last year’s integrated annual report, in my capacity then as chairman designate, I referred to Tiger Brands as being at a critical inflection point – with the company’s management team facing significant pressure to deliver a rapid and visible change in fortune – and to do so in the context of the pandemic and a particularly tough operating environment. One year on, and while the company has not yet crossed this inflection point, I believe that it has made some important progress in key areas of its strategy and I remain confident that it is on the right path for recovery and growth. The next two years will be critical in ensuring that Tiger Brands is able to build on its 100-year legacy and deliver on its potential. “ Geraldine Fraser-Moleketi Chairman Tiger Brands’ main market, South Africa, continues to face a very challenging socio-economic environment, with the Covid-19 pandemic exacerbating already high levels of inequality and unemployment, and further dampening GDP and wage growth. Combined with rising input costs and food inflation, this is placing profound pressure on consumers. All of us in the FMCG sector have been feeling the impact of these pressures, with the combination of reduced consumer spend and heightened competition among food producers and retailers, impacting volumes, market share and margins. The costs associated with the civil unrest that took place in July, and the precautionary recall of canned vegetable products following the early detection of defective welds, had a further negative impact on group earnings. These costs are reflected in Tiger Brands’ results this year, with group operating income and HEPS from continuing operations down 10% and 6%, respectively. Excluding the impact of the civil unrest and the product recall, group operating income increased by 20%, proving the defensive nature of the core portfolio. At financial year end an ordinary final dividend of 506 cents per share was declared. The company’s dividend policy of 1,75x cover was applied to normalised headline earnings per share, excluding the impact of the canned vegetable recall and the civil unrest. Despite the challenges faced this year and some specific areas where strategy execution has fallen short of expectations – most notably in Milling and Baking, and Exports – there has been valuable progress in some of the company’s critical strategic drivers, particularly in improving operational performance, realising efficiencies within the supply chain and in delivering on product quality and food safety objectives. For Tiger Brands to turn the corner and produce the necessary step change in performance – and at most, we have two years to do so – the company will need to build substantially on its recent foundational work in striving to instil a high- performance culture, supported by best-in-class capabilities. We all know that “culture eats strategy for breakfast”. For too long the company has been playing it safe; the Tiger has been complacent, sitting in the sun. It’s time for the Tiger to start hunting – to develop a bolder, hungrier, more aggressive and creative mindset, to be out there in the trade, finding the entry points and driving the innovations that will enable the company to fulfil its growth aspirations and do justice to its rich history and 100-year legacy. The management team is fully aware of the challenges that lie ahead, the tough decisions to be taken, 12 Tiger Brands Limited Integrated annual report 2021 www.tigerbrands.com Tiger Brands Limited Integrated annual report 2021 13 OVERVIEW OUR BUSINESSOUR OPERATING CONTEXTOUR STRATEGYOUR PERFORMANCEOURGOVERNANCEADMINISTRATION Chairman’s review continued and the work to be done in driving a more aggre ssive approach to both organic and inorganic growth. EMBEDDING A CULTURE OF FOOD SAFETY AND QUALITY An important area of progress this year has been the company’s drive to enhance product quality and ensure consumer safety. As Africa’s largest food producer, we recognise that we have an incredible responsibility to strengthen regional food security, improve nutrition and strive to maintain the highest levels of food safety and quality. Following the tragic listeriosis incident in February 2018, the board has maintained a heightened focus on driving a sustained improvement in Tiger Brands’ food safety and quality practices and on strengthening the quality of reporting and board oversight. The company has continued to make progress in embedding a strong quality culture and in implementing robust management and auditing systems, both across its own operations and among its suppliers and third-party manufacturing partners. It is pleasing to see that against some key metrics there have been marked improvements this year, with a 25% reduction in consumer complaints and a 40% reduction in marketplace incidents. Within Tiger Brands’ own operations, the company has implemented necessary critical control measures in identified high-risk areas, introduced new automation and in-line inspection technologies, and continued to conduct quarterly self-assessments against the Global Food Safety Initiative requirements. All of Tiger Brands’ manufacturing facilities maintained their certifications this year against either the globally recognised Food Safety System Certification (FSSC 22000) or the Hazard Analysis and Critical Control Points (HACCP) system. In terms of suppliers, the product recall in our canned vegetable range, after the company identified a latent defect in a supplier’s cans, was of course a great disappointment. Tiger Brands acted quickly and decisively in recalling the cans, ensuring a strong precautionary approach to minimise any potential impact on public health. Various measures have subsequently been taken to strengthen the quality assurance processes of suppliers, including introducing a new supplier quality accreditation protocol and a more robust supplier audit programme, working with suppliers to proactively close any identified gaps. DISAPPOINTING PROGRESS IN AFRICA Tiger Brands’ aspiration is to be a truly pan-African business with a South African head office. The company has ambitious growth targets for the next five years, building on its established presence across the continent, targeting consumer-led category growth through carefully chosen brand investments and innovations, developing superior routes to markets, and investing in developing supply chain capacity. As I mentioned in last year’s report, I believe that these are credible and appropriate ambitions. Some of the most exciting growth opportunities are in markets across Africa, where we are likely to see stronger levels of economic growth than in South Africa. While I appreciate that some investors and board members might be cautious – given Tiger Brands’ and other South African companies’ recent experiences on the continent – I believe that the company is correct to expand its current export strategy, learning from past mistakes and building on the success in Cameroon. Given this context, it has been disappointing for me to see the performance this year in the Exports portfolio, where I expected us to do much better. I have spent time this year visiting some of our operations, meeting with management teams and service providers and seeing first-hand the challenges on the ground. While some of the performance disappointments have been a result of headwinds beyond our control, there are clear areas where the company has underperformed, reflecting challenges both in our business model and in the execution of our strategy. The board and the management have reflected on the experiences learned and are taking various steps to ensure improved performance, recruiting the right skills, developing an innovation pipeline, investing in improving overall equipment effectiveness in key operations and building distributor management capabilities. ENCOURAGING ESG AND SUSTAINABILITY PERFORMANCE In the context of the recent significant increase in investor interest and engagement on environmental, social and governance (ESG) issues, it has been pleasing to see the continuing progress the company has been making in delivering on its sustainable future strategy, and on its commitments in each of its three strategic focus areas: