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The Dynamic African Consumer Market: Exploring Growth Opportunities in Sub-Saharan Africa

Authors:
The Dynamic African Consumer
Market: Exploring Growth
Opportunities in Sub-Saharan Africa
Grant Hatch, Pieter Becker and Michelle van Zyl
2
Contents
Introduction 4
Why is the African consumer an attractive 7
proposition?
Where should companies focus? 15
1 Basic Survivors 19
2 Working Families 21
3 Rising Strivers 23
4 Cosmopolitan Professionals 25
5 The Affluent 27
How can companies unlock the potential in 31
Sub-Saharan Africa?
Conclusion 41
Appendix 42
3
• Africa is a diverse continent,
with an estimated 1,500 languages
grouped into six linguistic families.
• In 2010, sub-Saharan Africa
(SSA) was populated by more
than 856 million consumers. The
region will have more than 1.3
billion consumers by 2030.
• The most populous country in
SSA is Nigeria, with a population
of 151 million, while the smallest,
Seychelles, has just 100,000 people.
• While the global economy is
predicted to grow by two percent to
three percent between 2011 and 2020,
SSA is poised to grow by five percent
to six percent, making it one of the
world’s fastest-growing regions.
• African countries received $72
billion in foreign direct investment
in 2008, which is five times the
amount received in 2000. While lower
than China’s investments ($92.4
billion), this amount exceeds that
received by other emerging markets
such as Brazil ($45.1 billion).
• Consumer expenditure in SSA
equaled nearly $600 billion in
2010, accounting for almost eight
percent of all emerging-market
spending, and is expected to reach
nearly $1 trillion by 2020.
• Consumer spending in South
Africa and Nigeria accounts for 51
percent of SSA's total expenditure.
• Poverty in SSA is decreasing
rapidly—from 40 percent in 1980 to
less than 30 percent in 2008—and is
expected to fall to 20 percent by 2020.
• By 2050, almost 60 percent of
people in SSA will live in cities,
compared with 40 percent in 2010.
This means 800 million more people
will live in urban environments.
• By 2012, over 50 percent of all
Africans—or more than 500 million
people—will own a mobile phone.
By 2014, this portion is expected to
increase to 56 percent (more than 600
million people), giving Africa one of
the world’s highest mobile usage rates.
Africa consumer key facts
4
For companies looking for growth via
emerging markets, Sub-Saharan Africa
looms large. The continent’s sheer size
merits attention: Since 2000, Sub-
Saharan Africa has experienced rapid
growth in consumer spending of four
percent Compound Annual Growth
Rate (CAGR), reaching nearly $600
billion in 2010. Consumer spending is
expected to rise to nearly $1 trillion
by 2020. Accompanying the growth
are rapid improvements in income
levels, infrastructure and the business
environment that promise continued
growth as a consumer market.
Companies will have to adjust their
strategies and expectations when
entering Africa. Logistics can be
unreliable and infrastructure lags
much of the developed world.
Furthermore, understanding the
diverse nature of opportunities
in Africa can be challenging. As a
result, many executives planning on
entering Africa want to know why
Africa’s consumers are an attractive
proposition, which segments they
should focus on, and how they can
capture the market’s potential most
effectively.
In the pages that follow, Accenture
presents an in-depth analysis and
segmentation of the Sub-Saharan
African consumer market that can
help guide companies as they consider
how and where to enter the market.
We also provide concrete steps and
recommendations on how companies
can tailor their strategies to the
challenges and opportunities in Africa.
Introduction
5
Cape Town
Maputo
Johannesburg
Dar es
Salaam
Nairobi
Addis Ababa
Dakar
Accra
Luanda
Douala
Lagos
Kinshasa
Major African Cities
Windhoek
Kampala
Figure 1: Sub-Saharan Africa: A Large and Compelling Opportunity
6
7
Why is the African consumer an attractive
proposition?
Figure 2: Sub-Saharan Africa Consumer Expenditure* ($ Billions)
2011 – 20202001 – 2010
0
100
200
300
400
500
600
700
800
900
1,000 1990 – 2000
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
Eastern Hub Southern Hub Western/Central Hub
*Historic / Forecast - US$ mn - Constant 2010 Prices - Fixed 2010 Exchange Rates’
Source: Euromonitor 2011
3.2% CAGR
3.9% CAGR
4.3 % CAGR
$ Billions
The new African consumer
is a force to contend
with and represents an
opportunity no company
can afford to ignore.
