Consumer Goods in Africa and Nigeria - · PDF fileConsumer Goods in Africa and Nigeria: ......

Consumer Goods in

Africa and Nigeria:

The Accenture Perspective

Copyright © 2013 Accenture All rights reserved. 2

SSA has 12% of the world’s population and only 2% of world GDP: a glass half-empty or half-full?

Sample African Country GDP Growth

(2010 used as base year)

$1.7 Trillion Africa Collective Gross domestic

product

399 Million Number of people between the

ages of 15 and 24

12% Africa population as percentage of

world population

~50 Number of African cities with 1

million+ consumers

Africa Growth Takes Root

2% Africa GDP as percentage of world

GDP

*Source: Africa Development Bank (Low Case Scenario)


Images of starving children created a reputation of famine that does injustice to the continent’s potential

Africa has the potential to not only feed itself, but also to become a major supplier

for the rest of the world

Africa as the World’s Pantry

590

300

80

Sub-Saharan

Africa

Latin

America

Others

60%

31%

8%

Arable Land Available

(Million Hectares)

60%

95%

90%

50%

Africa holds...

…of the world’s arable land

…of the world’s platinum metals

…of the world’s chromite ore

…of the world’s cobalt reserves

*Source: Standard Bank. The five trends powering Africa’s enduring allure


Alongside its resource potential, Africa is becoming an important consumer market…

Africa in the Future

Before (2010) Future (2030)

US$1.7 trillion Collective GDP in 2010

US$3.9 trillion

Collective GDP in 2030

40% Urbanisation rate in 2010

50% Urbanisation rate in 2030

1.03 billion # consumers in 2010

1.4 billion # consumers in 2030

399 Million # people 15 – 24 in 2010

736 Million # people 15 – 24 in 2030

*Source: Africa Development Bank (Low Case Scenario)


Infrastructure

One of the greatest single

problems businesses face

in Africa is electricity supply

and road infrastructure

But the opportunity is far from straight forward; Africa takes risk to the next level

Political Stability

High levels of corruption

and a flourishing illicit trade

will pose unique challenges

to businesses

Foreign Competition

Competition from foreign

consumer companies is

increasing margin pressure.

Supply Constraints

It is estimated that the cost

of transporting goods is 60-

70 percent higher than

developed markets

Skills Shortages

Africa as whole faces dire

challenges in terms of skills

availability

Shifting Landscapes

Factors such as

urbanisation create a

situation where RTM are

continuously shifting

Africa

Risks

1

2

3 6

5

4

Africa Risks


These challenges severely impact the cost of business. Indirect costs erode profitability.

0

2

4

6

8

10

12

0

2

4

6

8

10

12

0

2

4

6

8

10

12

0

2

4

6

8

10

12

0

2

4

6

8

10

12

Indirect Costs as Percentage of Total Sales

Nigeria India Brazil China South Africa

Legend: Electricity Bribes Transport Disruptions Theft and Robbery

Indirect Costs

Source: World Bank – Nigeria Investment Climate 2011

Russia

0

2

4

6

8

10

12

11.5% 10.5% 5.5% 4.9% 4% 2.2%


Among the four sub regions, West Africa has recorded the highest growth, followed by the East

Regional Differences

-2

-1

0

1

2

3

4

5

6

7

8

2008 2009 2010 2011 2012 2013

West Africa

East Africa

SSA

Southern

Africa

Real GDP Growth (%)

Source: IMF Database

Central

Africa

West Africa

7% expected GDP growth in

2013

Southern Africa

3.8% expected GDP growth

in 2013

East Africa

6% expected GDP growth in

2013

Central Africa

5.3% expected GDP growth

in 2013

South

Africa


Within each of these regions, 9 key markets show the largest potential for future consumer goods growth

Our analysis shows that nine African

countries will comprise nearly three-

quarters of total consumer spending in

sub-Saharan Africa by 2020

Kenya

Nigeria

Angola

Ghana

Zambia

ECOWAS

EAC

SADC

Focus Countries Population

2010

GDP

Growth

2015

2020

Consumer

Spend

Kenya 40m 6.4% $ 37bn

Ethiopia 83m 5.5% $ 43bn

Uganda 33m 7.9% $ 30bn

EAC & COMESA

Nigeria 151m 7.4% $ 167bn

Ghana 24m 13.2% $ 29bn

Senegal 13m 4.6% $16bn

ECOWAS

South Africa 49m 4.1% $ 315bn

Angola 19m 8.1% $18bn

Zambia 13m 7.1% $ 23bn

SADC

Ethiopia Uganda

South Africa

Senegal

*Eastern Hub includes COMESA countries that are not covered in the Southern Hub EAC: East African Community; COMESA: Common Market for Eastern and Southern Africa ECOWAS : Economic Community of West African States SADC: Southern African Development Community

