The tale of the Tiger and Africa's bruising giant

Since 2012, Tiger Brands hasn't put a foot right in Nigeria

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Last week, I took some time to rest, so I didn't send out the Sunday newsletter, but now I'm backkkkk! 

I love Sunday newsletters because they're easier. Friday newsletters come with a lot of worries, even with three days of editing. For instance, in the last newsletter, I wrote "I never miss the chance to fame ex-colleagues," when I meant to write "famz." But Sunday is here, mistakes are forgotten, and I'm like an athlete who's gotten in a good warmup. I feel spectacular. But one company that's not feeling the same way is South Africa's largest food company, Tiger Brands Limited.

Nigeria is the case Tiger Brand can't solve 

The Nigerian economy is in the dustbin, and anyone who doesn't know this is either a fool or a crook — said person could also be Buhari, but I digress. On Sunday morning, a Bloomberg report confirmed that Tiger Brands Limited was selling its 49% stake in UAC Foods, effectively almost completing its exit from the Nigerian market. Tiger Brand's sale of its UAC stake comes months after Shoprite also made its Nigerian exit.

Some may argue that exits like this don't mean anything, but that's false. They point to a larger trend of investors losing faith in the Nigerian economy and the dwindling purchasing power of Nigerians. Nothing explains this better than this excerpt from a 2012 article, the year after Tiger Brands bought a stake in UAC Foods:

"The consumer boom and changing lifestyles in Nigeria have not gone unnoticed by some of Africa’s biggest retailers, such as South Africa’s Shoprite and SABMiller. The latter has established a $100m brewery in Onitsha, southeastern Nigeria.

Tiger Brands Limited, South Africa’s largest food company, has also moved in to take advantage of the opportunities in the Nigerian food industry. Tiger Brands acquired a 63.35% stake in Nigeria’s Dangote Flour Mills Plc (DFM) in a recent transaction valued at $183m. The investment, which is Tiger Brands’ third acquisition in Nigeria in the last two years, is its largest so far. Tiger Brands acquired 100% of Deli Foods Nigeria Limited, a biscuit manufacturing firm based in Isolo area of Lagos in April last year and a 49% stake in UAC of Nigeria Plc’s Food and Beverage businesses in May also last year."

Despite the early optimism, here's what has happened since 2015:

• In 2015, Tiger sold back its Dangote Flour Mills stake to Dangote for $1 and wrote off $120 million in the process

• In 2019, Tiger also announced that it would close its Deli Foods - which it acquired for $18.7 million — after the business continued to "suffer losses despite managerial efforts."

• In 2020, the Tiger ran into legal trouble relating to its brands, Jolly Jus drink and Benny seasoning.

• Because of that legal dispute, it could not export those products to Nigeria. It has now settled the court case for $4.8 million.

• Last year, Tiger did not pay dividends to investors for the first half of 2020, as it had to start thinking about cutting costs.

It became likely in 2020 that Tiger Brands, with its spectacular bad luck in Nigeria, would look to exit the market. Its profits were down 7%, and the business had to write down 557 million Rands. While Tiger could and should have avoided a few things (don't buy a business from Dangote if you're not the Nigerian government), they could have survived regardless if the economy was better. As my friend with extensive experience working with Fast Moving Consumer Goods (FMCG) companies always says, these companies can get away with mismanagement when the economy is great; you know that things are bad when an FCMG is talking about cutting costs.

While there’s no indication that UAC Foods is doing poorly, with earnings before interest and taxes of ~N1.1bn in 2019. Yet that's not significant enough to keep it in a country where it has not put a foot right since 2012. The Tiger is beating a hasty retreat and UACN Group, which isn't profitable, will pick up those shares.

Since we're on the subject of markets, economies and customers, one question that gets asked a lot is, how many subscribers does Netflix have in Nigeria?

Will Nigeria hit 2 million Netflix subscriptions?

The prediction that Netflix will crush MultiChoice's dominance in Africa may still be a few years too early. Thanks to a new report, we now know that Netflix will end 2021 with 2.61 subscribers in Africa — MultiChoice has 20.1 million pay-TV subscribers. But this comparison is unfair. It’s more useful to compare Netflix to MultiChoice’s streaming service, Showmax. 

While MultiChoice has the pay-TV market in its grip, it only recently started taking its digital efforts seriously, so it is behind Netflix on the streaming front. MultiChoice uses cheaper subscriptions, sporting content that people love, and Big Brother Nigeria to get more users. Despite these efforts, Showmax will end the year with around 861k subscribers and as internet access gets cheaper, MultiChoice and Netflix will find themselves competing in two major markets: Nigeria and South Africa.  

The majority of MultiChoice’s pay-TV subscribers are in Nigeria, while South Africa is by far its most profitable market. Netflix, on the other hand, is focusing its attention on South Africa and Nigeria so far. As my people say, e get why.

"Digital TV Research forecast that subscription video-on-demand users in Africa would, by 2026, number 15.06 million, triple the 5.11 million expected at the end of 2021.

“From the 10 million additions, South Africa and Nigeria will each supply 2.3 million,” the firm said. “These two will be the only countries with more than 1 million subscriptions.”

The video streaming on-demand space is definitely one you should pay attention to. I haven’t got a crystal ball, but Netflix taking an early lead here may be important; Netflix has only one focus, while MultiChoice has to do the balancing act of pay-TV and streaming service. May the best service win.

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 That’s about it for today’s newsletter. All the winners of the referral campaign will get their t-shirts sent to them by the end of the week. Let me know in the comments if you think I should give the referral campaign any go — I’ve got some really pretty Notadeepdive mugs, and there’s only so much coffee one person can drink. 

See you on Friday and don't forget to share the newsletter!