Consumer Goods in Africa and Nigeria

Consumer Goods in
Africa and Nigeria:
The Accenture Perspective

SSA has 12% of the world’s population and only 2%
of world GDP: a glass half-empty or half-full?
Africa Growth Takes Root
Sample African Country GDP Growth
(2010 used as base year)

$1.7 Trillion
Africa Collective Gross domestic
product

12%
Africa population as percentage of
world population

2%
Africa GDP as percentage of world
GDP

399 Million
Number of people between the
ages of 15 and 24

~50
Number of African cities with 1
million+ consumers
Copyright © 2013 Accenture All rights reserved.

*Source: Africa Development Bank (Low Case Scenario)

2

Images of starving children created a reputation of
famine that does injustice to the continent’s potential
Africa as the World’s Pantry
Arable Land Available
(Million Hectares)

Africa holds...
60%

…of the world’s arable land

Others

…of the world’s platinum metals

90%

Latin
America

300

Sub-Saharan
Africa

95%

80

590

8%

31%

…of the world’s chromite ore

50%

60%

…of the world’s cobalt reserves

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

*Source: Standard Bank. The five trends powering Africa’s enduring allure 3

Alongside its resource potential, Africa is becoming
an important consumer market…
Africa in the Future
Before (2010)

US$1.7 trillion

Future (2030)

Collective GDP in 2010

US$3.9 trillion
Collective GDP in 2030

1.03 billion

1.4 billion

# consumers in 2010

# consumers in 2030

399 Million

736 Million

# people 15 – 24 in 2010

# people 15 – 24 in 2030

40%

50%

Urbanisation rate in 2010

Urbanisation rate in 2030


*Source: Africa Development Bank (Low Case Scenario)

4

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

Supply Constraints

High levels of corruption
and a flourishing illicit trade
will pose unique challenges
to businesses

It is estimated that the cost
of transporting goods is 6070 percent higher than
developed markets

1

4

Foreign Competition
Competition from foreign
consumer companies is
increasing margin pressure.

Shifting Landscapes
Africa
Risks

2

3

5

6

Factors such as
urbanisation create a
situation where RTM are
continuously shifting

Skills Shortages

Infrastructure

Africa as whole faces dire
challenges in terms of skills
availability

One of the greatest single
problems businesses face
in Africa is electricity supply
and road infrastructure 5


These challenges severely impact the cost of
business. Indirect costs erode profitability.
Indirect Costs as Percentage of Total Sales

India

Nigeria

11.5%

Brazil

10.5%

China

5.5%

4.9%

Russia

4%

South Africa

2.2%

12

12

12

12

12

12

10

10

10

10

10

10

8

8

8

8

8

8

6

6

6

6

6

6

4

4

4

4

4

4

2

2

2

2

2

2

0

0

0

0

0

0

Indirect Costs

Legend:

Electricity

Bribes

Transport Disruptions

Theft and Robbery

Source: World Bank – Nigeria Investment Climate 2011

6

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

Real GDP Growth (%)
8

West Africa

7

East Africa
SSA
Central
Africa
Southern
Africa

6
5
4

3

South
Africa

2
1

West Africa
7% expected GDP growth in
2013
East Africa
6% expected GDP growth in
2013
Central Africa
5.3% expected GDP growth
in 2013

0

2008

2009

2010

2011

-1
-2

2012

2013

Southern Africa
3.8% expected GDP growth
in 2013
Source: IMF Database

7

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

Kenya
Ethiopia
Uganda
EAC & COMESA

ECOWAS
EAC
Senegal

Uganda
Ghana

Nigeria
SADC
Angola

Ethiopia
Kenya

Zambia
South Africa

*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


Nigeria
Ghana
Senegal
ECOWAS
South Africa
Angola
Zambia
SADC

Population
2010
40m
83m
33m

GDP
Growth
2015
6.4%
5.5%
7.9%

2020
Consumer
Spend
$ 37bn
$ 43bn
$ 30bn

151m
24m
13m

7.4%
13.2%
4.6%

$ 167bn
$ 29bn
$16bn

49m
19m
13m

4.1%
8.1%
7.1%

$ 315bn
$18bn
$ 23bn

Our analysis shows that nine African
countries will comprise nearly threequarters of total consumer spending in
sub-Saharan Africa by 2020
*Source: Euromonitor

8

Nigeria is a rising star among these countries and is
expected by 2020 to be the largest economy in Africa
Nigeria Deep Dive
GDP Growth
(Constant 2000 Prices)

Nigeria Facts

166M
Population in 2012

21%

$268bn
GDP in 2012 (Current US$)
16%

7.0%
Forecasted 5 year compound annual
GDP growth rate

11%

12.1%
Asia

Average estimated inflation for 2012

Nigeria
6%

SSA
MENA

17.6%
Estimated lending rate in 2012

LATAM
Advanced
Economies

1%
2000

2002

2004

2006

2008

2010

2012

$11.2bn
Estimated FDI in 2012

2014

24.2%
-4%

Estimated unemployment in 2012
9

Underlying the growth in these countries are key
cities acting as hubs of commercial activity
Key Cities
Africa Biggest Cities
Alexandria
(4.6m)

Cairo
(11.4m)
Addis Ababa
(3.8m)

Abidjan
(4.5m)

Lagos
(11.7m)
Kinshasa
(9.9m)

Nairobi
(4.0m)

Luanda
(5.5m)

Cape Town
(3.5m)

Johannesburg
(3.8m)

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
10

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

Africa has four main ethnic
groups: Arab, Ashanti,
Bantu and Swahili

There are over 2100 and
by some counts over
3000 languages spoken
natively in Africa

