Tiger says exit from Ethiopia does not signal a retreat from the rest of Africa
Business Day Live - Jun 10th 2016, 12:09
Food producer Tiger Brands on Thursday pulled the plug on a second major African market, with the sale of its stake in an Ethiopian business — less than six months after it disposed of a Nigerian venture.
However, the company said the exit did not signal a retreat from the rest of Africa, but was rather a realignment of its growth strategy.
The continent’s largest food producer said it would offload its 51% stake in East African Tiger Brands Industries (Eatbi) to its joint venture partners. The disposal followed a review with its partner, EAG.
A significant investment to secure raw materials had been one of the issues identified in the review, Tiger Brands said.
"(Our) core competency lies in developing branded products for the end consumer," it said.
Its new strategy would focus on strong brands and categories in which it had a proven track record.
Eatbi’s core focus was laundry detergents, a category in which Tiger did not have a strong presence.
Its core competencies were in food products, such as Albany bread; breakfast cereals including Jungle Oats; Tastic rice; maize brand Ace; tinned fruit and vegetables such as Koo; and energy drinks.
Tiger did not disclose the amount for which it would sell the Ethiopian stake, but said it would make a profit. Tiger bought Eatbi in 2011, under the leadership of former CEO Peter Matlare, who drove much of the expansion across the continent.
In 2012, Matlare led the acquisition of the 65.7% stake in Nigerian consumer goods business Dangote Industries (formerly Dangote Flour Mills) for R1.6bn.
However, the Nigerian venture turned sour and after several losses, Tiger sold its controlling stake back to Nigerian partner and business tycoon Aliko Dangote for $1 in December 2015. Dangote Industries has since returned to profit.
During Matlare’s tenure, Tiger Brands also incurred losses in its Kenyan operations, which were hit by allegations of fraud.
When new CEO Lawrence MacDougall took office in May, he pledged a sweeping overhaul of the operations.
Although analysts had expected a realignment of operations, the decision to exit Ethiopia came as a surprise, said Investec’s Anthony Geard.
"Ethiopia was at the bottom of the list in terms of countries we expected (them) to exit."
Geard said this now "puts a question mark on their preparedness to take on Africa risk".
Sumil Seeraj, equity research analyst at Standard Bank, agreed that the sale raised questions about Tiger’s approach to the rest of Africa, and which other operations could see possible divestment.
Seeraj said cutting back on Africa would be problematic, given SA’s low economic growth. "It’s a catch-22 situation. Where else will Tiger get growth outside SA?" he asked.
Tiger has five manufacturing plants outside SA and exports to 21 countries on the continent.From Business Day Live
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