health and nutrition, enhanced livelihoods, and environmental stewardship. APPRECIATION This has been a stimulating and rewarding first year as chairman of the Tiger Brands’ board. I would like to thank all my colleagues on the board for their support and insight in fulfilling our governance responsibilities, as well as all the Tiger Brands’ executive committee and employees for their efforts in striving to deliver value in this particularly challenging environment. Geraldine Fraser-Moleketi Chairman 18 November 2021 GOVERNANCE AND ACCOUNTABILITY There have been several changes to the board this year. In February, Mr Makhup Nyama retired from the board, after 10 years of service, and in June Mr Ian Burton resigned from the board, stepping down as chairman of the investment committee. Ian has subsequently entered into an agreement to provide consulting services to the company, enabling us to access his valuable insight and extensive FMCG experience. Looking ahead, Ms Maya Makanjee will be stepping down as independent non-executive director, and as chairman of the social, ethics and transformation committee with effect from 31 December, and Mr Mark Bowman will retire from the board, and as chairman of the remuneration committee immediately following the AGM in February 2022. Both have been on the board for more than 10 years; the board extends our gratitude to each of these departing members for their valuable contribution and wish them well in their future endeavours. I believe that we have a highly engaged board, that brings differing individual strengths and that is robust in ensuring accountability of the management team. Following the recent and imminent departures of some longstanding board members, we will be announcing some new appointments shortly, where we will be looking to bring in valuable new skills, experience, and insights, particularly in the FMCG and retail sectors, as well as ideally on ESG issues. Tiger Brands has launched several new healthy and affordable products, improved its labelling to accommodate more nutrition information, and run a television campaign in partnership with KOO and SABC 2 to promote healthy home-cooking, supported by further investment in our Eat Well Live Well programme. Significant further strides have been taken in promoting economic inclusion and food security through the company’s enterprise and supplier development fund, preferential procurement activities and ongoing investments in socio- economic development. In addressing some of the more immediate food security challenges in poor communities, the Tiger Brands Foundation has continued to make a meaningful impact to the nutritional needs of learners, students and vulnerable families across the country. As a large food company, we recognise our significant responsibility in responding to the climate change challenge; globally the food sector is both one of the largest contributors to greenhouse gas emissions and also potentially one of the most vulnerable. While it is encouraging to see the company’s progress this year in improving energy and water efficiency, reducing GHG emissions and striving for zero waste-to-landfill operations, more still needs to be done to fully integrate this thinking across the organisation. I encourage you to read the separate sustainability report which reviews the company’s progress in addressing its most significant ESG impacts in more detail. 14 Tiger Brands Limited Integrated annual report 2021 www.tigerbrands.com Tiger Brands Limited Integrated annual report 2021 15 > WACC 12,2%. Ensuring sustainable growth in financial capital sometimes involves significant capital investments in the short term – for example to maintain and optimise plant and equipment, invest in research and development (R&D), and develop employee talent – or alternatively involves divesting from certain businesses and/ or closing of manufacturing plants. Some of these activities to optimise financial capital may be more efficient and have positive benefits in terms of safety and the environment, but come at the cost of employment opportunities, undermining social capital and contributing to broader downward trends in consumer spend. The trade-off between delivering short-term results – to enhance investor sentiment and attracting necessary financial capital – against the need to deliver longer-term sustainable growth, is one of the more challenging trade-offs affecting businesses generally. intensity down by 15%. Challenges remain in certain areas: xWater intensity up by 6% xPost Covid-19 global supply chain squeeze. Natural capital is a critical input for our activities. Our means of generating value across the other capitals unfortunately often involves some negative impact on natural capital, sometimes only evident in the longer term. The global food system is recognised as having a significant impact on biodiversity and habitat loss, climate change and packaging pollution, placing direct pressure on some of the resources we depend on, and increasing consumer and regulatory pressure for more sustainable business practices. Given our dependency on natural capital, as well as the potential impact on reputational capital, we strive to minimise environmental impacts by investing in mitigating measures in our processes, products and packaging. These measures may themselves have trade-offs – for example using more packaging to reduce food waste, or investing in carbon-efficient technologies that reduce jobs. Balancing these trade-offs is an important challenge affecting all businesses in resource- related sectors. SEE PAGE 40. SEE PAGE 48. SEE SUSTAINABILITY REPORT. 22 Tiger Brands Limited Integrated annual report 2021 www.tigerbrands.com Tiger Brands Limited Integrated annual report 2021 23 > OUR OPERATING ENVIRONMENT Changing dynamics in our operating environment shape our ability to create value and deliver on our purpose. We have identified five core trends that have a material bearing on our business model and strategy. Our updated strategic priorities have positioned the company to respond effectively to the risks and opportunities emerging in association with each of these trends. WEAK MACRO-ECONOMIC FUNDAMENTALS We track and review changes in the macro-economic environment, as we would benefit from a strong economy and healthy consumer demand. The tough macro-economic environment has resulted in reduced demand for discretionary and premium products, shifting demand to value offerings, and increasing competition. Volumes and margins are threatened, and cost recovery ahead of inflation remains a challenge. The impact of these developments was exacerbated by the civil unrest and looting in South Africa, as well as operational challenges that include employee unrest across several operations. On a positive note, the government has released economic stimulus capital, further opened the door to independent power producers, and allowed the private sector to participate in improving rail and port infrastructure. For consumers, the renewal of the social relief of distress grant until March 2022 will help bolster consumer confidence for low-income households. CONSUMER CONFIDENCE VS HOUSEHOLD EXPENDITURE (quarterly change year-on-year) 16 12 8 4 0 (4) (8) (12) (16) (20) (0,1) (0,2) (0,3) (0,4) 2016 2017 2018 2019 2020 2021 FNB/BER consumer confidence index Final consumption expenditure by households – Stats SA 40 30 20 10 4 0 (10) (20) (30) (40) (50) OUR STRATEGIC RESPONSE › To meet the growing needs of the value-conscious consumer, we are driving our relevance in the value segment through innovation and renovation to meet value-specific consumer needs, highlighting the benefits of our current brands through marketing best practice and delivering commercially viable opportunities to manufacture private label products to our benefit › We have introduced a more systemic approach to delivering cost saving and efficiencies across the business, changing the governance structures, improving accountabilities, strengthening our central revenue management capability within each of our business units, and improving our stock-keeping unit (SKU) rationalisation; these various initiatives have contributed to R498 million in savings this year › We are driving