*Source: Euromonitor

Key Markets


Nigeria is a rising star among these countries and is expected by 2020 to be the largest economy in Africa

GDP Growth (Constant 2000 Prices)

$268bn GDP in 2012 (Current US$)

$11.2bn Estimated FDI in 2012

7.0% Forecasted 5 year compound annual GDP growth rate

12.1% Average estimated inflation for 2012

-4%

1%

6%

11%

16%

21%

2000 2002 2004 2006 2008 2010 2012 2014

Asia

SSA MENA

LATAM

Advanced Economies

Nigeria

Nigeria Facts

24.2% Estimated unemployment in 2012

17.6% Estimated lending rate in 2012

166M Population in 2012

Nigeria Deep Dive


Underlying the growth in these countries are key cities acting as hubs of commercial activity

Africa Biggest Cities

Lagos

(11.7m)

Abidjan

(4.5m)

Luanda

(5.5m)

Kinshasa

(9.9m)

Cape Town

(3.5m)

Johannesburg

(3.8m)

Nairobi

(4.0m)

Addis Ababa

(3.8m)

Cairo

(11.4m)

Alexandria

(4.6m)

Key Cities

Lagos is a megacity

within Africa boasting a

population of over

11.7m

Nairobi is arguably the

best-connected city on

the continent in terms

of ICT

Accra in Ghana was

recently flagged by

MasterCard as next

growth hub of Africa

Addis Ababa hosts the

African, headquarters of

almost every major

multilateral organisation


There are over 2100 and

by some counts over

3000 languages spoken

natively in Africa

Within these markets consumers are divided between numerous ethno-linguistic groups and religious lines

Africa has four main ethnic

groups: Arab, Ashanti,

Bantu and Swahili

Africa Diversity

In Africa, there are 3

major religions:

Traditional, Christian and

Islam


Despite these differences, our research reveals five broad key consumer groups

Basic Survivors

Affluent

Working Families

Cosmopolitan

Professionals

Rising Strivers

Key Consumer Segments Basic survivors are the

majority group in Africa and

tend to live in urban slums

Working families focus their

spending on their children’s

needs

Rising Strivers emerge from

the first two segments and are

highly aspirational

Cosmopolitan Professionals value pragmatic products but are also brand conscious and influenced by media

The affluent have

disproportionately high

income and are driving a new

luxury market in Africa


Rising Strivers and Working Families will be the primary drivers of consumption growth

* Source: Canback 2010, Accenture Analysis

Segment Population Evolution

Africa Population Evolution

2010

51%

31%

13%

3%

2%

Basic Survivors

Working Families

Rising Strivers

Cosmopolitan Professionals

Affluent

66% 54% 51%

45%

21%

29% 31% 33%

9% 12% 13% 16%

2% 3% 3% 3%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2000 2005 2010 2015

Affluent Cosmopoliton ProfessionalsRising Strivers Working FamiliesBasic Survivors

2015

45%

33%

16%

3%

3%

http://www.google.com/imgres?imgurl=http://developmentalidealism.org/img/africa/5f.jpg&imgrefurl=http://www.purplemag.com/2007/11/blogging-day-for-justice-to-protect.html&usg=__4h-LQ5Uwa-YYWI4wZoM-IKdy3MU=&h=467&w=500&sz=42&hl=en&start=34&zoom=1&um=1&itbs=1&tbnid=3mB469w2ICRbmM:&tbnh=121&tbnw=130&prev=/images?q=African+families&start=20&um=1&hl=en&sa=N&rls=com.microsoft:*&ndsp=20&tbs=isch:1


Growing economies and aspirational drive in Africa is creating a booming entrepreneurial culture

Source: Global entrepreneurship monitor 2012 survey

Entrepreneurship is seen as a good

career choice by 76% of people in

SSA (vs.59% in the Asia Pacific)

Furthermore, 70% of people in the

region (as high as 82% in Nigeria)

believe there are good opportunities

for starting a new business

However, most of the new ventures

are still mostly low margin and

survival entrepreneurship (e.g. small

vendors)

As a result, the region has the

highest percentage of new

entrepreneurs in the world

Africa Entrepreneurship

Percentage of Population Starting or

Running a new Business in 2012

13%

8% 8%

28%

35%

15%

7%

0%

5%

10%

15%

20%

25%

30%

35%

40%

US EU MENA SSA Nigeria Ethopia SouthAfrica


Distribution Flow Returns and Funds Flow

Sales to distribution Sales to trade Sales to consumer

Consumer

Manufacturer

Wholesalers

Formal Retail

Open Markets

Corner Shops/ Kiosk

43%

55%

2%

98%

Source: Gain, Euromonitor

Nigeria FMCG Trade Structure Example

This entrepreneurial drive has resulted in a unique informal trade structure


You often hear about great African expansion growth stories …

Shoprite is the largest food retailer on the African continent

(operating upwards of 130 stores in 16 African countries)

