Tiger Brands' Quest for a Share in the Multibillion-Rand Informal Market

Tiger Brands, a South African food producer, is eyeing a larger share of the revenue-generating informal traders’ market in its efforts to retain access to lower-end consumers, who have been hit the hardest by the high cost of living crisis. To that end, the JSE-listed company has unveiled a new route-to-market strategy centred on strengthening distribution networks and advertising in these areas.

The foundation of this strategy is the development of strong relationships with wholesalers and midi-wholesalers in the township economy. Tiger Brands hopes to demonstrate its product superiority and secure mass sales among spaza shop owners and informal market consumers by funnelling products from its factories to these key players and leveraging its 198 representatives stationed at wholesale points nationwide.

According to Luigi Ferrini, Chief Customer Officer, the local informal market is largely untapped and growing faster than modern trade. The company believes there is significant room for growth in this segment and is committed to assisting traders while effectively presenting its brands at the point of purchase. Tiger Brands sees this as an opportunity to gain a competitive advantage through its heritage brands, which hold aspirational category positions in South Africa.

The informal trade environment is an important point of sale for lower-income consumers who are negatively impacted by high food prices. This retail sector is well-versed in lower-income consumers’ purchasing habits, needs, and typical basket sizes. Tiger Brands’ entry into this market is fueled by its understanding of these consumers and their preferences.

Access to disposable income, according to the company, is a significant differentiator between consumers in the formal and informal markets. As a result, this distinction is critical in how Tiger Brands innovates and tailors its products for the informal market. Garth Fraser, the Route to Market Manager, emphasises that they offer different pack sizes to cater to different affordability levels, allowing consumers to purchase the same products but in quantities that correspond to their budget constraints.

According to Tiger Brands, informal traders such as spaza shops account for up to 26% of South Africa’s R716 billion fast-moving consumer goods (FMCG) market. Furthermore, this market is growing faster than the modern market, with a reported growth rate of more than 6% between 2018 and 2023.

With these insights, Tiger Brands intends to increase its investment in the informal market, expanding its presence across the country. The company has already invested approximately R10 million in infrastructure support and store appearance improvements.

Tiger Brands currently has a presence in over 46,500 general trade outlets throughout South Africa, with a focus on the greater Gauteng region. By the end of September, the company hopes to have expanded its reach to 50,000 outlets and to be present in 130,000 informal stores nationwide within the next five years.

Tiger Brands is bullish on the potential returns from its targeted marketing strategy in the coming years, particularly if inflation and interest rates fall, giving consumers more disposable income. The company expects the results and benefits of this expansion to become apparent as it scales up over the next two years, leading to increased competitiveness and brand relevance.

Tiger Brands hopes to tap into a lucrative and rapidly growing segment of the South African economy by investing in the informal market, while also ensuring that its products remain accessible to lower-income consumers facing economic challenges. The company’s dedication to innovation and understanding the specific needs of its customers will undoubtedly be critical to its success in the informal market.