long-term cost savings and improved productivity across our supply chain, investing in world-class manufacturing operations, improving our procurement capabilities, and approving an ambitious logistics transformation programme to be executed over the next three years › We have further strengthened our activities to boost economic opportunities and improve the livelihoods of thousands of people across our value chain, including through a deliberate focus on supporting black/black-women farmers and owned enterprises. AN INCREASINGLY COMPETITIVE MARKET We are inspired to meet the shifting needs of consumers, and beat our competitors, by harnessing our capabilities to bring innovative new products to market with speed and agility. The maturing food retail environment in South Africa remains particularly competitive, both among food producers and within distribution channels. New producers are establishing strong premium brands and successful niche products, challenging traditional market leaders, and placing significant pressure on industry margins. While supermarkets remain the leading distribution channel in packaged food, the channel is seeing strong competition from mixed and wholesale retailers, independents, and emerging informal players. Food retail generally has diversified, with increasing online engagement and digital sales. Retailers have hardened their procurement practices, and in many instances built successful private labels on core staples and key niche products. As convenience and value have become key drivers of consumer choice, and informal players capture consumers closer to home, a shift to alternative pack formats has enabled market expansion and affordable price points. Heightened promotional activity has undercut margins, runs the risk of damage to price perception, and inspired competition and differentiation towards richer value propositions that threaten brand dominance. Innovation and speed-to-market is increasingly necessary to meet consumer trends and gain market share. The pressure on food safety governance and management has mounted, as has the need and benefit of adopting digital technologies and new ways of working to drive smarter, more efficient operations. While digitalisation brings valuable performance benefits, it also brings cyber security risks. These various dynamics reflect the complexity of the market and the relentless intensity of competition. In this context we are challenged to reinvent our historic brand advantage, and to ensure the sophistication of our operations, but are inspired to build our agility and capability for innovation. OUR STRATEGIC RESPONSE well as building our "Big Brand" image and consumer intimacy and loyalty identified opportunities to optimise our product portfolio and respond to the growth in private label › We have enhanced our research and analytics, strengthened our monitoring of customer and brand strategies and performance, and › We have invested in strengthening innovation, focusing on fewer and larger innovation projects – on value, nutrition and convenience – as › We are developing product offerings and distribution strategies to expand our reach and target faster growth in the emerging informal market › We have strengthened our customer marketing teams, invested in category management resources and tools to enhance in-store execution, and established key account forums and joint business plans with major customers. We are introducing legally compliant, fair and equitable trading terms that are performance and behavioural-based. (general trade) CHANGING CONSUMER EXPECTATIONS We continuously adapt to the changing needs of consumers who demand connectivity, convenience, quality, affordability, taste, health and sustainability. Shifting patterns of consumer behaviour are leading to significant changes in the food system, driven by increasing urbanisation, digital connectivity and mobility, the rising number of single households, and changing personal priorities. Dietary shifts reflect these changing global patterns and economic aspirations, with growing public health concerns offset by the consistent uptake of processed products, and convenience foods, snacks and beverages. In the emerging post-Covid-19 environment, consumers across income-groups are typically shopping less frequently, across fewer categories, and at fewer retailers, for bigger baskets. E-commerce channels have become markedly more important for middle and higher-income groups. The practice of home cooking, stocking pantries, and extending product life has increased broadly, along with momentum towards more health-conscious purchasing. Middle and high-income consumers are increasingly sensitive to the social and environmental practices of retailers, brands and products. The profile of goods favoured has shifted for each income-group, with consumers needing to spend more for the same, driving growth in value for food businesses but lower growth in volumes. The overriding rise in the price-consciousness of consumers has increased demand for value and affordability. The increase in health-consciousness has increased product scrutiny and an emerging social and environmental-awareness is prompting the search for added value. These multifaceted shifts in consumer needs present a significant opportunity for innovation. OUR STRATEGIC RESPONSE process innovation and to optimise our product portfolio › Our consumer and market insights team tracks market and consumer behaviour and preferences to identify opportunities for product and › We have appointed an innovation director who is reworking our innovation practices and methodologies to drive a step-change in › Given recent and anticipated growth in the e-commerce channel, fuelled in part by the pandemic, we are working to raise our online innovation performance, with innovation opportunities currently being realised in areas such as snackification, value and health and wellness 24 Tiger Brands Limited Integrated annual report 2021 www.tigerbrands.com Tiger Brands Limited Integrated annual report 2021 25 presence and become the preferred supplier to priority e-commerce partners. OVERVIEW OUR BUSINESSOUR OPERATING CONTEXTOUR STRATEGYOUR PERFORMANCEOURGOVERNANCEADMINISTRATION Our operating environment: material trends continued PRESSURE TO IMPROVE ESG PERFORMANCE We acknowledge the growing interest from investors and stakeholders on our ESG performance and recognise the importance of building an ethical and sustainable business practice. Increasing consumer and investor activism on ESG issues, and emerging regulatory interventions, reflect a growing concern to address the negative nutritional, health and environmental outcomes of the food system, placing greater pressure for industry action, transparency and accountability. Globally, the food system has been identified as “the single strongest lever to optimise human health and environmental sustainability*”. Locally, South Africa has profound food-related health challenges, characterised by high levels of obesity, lifestyle-induced non-communicable disease (NCD), and persistent hunger and malnutrition. The SDGs provide a benchmark for clear targets and an increasing number of global industry initiatives demand collective action. Enhanced regulatory and voluntary interventions have introduced new marketing, health and environment-related control mechanisms, regulations and taxes. An increased threat of litigation threatens resources and reputation. Higher-income consumers are more willing to trade-off on price for health and sustainability, with increasing demand for brands-with-purpose, sustainable and local products, plant-based proteins, ethical marketing and front-of-pack nutrition labels. These shifts challenge some traditional business approaches and encourage the adoption of purpose-led innovation. We are increasingly pressured to align with global agreements and voluntary initiatives, proactively address environmental impacts, accelerate social transformation and prioritise value creation that aligns with public health interests. * EAT/Lancet Commission (2019) Food Planet Health OUR STRATEGIC RESPONSE › We have made further progress this year on our commitment to enabling consumers to improve their health and