Over the past few years, investors and CEO's of businesses have leveraged Africa's vast potential in the FMCG sector. Africa's continent is home to more than 1.1 billion people and will account for one-fifth of the world's population by 2025. According to a KPMG report, Fast Moving Consumer Goods in Africa, the FMCG sector on the continent stands to benefit immensely. As the sector provides either necessities or accessible luxury goods, the size of the market is not limited by income dynamics in the same way as many other industries.
The demand for better quality and more sophisticated products and brands is increasing as populations grow and living standards improve. With food always being a necessity, there’s an increase from basic staple foods to a wide range of products. Products in the beverages, personal and home care range have a huge growth potential in the relatively untapped African markets.
The working-age population in Africa is growing at 2.7% each year. By 2025, nearly two-thirds of the estimated 303 million African households will have discretionary income. African consumers are young and willing to spend. According to KPMG’s report, the following African countries will offer the best prospects for growth in the FMCG sector taking demographic profiles, income levels and economic growth potential into account in the next five to ten years: Angola, Ethiopia, Ghana, Kenya, Morocco, Mozambique, Nigeria, Rwanda, Tanzania, Uganda, and Zambia.
More than 400 companies generate at least $1 billion in Africa-based revenues with brands such as Coca-Cola, Nestlé, and Unilever enjoying significant market share in their categories. The most successful entrants into Africa are those that have been careful and selective about the markets they enter.
Instead of seeking to build a presence across entire countries, they’ve targeted the fastest-growing cities or city clusters-urban centers where per capita income and consumption spending far exceed the national average. A city-based strategy is essential in Africa, given the rapid pace of urbanization and the differences in growth rates even among cities within the same country.
Companies must seek to understand local needs and preferences and tailor their products accordingly to drive mass adoption. For example in Zambia, SABMiller’s brand is Mosi (which is what Zambians call Victoria Falls), with a label that shows the waterfall. Consumer companies must become aware of not only local product preferences but also local buying behaviours. In Lagos and Luanda, consumers perceive low-priced food items to be of questionable quality, whereas consumers in Abuja, Accra, and Nairobi don’t share the same perception and thus wouldn’t hesitate to buy discounted food.
Some international food chains have tailored their products to local tastes by adding popular local ingredients. In Nigeria Domino's sells pizza topped with Jollof rice, a West African staple, and suya, a spiced meat dish often served on kebabs by local street vendors.
America’s fast-food culture has had a massive penetration into Africa, with an increasing number of fast-food brands launching - a result of cultural globalisation. In its efforts to improve status and attract the emerging middle-class customers, fast-food restaurants offer air-conditioning, comforting seating, wireless-internet, music videos and movies that play on television.
KFC has had the biggest reach across the continent out of international brands, with 771 outlets in South Africa and franchises in Angola, Namibia, Botswana, Mozambique, Malawi, Ghana, Kenya and Zambia. In 2013, it extended into Zimbabwe, Tanzania and Uganda.
The growing demand for fast-food can be attributed to the continent’s growing middle class whose disposable income and changing lifestyle has left them with an appetite for quick food on the go.
Consumer companies seeking a foothold in Africa must be prepared to invest for the long-term. Even though it may at times be a challenging and sometimes frustrating journey, the payoff will be well worth it. African consumers reward brands they trust, and a brand that wins them over can thrive in the market for decades to come.
Speak to us today about partnering with key decision makers on the African continent if you’re looking to invest into new markets. We continuously compile, update and authenticate contact lists of business professionals and offer appointment setting services on the African continent.