Indomie, an Indonesian brand of instant noodles, struggled to meet

due to challenges associated with importing raw materials. The

company integrated backward, developing local manufacturing

capabilities for all raw materials. Due to its ability to respond quickly

to local demand, Indomie has captured 70 percent of the Nigerian

instant noodle market

From its South African roots, it operates in 21 countries in Africa

and the Middle East. To gain market share among low-income,

rural Africans, MTN has made it easier for them to buy and use

airtime, enabled its agents to reach remote areas, and created

smaller airtime denominations.

•

Africa Success Stories


But, what you don’t often hear about, is the business failures that have occurred …

Prominent retailer abandoned

100 stores in Egypt. It is

estimated it was losing over

$50 million a year

Large telecoms operator

sold its operations at a loss

of $70m after its east

African entry in 2008

Large global brewer exits

Kenyan market after only

year of entry due to stiff

local competition

Global media house,

pulled the plug on its East

Africa division because of

low return on investment

Fast food chain closed its

outlets in Kenya amidst stiff

competition from local players

Large telecommunications

acquisition ended up

costing the company over

$695m in losses

Africa Failures


Tapping into the hidden wealth offered by the African consumer markets requires a mind-set shift

Innovation is Key

• Ten, fifteen years ago,

many multinationals could

rely on stripped down

products to earn revenue

in Africa because scarcity

of competition and novelty

made the sale

• Today, understanding

Africa’s consumers' unique

cultural requirements and

adapting your products

and operating models are

key

Key Success Factors for Breeding

Innovation and Success in Africa

Cost Advantage

Local Talent

Local Decision Making

• Build scale

• Practice lessons from frugal innovation

• Leverage local talent

• R&D centres closer to your consumer markets

• Empower local decision making

• Integrate local and corporate strategies

Leveraged data

• Analytics help your sales force, distributors

and product development decisions


10 Traits of Master Innovators – South African Research

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50%

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High performers

Rest of SA market


Different strokes for different folks…

Strategy Execution

Market

Focus

Value

Proposition

Market

Entry

Strategy

Sourcing/

Manufact. Distribution Marketing

Trade &

POS

1 2 3 4 5 6 7

Do we

understand

our target

market?

Do we

have the

right

product/

service to

offer?

How do

we enter

the market

with

minimal

risk?

Do we

source

locally or

import?

How do we

reach our

customers?

How do we

ensure that

there is

demand for

our

product?

How do

we

manage

the point

of sale?


Selecting and entering African markets requires on-the ground knowledge and local partnerships

Strategy – Levers for Breakthrough

Market

Focus

Value

Proposition

Market

Entry

Challenge Insight

Walk the markets

and gain insights from

talking to street vendors

and observing

consumers

Beware of your home

country biases, ensure

to adapt products to

local tastes and cultures

Assess your own

capabilities and market

requirements to

determine if you should

partner or go it alone

Traditional market

research is very limited

and public data may be

unreliable or outdated

Significant cultural

differences within and

across markets creating

distinct consumer needs

Significant entry barriers

in terms of political, legal

(e.g. ownership

structures) and financial

(e.g. repatriation)


Operating in Africa is challenging, but several companies are innovating to be successful

Strategy – Levers for Breakthrough

Sourcing

Distribution

Marketing

Challenge Insight

It is essential to develop

local partnerships for

local sourcing and

production

Use local networks and

leverage the use of low

cost pushcarts, trolleys

and motorcycles to get

close to the consumer

Direct personal selling in

the informal sector are

key. Promotions that are

community based will

gain more traction

Ports are hopelessly

congested. Imported

materials can account

for almost two thirds of

final costs

Informal trade dominate

the retail landscape with

narrow gravel roads

where trucks can’t enter

Traditional print and

media don’t always reach

the masses. Community

endorsement is a key

driver for the purchase


Accenture’s Africa Desk can provide practical insight to help you craft these creative offerings and solutions

Our Offering

Structure

What is the most

effective way to

structure and

setup?

Strategize

How will we create,

deliver, and

capture value?

Assess

Which growth

market to enter?

Implement & Run

How will we

control, direct and

partner to execute?

Accenture

Offering

Growth

Market

Assessment Business

Model Design

M&A

Execution

Managed

Services

Capacity

Services

Roadmap & Financial Case Development

Market Entry

& Due

Diligence

Operating

Model Design

Outsourcing

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