wellbeing, refreshing our Eat Well Live Well programme, updating our nutritional standards to align with globally recognised guidelines, and taking deliberate steps to prioritise health and nutrition in our innovation pipeline › We have continued to invest significantly in driving quality and food safety across the company to ensure that we have robust management systems, qualified people and a strong quality culture, further strengthening our audit and assessment processes, achieving external certification for all our manufacturing facilities against globally recognised food safety standards, and made valuable progress in securing certification for our warehouses › We are striving to reduce our environmental impact through innovative solutions, including optimising energy and water usage, developing innovative products and packaging, leveraging our brand and marketing, and implementing circular economy initiatives that stimulate economic opportunities › We are continuing in our efforts to improve the livelihoods of thousands of people across our value chain, using our procurement practices and our investment in supplier and enterprise development, to stimulate economic opportunities, including through a specific focus on supporting black/black-women farmers and owned enterprises. PERSISTENT IMPACTS OF THE COVID-19 PANDEMIC We have responded effectively to the prolonged impacts of a persistent pandemic by re-allocating capital and capacity to protect our people and business operations. The Covid-19 pandemic had a material impact on all business across the food producer sector, despite much of the sector being classified as an essential service. The pandemic has increased complexity in the operating environment and amplified existing macro-economic challenges, placing further pressure on consumer spending and driving changes in consumer needs and expectations. It has impacted local and global supply chains, increased the costs of production, contributed to production setbacks, and presented new challenges in terms of employee engagement and wellbeing. The rise of new Covid-19 variants, the slow vaccination roll-out in South Africa, and a potentially widening gap between the recovery of developed and emerging markets, means that the Covid-19 pandemic will continue to impact the economy and directly shape our plans and prospects for the next few years. OUR STRATEGIC RESPONSE › During the stringent lockdowns we worked with suppliers, logistics and customers to limit disruptions in essential food supplies, supplemented by effective communication to address concerns around food security › We have prioritised the safety and wellbeing of employees, requiring remote working where possible, and introducing health screening and testing for staff at essential service sites, accompanied by numerous other measures to ensure employee wellbeing › Although global raw material availability may impact supply levels in some categories, we are generally well-placed to meet demand and increase production capacity on key products if needed. OUR KEY RELATIONSHIPS We have a structured stakeholder relations strategy in place to ensure a consistent and proactive approach to engagement across the group. In 2017, we undertook a dedicated engagement process to develop a baseline appreciation of stakeholders’ perceptions regarding our existing engagements and to identify opportunities to foster increased inclusivity. Since October 2018, we have been working with various stakeholder groups to develop and implement site-specific stakeholder engagement plans. During 2020, we started the programme of engaging with host communities and partnering with non-governmental organisations (NGOs) to undertake social-mapping exercises. These have not yet been completed due to the prevailing Covid-19 circumstances. We will resume with these earlier in the next financial year, enabling us to be more responsive to specific community needs and to inform the development of sustainable impact programmes for beneficiary communities. In the table below, we identify those stakeholder groups that have a substantive impact on our ability to create value, briefly outlining their contribution to value creation, our means of engaging with them, and each stakeholder group’s primary interests relating to our business activities. Although we appreciate that there is often substantial diversity of perspective and interest within each group, we believe that the interests listed below are a sufficiently accurate reflection of each group’s most material interests regarding Tiger Brands’ activities and performance. EMPLOYEES Provide the capability, experience and innovation required to deliver on our business strategy Eat Well Live Well How we engage employees › CEO engagements › Virtual and face-to-face executive leadership engagements › Internal website › ROAR App specifically designed for employee communication and engagement › Digital communications › Employee hotline › Site engagements › One-on-one consultations › Focus groups. What is important to employees › Talent and career management › Rewards › Strong internal engagement › Cross-functional teamwork and collaboration › Diversity, inclusion and equity › Recognition and feedback › Work-life balance and wellbeing › Opportunities to innovate and challenge the status quo. Responding to employee interests (pg 45) › Our people strategy and operating model seeks to address each one of our employee issues directly › Employee feedback is solicited through our Voice of Tiger engagement and employee experience survey and pulse which is conducted across all our sites in six languages › Specific actions to address key feedback areas › Fit-for-purpose people processes focusing on talent, capability development, leadership, rewards, wellbeing, engagement and culture › Our THRIVE employee wellbeing programme directly supports employees and their families by proactively managing their physical, emotional and mental wellbeing. CUSTOMERS Our retail and wholesale customers provide consumers with ready access to our product How we engage customers › Top-to-top meetings › Category presentations to provide customers with category insights › Growth workshops to ensure plans are in place a quarter in advance › Business forums › Joint business planning. What is important to customers › Trading terms that are fair and equal › Stock availability › Competitive pricing › Continuous promotional support. Responding to customers interests (pg 43) › Various customer engagements undertaken to ensure clarity on expectations, including through jointly developed business plans › Various innovations undertaken to ensure we continue to win at the point-of-sale (POS) › Differentiated promotions based on basket associations, including value promotions to meet consumer needs in a tough economy. 26 Tiger Brands Limited Integrated annual report 2021 www.tigerbrands.com Tiger Brands Limited Integrated annual report 2021 27 > OUR STRATEGY DELIVERING ON OUR PURPOSE Tiger Brands is one of Africa’s largest listed manufacturers of FMCG. Our core business is the manufacture, marketing and distribution of everyday branded food and beverages. Our products are relevant across every meal occasion and are well positioned to grow. The portfolio also includes leading brands in the home and personal care segments and we have a growing presence in Africa. DELIVERING ON OUR PURPOSE: OUR STRATEGY MEET THE NEEDS OF THE CONSUMER OPTIMISE OUR SUPPLY CHAIN › Value › Health and nutrition › Snacking › Sustainability. › World-class factories › Seamless logistics › Advanced procurement. BUILD A GROWTH PIPELINE IGNITE OUR PEOPLE › Leadership, capability and culture. › Innovation enablement › Adapt to evolving channels › Future-proof our categories › Restage the Rest of Africa. BE OBSESSED ABOUT COST SAVINGS AND EFFICIENCIES › Supporting systems › Revenue growth management › Cost benchmarking and zero-based budgeting › Continuous improvement. OUR VALUES We treat each other with care and respect We deliver with passion and  excellence Safety and quality are non- negotiable for us We embrace diversity  and inclusivity We act with integrity and accountability in all we do WINNING BEHAVIOURS Consumer obsession Teamwork Empowered