In Africa, there are 3
major religions:
Traditional, Christian and
Islam

11

Despite these differences, our research reveals five
broad key consumer groups
Key Consumer Segments
Basic survivors are the
majority group in Africa and
tend to live in urban slums

Basic
Survivors

Affluent

Working
Families

Rising
Strivers

Cosmopolitan
Professionals


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
12
luxury market in Africa

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

2010

Africa Population Evolution
100%
90%
80%

2015

3%
13%

Working
Families

3%

29%

31%

60%

31%

33%

13%

16%

3%

3%

2%

3%

16%

21%

70%

45%

Rising
Strivers

3%
12%

51%

Cosmopolitan
Professionals

2%
9%

Basic
Survivors

33%

50%

40%
30%

66%
54%

51%

20%

45%

10%
0%
2000
Affluent
Rising Strivers
Basic Survivors

2005

2010

2015

Cosmopoliton Professionals
Working Families

*
Copyright © 2013 Accenture All rights reserved. Source: Canback 2010, Accenture Analysis

Affluent

13

Growing economies and aspirational drive in Africa
is creating a booming entrepreneurial culture
Africa Entrepreneurship
Percentage of Population Starting or
Running a new Business in 2012
40%

35%

35%
30%

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

28%

25%
20%
15%

As a result, the region has the
highest percentage of new
entrepreneurs in the world

15%
13%

10%

8%

8%

7%

5%
0%
US

EU

MENA

SSA


Nigeria Ethopia South
Africa

However, most of the new ventures
are still mostly low margin and
survival entrepreneurship (e.g. small
vendors)
Source: Global entrepreneurship monitor 2012 survey

14

This entrepreneurial drive has resulted in a unique
informal trade structure
Nigeria FMCG Trade Structure Example
Sales to distribution

Sales to trade

Wholesalers

Sales to consumer

Open Markets

Manufacturer

Consumer
55%
98%

Corner Shops/
Kiosk

Formal Retail

43%

2%

Distribution Flow

Returns and Funds Flow
15
Source: Gain, Euromonitor

You often hear about great African expansion
growth stories …
Africa Success Stories
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
Shoprite is the largest food retailer on the African continent
(operating upwards of 130 stores in 16 African countries)

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.
•

16

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

Prominent retailer abandoned
100 stores in Egypt. It is
estimated it was losing over
$50 million a year

Large telecommunications
acquisition ended up
costing the company over
$695m in losses

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

Fast food chain closed its
outlets in Kenya amidst stiff
competition from local players

Global media house,
pulled the plug on its East
Africa division because of
low return on investment


17

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
•
•

Build scale
Practice lessons from frugal innovation

Local Talent
•
•

Leverage local talent
R&D centres closer to your consumer markets

Leveraged data
•

Analytics help your sales force, distributors
and product development decisions

Local Decision Making
•
•

Empower local decision making
Integrate local and corporate strategies
18

10 Traits of Master Innovators –
South African Research
60%
50%
40%
30%
20%
10%
0%

High performers


Organisational
Ecology

Integration

Tangible
Benefits

Customer
Value

Foresight

Resources

Engagement

Process of
Innovation

Overall index
score

Rest of SA market

19

Different strokes for different folks…

Strategy
1

Execution
2

Market
Focus

Value
Proposition

Do we
understand
our target
market?

3 Market
Entry
Strategy

Do we
have the
right
product/
service to
offer?


How do
we enter
the market
with
minimal
risk?

4
Sourcing/
Manufact.

Do we
source
locally or
import?

5

6

Distribution

How do we
reach our
customers?

Marketing

How do we
ensure that
there is
demand for
our
product?

7
Trade &
POS

How do
we
manage
the point
of sale?

20

Selecting and entering African markets requires onthe ground knowledge and local partnerships
Strategy – Levers for Breakthrough

Challenge
Market
Focus

Traditional market
research is very limited
and public data may be
unreliable or outdated

Insight

Walk the markets
and gain insights from
talking to street vendors
and observing
consumers

Value
Significant cultural
Proposition differences within and
across markets creating
distinct consumer needs

Beware of your home
country biases, ensure
to adapt products to
local tastes and cultures

Significant entry barriers
in terms of political, legal
(e.g. ownership
structures) and financial
(e.g. repatriation)

Assess your own
capabilities and market
requirements to
determine if you should
partner or go it alone

Market
Entry

21

Operating in Africa is challenging, but several
companies are innovating to be successful
Strategy – Levers for Breakthrough

Challenge

Insight

Sourcing

Ports are hopelessly
congested. Imported
materials can account
for almost two thirds of
final costs

It is essential to develop
local partnerships for
local sourcing and
production

Distribution

Informal trade dominate
the retail landscape with
narrow gravel roads
where trucks can’t enter

Use local networks and
leverage the use of low
cost pushcarts, trolleys
and motorcycles to get
close to the consumer

Traditional print and
media don’t always reach
the masses. Community
endorsement is a key
driver for the purchase
Marketing

Direct personal selling in
the informal sector are
key. Promotions that are
community based will
gain more traction

22

Accenture’s Africa Desk can provide practical insight to
help you craft these creative offerings and solutions
Our Offering
Assess
Which growth
market to enter?

Growth
Market
Assessment

Accenture
Offering

Market Entry
& Due
Diligence

Strategize
How will we create,
deliver, and
capture value?

Structure
What is the most
effective way to
structure and
setup?

Operating
Model Design
Business
Model Design
M&A
Execution

Implement & Run
How will we
control, direct and
partner to execute?

Capacity
Services
Managed
Services
Outsourcing

Roadmap & Financial Case Development


23

Consumer Goods in Africa and Nigeria

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