accountability Focused execution PERFORMANCE SUMMARY 2021 ✓ Driven value-for-money innovations in certain categories to meet more affordable price points ✓ Introduced new healthier product lines in the Snacks, Baby and Personal Care categories, and relaunch of a lower calorie drinks product, with further significant launches imminent in health and snackification ✓ 25% reduction year-on-year in consumer complaints ✓ In the interest of public health, implemented a product recall after identifying a defect in supplied cans ✓ R14 billion BBBEE supplier spend ✓ R6 billion on black-owned enterprises ✓ Strengthened investment in community food and nutrition during pandemic. MEET THE NEEDS OF THE CONSUMER To protect and enhance our brand leadership, and to realise growth opportunities in a post-Covid-19 operating context, we are implementing measures to meet and beat the current and anticipated needs of our consumers. We are delivering market-leading consumer relevant solutions to meet the needs of the value conscious consumer, to realise commercial opportunities in health, nutrition and snackification, and to respond to changes in in-store shopping dynamics and heightened consumer sensitivity to sustainability issues. MEETING THE GROWING NEEDS OF THE VALUE-CONSCIOUS CONSUMER We recognised that to effectively meet the needs of the value-seeking consumer, we needed to take a combination of deliberate steps to be successful and deliver explicit value in price points as well as the total value equation. Last year, the board approved a clear value-trend strategy for the business, with three key focus areas: driving our relevance in the value segment by building the clear benefits of our current brands through marketing and communication best practice; driving innovation and renovation to meet value-specific consumer needs; and identifying and delivering commercially viable opportunities to manufacture private label products to our benefit. Although we have made some progress this year in each of these focus areas, this has not yet had a material impact on business performance, with many of the initiatives only landing in the last quarter. In addition to a recent value-led marketing campaign, we have driven value-for-money innovations in certain categories to meet more affordable price points, including new value packs in bread, chutneys, KOO (canned food), and in Personal Care categories. Given the continued growth in the sale of private label products in South Africa, including in some of our priority product categories, this year we have defined clear guidelines 34 Tiger Brands Limited Integrated annual report 2021 www.tigerbrands.com Tiger Brands Limited Integrated annual report 2021 35 OVERVIEW OUR BUSINESSOUR OPERATING CONTEXTOUR STRATEGYOUR PERFORMANCEOURGOVERNANCEADMINISTRATION Meet the needs of the consumer continued around engagement with customers in this regard, clarified the private label manufacturing decision-tree, and identified some specific private label manufacturing opportunities in key categories with relevant customers. Next year we should see the positive outcomes of this year’s projects, and we have plans for additional innovations and initiatives in the value space. Delivery of these initiatives will be aided by the accelerated rollout of revenue management aimed at optimising promotional activity, cost savings projects that help keep prices competitive, and our strategy for competing effectively in the deep discounter channel (see page 48). REALISING THE COMMERCIAL OPPORTUNITIES IN HEALTH AND NUTRITION As Africa’s biggest food company our health and nutrition agenda is integral to our corporate purpose to nourish and nurture more lives every day. We believe that there are valuable opportunities for business growth in leading the health and nutrition agenda in South Africa and across the continent. We are looking to realise these commercial opportunities through our health and nutrition strategy. The strategy has been in play for more than 18 months and remains particularly relevant given the state of nutrition in South Africa, as well as pending labelling and marketing regulations. We have recently revised the strategy to include a focus on commercialisation in a bid to drive stronger awareness and actions in favour of this portfolio of products. RESPONDING TO THE SNACKIFICATION TREND Earlier this year we commissioned comprehensive proprietary research on snacking trends in South Africa; this research supports global statistics that indicate that snacking is on the rise, particularly among younger consumers. Through qualitative and quantitative assessments, we have identified and sized five target platforms, and agreed an ambitious strategy to realise the growth opportunities in this trend. We are targeting this potential through our innovation pipeline, and through potential inorganic growth opportunities. Among other initiatives, we have launched the Black Cat brand (in countline bars and slabs) as our third power brand, joining Jungle Energy and TV Bar. ENHANCING SUSTAINABILITY THROUGH IMPROVED ESG PERFORMANCE Our sustainable future strategy supports delivery on our core purpose, communicates our forward-looking approach to sustainability, and orients the business towards improved ESG performance. The strategy addresses our most material ESG impacts, and articulates our societal value-proposition through our commitments to protecting and creating social, economic, and environmental value. The strategy includes four key focus areas: › Renovating our existing product range to make more of our products compliant with our “Eat Well Live Well” standards, while striving towards global best practice › Innovating within our existing brands and through new brands to develop more nutritious, affordable food products › Educating consumers, in partnership with government, academia and NGOs, in a manner that allows them to make better informed decisions about their wellbeing › Commercialising our portfolio to drive growth. We made some progress this year in delivering on this strategy, particularly in the education area with the launch of the second Eat Well Live Well State of Nutrition in South Africa report. We launched new healthy product lines in the Snacks, Baby and Personal Care categories, relaunched a lower calorie drinks product and introduced clear and simple consumer relevant health claims in various brands. Looking to the year ahead, our innovation pipeline programme is focused on filling this territory; while several renovations are underway, we anticipate this to become a more active space as the front of pack labelling regulations become firmer. 36 Tiger Brands Limited Integrated annual report 2021 www.tigerbrands.com Tiger Brands Limited Integrated annual report 2021 37 > FINANCIAL REVIEW “ Cash generated from operations increased by 34% to R4,0 billion. This included an overall improvement in working capital requirements despite the group’s conscious decision to increase inventory levels across the portfolio in anticipation of Covid-19 related and other supply chain disruptions.“ Deepa Sita Chief financial officer Total revenue from continuing operations (excluding the product recall and civil unrest) increased by 5%, underpinned by price inflation of 7%, which was partially offset by an overall volume decrease of 2%. As a result of the costs related to the product recall and civil unrest, operating income from continuing operations1 declined to R2,2 billion from R2,5 billion the previous year, with gross margin and operating margin declining to 28,5% (2020: 30,1%) and 7,2% (2020: 8,3%), respectively. In addition, naked margins came under pressure due to the high level of agricultural commodity cost push not being fully recovered in selling prices. However, this was offset by a steady improvement in manufacturing efficiencies, resulting in a marginal improvement of overall gross margins (excluding the product recall and civil unrest) to 30,3% from 30,1% in the prior year. Operating income1 (excluding the product recall and civil unrest) increased 20% to R3 billion. The impairment charge in the current period of R154 million relates primarily to property, plant and equipment in the Deciduous Fruit business. Net financing costs for the year amounted to R54 million (2020: R97 million), benefiting from lower interest rates and lower average debt levels, due primarily to improved debtor collections. A foreign exchange loss of R9 million was recorded due to the significant strengthening of the rand against other major currencies during the year under review. This negatively impacted the translation of foreign currency cash balances, relative to a net foreign exchange profit of R40 million reported last year. Income from associates decreased by 2% to R346 million despite an improved performance from all three associate companies in local currency. National Foods’ reported outcome, which has been accounted for in line with IAS 29 Financial Reporting in Hyperinflationary Economies was adversely impacted on currency translation. As previously reported, Tiger Brands disposed of its 49% shareholding in UAC Foods effective 1 September 2021. The loss on sale of UAC amounted to R11 million. The effective tax rate before impairments, non-operational items and income from associates, declined from 32,0% to 29,1%, largely due to an increased benefit in respect of special investment allowances claimed on qualifying capital projects in the current year as well as lower non-tax deductible expenditure. Earnings per share (EPS) from continuing operations increased by 21% to 1 070 cents (2020: 886 cents), while headline earnings per share (HEPS) from continuing operations declined by 6% to 1 127 cents (2020: 1 196 cents). EPS from total operations increased by 87% to 1 142 cents (2020: 612 cents), and HEPS from total operations increased by 20% to 1 127 cents (2020: 940 cents). The relatively higher rates of increase in EPS from total and continuing operations, compared to the year-on- year percentage changes in HEPS, are primarily due to the significant impairment charges of R603 million recorded in 2020, all of which related to continuing operations. These impairment charges were excluded from the calculation of HEPS. The increase in HEPS from total operations is primarily due to the losses recorded in Value Added Meat Products (VAMP) in 2020 compared to a small profit in the year ended 30 September 2021. Consistent with the previous year, VAMP has been treated as a discontinued operation. The total after tax profit for the year from discontinued operations amounted to R120 million (2020: R453 million loss). This primarily relates to the release of foreign currency translation reserves following the closure of Deli Foods as well as profit on the sale of trademarks, property, plant and equipment at Deli Foods and VAMP. SEGMENTAL OPERATING PERFORMANCE Domestic revenue in the second half was adversely impacted by volume declines across the Grains portfolio, Groceries and Snacks & Treats, compounded by lower overall price inflation relative to the first half. Despite the muted second half growth, Domestic revenue for the year increased by 5% to R27,6 billion, driven by price inflation of 8% which was marginally offset by overall volume declines of 3%. The effective containment of costs together with an improvement in production efficiencies, resulted in positive operating leverage, with Domestic operating income1 (excluding the product recall and civil unrest), increasing by 19% to R2,9 billion. Total revenue for the Exports and International businesses increased by 7% to R3,6 billion. This was primarily attributable to a strong start to the year as our Exports division resumed trade in Nigeria following resolution of the trademark dispute with a former distributor. The second half, however, proved challenging for Exports, the Deciduous Fruit business, as well as our operation in Cameroon. Operating income for the year reduced by 7% to R96 million as a result of increased losses in Deciduous Fruit. Further details of the performance of our operations are provided in our operational review. SEE PAGE 50. CASH FLOW AND CAPITAL EXPENDITURE Cash generated from operations increased by 34% to R4,0 billion. This included an overall improvement in working capital requirements despite the group’s conscious decision to increase inventory levels across the portfolio in anticipation of Covid-19 related and other supply chain disruptions. The group ended the year in a strong net cash position of R2,2 billion (2020: R1,8 billion). Total capital expenditure increased 8% to R1,0 billion, with replacement capex amounting to R762 million (2020: R659 million) and the balance relating to expansionary projects. For the year under review, ROE increased to 12,7% from 9,0% last year. Similarly, ROIC improved to 12,1% from 11,2% relative to the WACC of 12,2% (2020: 12,8%). The year-on-year improvement in both metrics was driven by higher after-tax earnings. RONA decreased to 19,3% from 21,1% due to increased capital expenditure, compounded by the adverse impact of the product recall and civil unrest on operating income. Excluding the cost of the product recall and civil unrest, ROE, ROIC and RONA increased to 16,1%, 15,3% and 25,7%, respectively. CLASS ACTION UPDATE As previously reported, the awaited subpoena appeal relating to the request by the company for various third parties to provide epidemiological information required for the Class Action lawsuit was finally heard by the Supreme Court of Appeal on 5 November 2021. Judgment is not expected to be handed down before the end of this calendar year. The parties continue to attend to pre-trial preparations, including discovery in terms of the Rules of the Court. FINAL ORDINARY DIVIDEND The board declared a final ordinary dividend of 506 cents per share for the year ended 30 September 2021. This, together with the interim ordinary dividend of 320 cents per share, brings the total dividend for the year to 826 cents. In light of the company’s ungeared balance sheet and strong cash generation, this year’s total dividend was calculated on adjusted headline earnings. Consequently, HEPS was adjusted to exclude the impact of the product recall and the civil unrest, which took place in July this year. The company’s dividend policy of 1,75x cover has therefore been applied to HEPS after the aforementioned adjustments. Shareholders are referred to the accompanying dividend declaration for further details. SEE PAGE 83. OUTLOOK We expect the constrained consumer environment to negatively impact demand, while global supply chain constraints may spill over into the domestic environment. Against this backdrop, we are encouraged by the meaningful progress made in terms of optimising our supply chain and driving cost saving initiatives, all of which are expected to gain momentum. Our long operating history and portfolio of strong brands, coupled with our ongoing focus on leveraging continuous improvement opportunities, position us well to deliver an improved overall performance in the year ahead. APPRECIATION I wish to thank Noel and my colleagues on the executive committee, the audit committee and the board for their support and guidance during my first year as CFO. I also wish to thank the finance department who continuously strive to deliver best practice and improved disclosure. Finally, thank you to our shareholders for their investment and meaningful engagement. Deepa Sita Deepa Sita Chief financial officer 18 November 2021 48 Tiger Brands Limited Integrated annual report 2021 www.tigerbrands.com Tiger Brands Limited Integrated annual report 2021 49 1 Before impairments and non-operational items 1 Before impairments and non-operational items OVERVIEW OUR BUSINESSOUR OPERATING CONTEXTOUR STRATEGYOUR PERFORMANCEOURGOVERNANCEADMINISTRATION Price increases coupled with improved efficiencies resulted in operating income in Other Grains increasing significantly to R353 million (2020: R114 million). 54% 2020: 56% Mill Bake REVENUE BY SEGMENT ● 54% ● 6% ● 7% ● 9% ● 4% ● 20% 6% 2019: 54% 2020: 6% 2019: 6% 7% 2019: 7% 2020: 7% 2019: 9% 2019: 4% 9% 2019: 18% 2020: 9% Breakfast (Jungle) Mill Bake Breakfast Sorghum Sorghum- based products Pasta Mazie Maize Rice 4% 2020: 4% 20% 2020: 18% Pasta Rice Revenue in Other Grains increased by 13% to R4,5 billion, comprising price inflation of 15% and an overall volume decline of 2%. Despite the impact of the civil unrest on the Rice business, its timely return to normal operations helped to ensure that it sustained its strong first half performance. As a result, the Rice business delivered a strong year-on-year improvement, underpinned by higher selling prices and sound cost management. Following muted revenue growth in the first half, Pasta volumes benefited as consumer behaviour favoured the category. Improved demand coupled with strong in-store execution resulted in Fatti’s & Moni’s gaining market share. Although growth in its core oats offering was sustained in the second half due to a successful winter campaign, an adverse mix impacted Jungle’s overall second half performance. Nonetheless, Jungle achieved a pleasing full-year performance. OPERATIONAL REVIEW GRAINS* PERFORMANCE SUMMARY Maize recovers in the second half to deliver positive full year result Consumer-centric innovation: Albany Xtra loaf, Tinkies mini value pack and Golden Cloud carrot cake mix Revenue in Other Grains increases to R4,5 billion Fatti’s & Moni’s gains market share Adverse bread category dynamics persist; Albany holding its premium; focus on volume share recovery Sorghum-based products experienced difficult year STRATEGIC OUTLOOK Our vision is to remain a leader in Milling and Baking. Our identified priorities over the medium term are to lead innovation and continue to build on our brand purpose that effectively differentiates Albany, while focusing on enhanced supply chain efficiencies. We will also be investing in maintaining superior route-to-market execution. In other segments of Milling and Baking we will seek to differentiate the brands, strengthening their visibility as tasty, quality nutrition, with strongholds developed and maintained in targeted geographies. In the ready-mix category, we aim to continue to lead the market, while driving value propositions through innovation. In Other Grains, we will maintain our market leadership through differentiated communication, purpose-driven campaigns and targeted pricing, while expanding into adjacent products and categories and innovating to capitalise on growing trends in health and wellness, on-the-go, convenience and value. This will be supported by realising further manufacturing and supply chain efficiencies by improving overall equipment effectiveness and maintaining improved quality- management practices. * Excludes civil unrest FINANCIAL HIGHLIGHTS +5% REVENUE +11% OPERATING INCOME R14,6 billion R1,4 billion (2020: R13,9 billion) (2020: R1,2 billion) OPERATING MARGIN 9,4% (2020: 8,9%) Revenue increased by 5% to R14,6 billion, reflecting price inflation of 10%, while overall volumes declined by 5%. Our ability to pass through some input cost inflation, combined with cost savings across the segment, resulted in operating income increasing by 11% to R1,4 billion and the operating margin expanding to 9,4% from 8,9% in the prior year. After a strong start to the year, Milling and Baking experienced a challenging second half, driven predominantly by Bakeries and Sorghum-based products. Revenue from Milling and Baking increased by a muted 2%, as average price inflation of 8% was mostly offset by an overall volume decline of 6%. Operating income declined by 9% to R1,0 billion. Maize enjoyed a strong recovery in the second half. Despite a year-on-year volume decline, primarily due to increased in-home consumption last year, margins improved in the second half, resulting in a positive performance for the year. The wheat-to-bread value chain continued to experience margin compression because of adverse category dynamics, with deep discounting in the market remaining prevalent. Higher selling prices were more than offset by the impact of reduced volumes. In addition to higher than expected electricity and fuel costs, lost sales and increased expenses caused by the civil unrest in KwaZulu-Natal, further negatively impacted performance. Sorghum-based products experienced a particularly difficult year as a result of higher conversion and distribution costs, which was compounded by lower sales volumes as competition intensified. 50 Tiger Brands Limited Integrated annual report 2021 www.tigerbrands.com Tiger Brands Limited Integrated annual report 2021 51 >< PEOPLE STRATEGYOVERVIEW OUR BUSINESSOUR OPERATING CONTEXTOUR STRATEGYOUR PERFORMANCEOURGOVERNANCEADMINISTRATION Remuneration and performance continued › The STI outcomes are determined based on a multiple of the on-target percentage of guaranteed package, which comprises three performance factors: – A group performance factor focused on group financial and non-financial metrics – A business unit performance factor focused on business unit financial and non-financial metrics – An individual performance factor focused on individual performance objectives and allows for differentiation in rewarding high performers. Payment of an STI is subject to the overriding condition that the group/business unit meets or exceeds the agreed entry threshold in respect of its earnings before interest and tax (EBIT). Calculation GROUP PERFORMANCE FACTOR (0 to 200%) =STI Annual TRP (GP) X On target % X BUSINESS UNIT PERFORMANCE FACTOR (0 to 200%) INDIVIDUAL PERFORMANCE (0 to 200%) EBIT THRESHOLD GATEKEEPER Predetermined weightings will be applied to each of the performance factors. In respect of the individual performance factor, participants will be rated on a rating scale ranging from 1 (poor performer) to 5 (exceptional performer). Target and maximum In FY22 the following ranges of STI awards will apply to the various categories of people covered by this report: On-target percentage of guaranteed package % Maximum of on-target percentage % CEO, CFO and executive directors Executive committee members Other participants (Paterson grades CU to E band) 60 60 8,5 to 50 200 200 200 Group and business unit performance factors The underlying values and weightings for each KPI are set and approved by the remuneration committee in advance of each year to determine parameters for the STI in the form of a balanced scorecard. Below is the group STI scorecard for FY22 that will be applied to the CEO, CFO, executive directors, executive committee members and other participants. Strategic objective Strategic objective weighting Growth*, ** 65% Efficiency*, ** 10% Key performance indicator Sales volume growth Brand health Innovation EBIT Overall Equipment Effectiveness (Factor in Waste) People and sustainability* Quality 25% Safety (LTI) Leadership positions filled internally Key performance indicator weighting 10% 7,5% 7,5% 40% 5% 5% 10% 10% 5% Threshold score = 50% On-target score = 100% Stretch score = 200% 92% 98% 92% 95% 100% 100% 100% 100% 108% 105% 108% 105% Improvement in Overall Equipment Effectiveness year-on-year 80% Material Usage Variance (R’m) 85% 100% 100% 103% Reduction in complaints (consumer call line) year-on-year 12% 10% 15% 120% Reduction in lost-time injuries year-on-year 46% 40% 50% 50% 54% 60% * The actual targets have not been provided as they are linked to budget and considered commercially sensitive information. ** For the key performance indicators within the growth and efficiency strategic objectives, the targeted percentages for “threshold”, “on-target” and “stretch”, as set out above, represent the targeted percentage achievement of the underlying budgeted amounts. The group, business unit and individual performance weightings applicable to the various employee categories are detailed below: Business unit Individual 0% 0% 20% 20% 20% Employee category CEO, CFO and executive directors Executive committee members Group 80% 80% Other participants (Paterson grades CU to E band) 0% to 40% 40% to 80% LTI Description We have aligned our LTI to our reward approach and operating model, taking into consideration the following principles: › Strengthen our ability to competitively attract and retain talent to enable the execution of our business strategy › Align Tiger Brands’ management’s performance to our long-term strategy and, in particular, to unleashing the power of our people objective › Employees in Paterson grade D and above may be eligible to participate in the annual awards of the LTI. The table below provides further details regarding the performance and restricted shares awarded under the LTI plan (LTIP): Performance shares Restricted shares Instrument Employee category Award mechanism CEO CFO Executive committee members Senior management and below Performance shares multiple 81,3% 81,3% 61,0% 10,6% to 27,7% Employee category Restricted shares multiple CEO CFO Executive committee members – – – Senior management and below 14,5% to 22,9% Performance multiplier Calculation of award quantum Vesting Performance conditions applicable to performance shares › The personal performance multiplier is used to modify the standard quantum of performance shares and restricted shares, based on an individual’s personal sustained performance and potential › This is a discretionary percentage ranging from 0% to 200% and applied on award. › (GP x performance share multiple/share price) › (GP x restricted share multiple/share price) x performance multiplier. x performance multiplier. › Three-year vesting based on anniversary › Three-year time-based vesting based on anniversary of award. of grant. HEPS growth (weighted at 50%): › 0 – less than CPI + GDP › 25% vesting (threshold) – CPI + GDP › 100% vesting – CPI + GDP +2% › 200% vesting (stretch) – CPI + GDP +4%. The HEPS calculation is performed on an annual compound basis over the three-year vesting period. Linear vesting to apply between threshold and stretch. ROIC – (weighted at 50%): › 0 – less than WACC +1% › 25% vesting (threshold) – WACC +1% › 100% vesting – WACC +2% › 200% vesting (stretch) – WACC +5% and above. Share price The measurement will be the average ROIC over the three-year vesting period. Linear vesting to apply between threshold and stretch. › Based on the VWAP for a Tiger Brands’ share calculated for the 10-trading day period ending immediately prior to the date of award/grant. 68 Tiger Brands Limited Integrated annual report 2021 www.tigerbrands.com Tiger Brands Limited Integrated annual report 2021 69 > CPI + rate of growth in GDP (measured Average ROIC measured over three, four and five years for each one-third tranche on an annual compound basis over the applicable period) Pro rata vesting on a linear scale: HEPS growth > CPI but below CPI + GDP rate. No vesting if HEPS < = CPI 50% ROIC < WACC +1% No vesting ROIC = WACC +1% 25% vesting ROIC > WACC +1% but < WACC +2% ROIC = > WACC +2% Pro rata vesting on a linear scale 100% vesting HEPS: Headline earnings per share. ROIC: Return on invested capital (after tax). For SARs allocated in December 2016, September 2017 and December 2017, the performance vesting condition is as follows: Metric HEPS Weight 0% vesting Maximum 100% vesting 100% CPI and below CPI +GDP Bonus-matching shares The practice of granting restricted shares in the form of “bonus-matching shares” (which were linked directly to the achievement of an STI in the previous financial year) was discontinued as from FY19 (with the last grant of bonus- matching shares made on 6 December 2018). All previous grants of bonus-matching shares will continue to vest in accordance with the rules of the LTIP. Pro rata vesting on a linear scale of HEPS growth > CPI but below CPI + GDP rate. Further vesting condition: Average annual return on capital over the relevant performance period must exceed the company’s weighted average cost of capital (WACC). Vesting takes place on the third anniversary of the date of grant. No performance conditions are applicable. BEE shares The following two schemes were established as part of the company’s black empowerment strategy: › Tiger Brands Black Managers Trust (BMT I) – Established in 2005 to attract and retain diverse talent – Rights allocated – Tiger Brands shares. Rights are settled after making the required capital contributions to BMT I. For all rights allocated on or before 31 July 2010, settlement may take place at any time after the initial lock-in period, i.e. from 1 January 2015. For all rights allocated after 31 July 2010, the lock-in date varies depending on the date of allocation. Periodically, new allocations are made to new joiners and top-up allocations are made to existing participants promoted to higher grades out of shares that may become available as a consequence of forfeitures. › Thusani Trust – Established in 2005 as part of the company’s BEE phase I empowerment initiative. The trust’s resources were enhanced in 2009 under the company’s BEE phase II transaction – The trust provides bursaries for tertiary education to dependants of permanently employed black people who might not otherwise be able to afford this cost. Dilution The maximum aggregate number of shares that may be acquired by participants under the LTIP and any other share plan may not exceed 5,5 million shares, and for any one participant 550 000 shares. In determining these limits, shares acquired through the JSE and transferred to participants are not considered. At 30 September 2021, the aggregate number of shares that may be acquired by participants under the various schemes was 2 634 230 (2020: 2 728 933), which represents approximately 1,4% of the number of issued ordinary shares. This is in line with JSE regulations. Minimum shareholding policy We have a minimum shareholding policy, where senior executives are expected to build up their personal shareholding in the company over a specific period. In the case of the CEO, the target is 200% of guaranteed package while the target for executive directors and members of the executive committee is 100% of guaranteed package. Senior executives who were in service when the policy was adopted in 2016 have six years to build up their shareholding from date of adoption. Senior executives appointed after adoption have six years to build their shareholding from date of appointment. They may use any vesting LTIs or their own resources to acquire these shares. Exemption from compliance with the minimum shareholding requirements In the case of the minimum shareholding requirement not being met, the board retains the overriding discretion to: › Vary the minimum shareholding level or extend the determination date for an individual executive or the executives as a whole. This will only be allowed to apply in exceptional circumstances considered as “business unusual” › Determine that an executive has complied with the policy even if the number of shares held by an executive does not meet the minimum shareholding requirements. Such an exemption will only be allowed in exceptional circumstances where compliance will result in severe financial difficulty for an executive or prevent an executive from complying with an order of a court of law. MALUS AND CLAWBACK A malus and clawback policy is in place with the intention to minimise risk. With respect to malus, if the remuneration committee, in consultation with the board and/or any committee of the board, believes that a trigger event has occurred, it has full discretion to reduce, in part or whole, unvested variable remuneration (i.e. STIs and LTIs) before the end of the vesting or payment period. In the case of clawback, it is the responsibility of the remuneration committee, in consultation with the board and/or any committee of the board, to implement clawback for the whole or portion of vested variable remuneration in the event of a trigger event occurring over a period of three years from the date on which payment was made of such vested variable remuneration. Trigger events include, but are not limited to: › Material misstatement of financial results › Misconduct, incompetence, fraud and dishonesty › Negligence or material breach of obligations to the company › Deliberate harm to the company’s reputation › Material failure of risk management. ILLUSTRATING POTENTIAL REMUNERATION OUTCOMES The variable pay arrangements described above have various potential outcomes. These outcomes could be from zero (minimum) to the expected level of performance outcomes (target) to the maximum potential variable pay outcomes (maximum). In the illustrations presented on page 72, it should be noted that: › STI represents the cash component of short-term performance › LTI represents the total award of performance vesting shares. 70 Tiger Brands Limited Integrated annual report 2021 www.tigerbrands.com Tiger Brands Limited Integrated annual report 2021 71 >

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