Since 2000, consumer spending in
Sub-Saharan Africa has grown at a
steady four percent per year, reaching
nearly $600 billion in 2010. The
market is expected to be worth
$1 trillion by 2020.1
While mineral resources will
undoubtedly continue to be important,
the most significant contributors to
growth are changing, with less reliance
on exports and more reliance on
domestic demand (consumer spending
and imports). Despite current low
per capita incomes in Africa, average
income is growing, giving rise to
an emerging middle class that will
become more demanding as income
levels and spending increase.
8
Figure 3: Structure of Demand (% of GDP)
Government SpendingConsumer Spending Exports Business Investment
Imports
Source: EIU 2010 (An average of % GDP figures were taken for the following countries: Algeria, Angola, Egypt, Kenya, Libya, Morocco, Nigeria,
South Africa and Tunisia)
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030
0%
10%
20%
30%
40%
50%
60%
70%
80%
Percentage of GDP
9
At JD Group, we look for two predominant
characteristics before considering entry into
any market, inclusive of the African market.
Firstly, we look at current and projected
potential in terms of demand forecast in the
short, medium and long term, assessing the
sustainability of the underpinning drivers for
demand carefully.
Secondly, we closely evaluate the capacity and
capability of the market to enable core business
processes such as logistics, infrastructure,
regulatory and legal policies, financial systems
and political stability to ensure effective service
delivery to the envisaged client base.”
Dr. Henk Greeff, Director: Strategy and Human Resources, JD Group
10
Figure 4: Africa Population Size (Millions)
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
Source: UN Population Division, 2010
2010
416m 40%
582m 56%
35m 4%
1,033m 100%
2050
546m 27%
1,320m 66%
142m 7%
1,999m 100%
0-14
15-65
65+
Total
Age
Age (Years)
Population Size (Millions)
Figure 5: Sub-Saharan Africa (SSA) Poverty 1980 - 2009
Poverty Rating (Share of population below $1 a day)
GDP Per Capita (Dollars)
0
500
1000
1500
2000
2500
3000
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
1980 1987 1994 2001 2008
GDP Per Capita (PPP)Poverty Rating
Source: Maxim Pinkovskiy, Massachusetts Institute of Technology Xavier Sala-i-Martin, Columbia
University and NBER, 2010
11
The rapid and sustained rise in
consumer spending is being fueled by
three key forces:
A population forecast to reach
almost 2 billion by 2050.2 In 2005,
Africa had an estimated population
of more than 920 million, which
increased to an estimated 1 billion
in 2010. By 2050 the population is
expected to increase to almost 2
billion. Furthermore, between 2010
and 2050, Africa’s economically active
population will grow from 56 percent
of the continent to 66 percent—a
striking contrast to more mature
continents whose populations are
aging and moving into the dependent
category (i.e., 65 years or older).3
Expansion of the economically active
population will lead to increased
demand for goods and services.
Significant decrease in poverty.4
By 2020, Accenture estimates that
poverty levels in Africa will fall to 20
percent from nearly 45 percent in the
1980s. Poverty fell for both landlocked
as well as coastal countries; for
mineral-rich as well as mineral-poor
countries; for countries with favourable
or with unfavourable agricultural
resources; for countries regardless of
colonial origin. GDP in Africa is growing
even faster than the continent’s
meteoric rise in population.5
Rapid urbanization. Africa’s
growing, increasingly wealthy
population is becoming more
urbanised. By 2050 almost two-
thirds of the population will live in
cities, compared with 40 percent
in 2010.6 Urbanisation, in turn, will
lead African consumers to purchase
more goods and services, and will
make it easier for companies to reach
consumers with products, services,
and communications. Rapid growth
in population and urbanization
will place additional constraints
on the infrastructure requirements
of Africa. This will require greater
planning and urban investment
which will require both public and
private sector participation.
Figure 6: Africa Urbanisation Rate (Percentage)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2000 2005 2009 2010 2015 2020 2025 2030 2035 2040 2045 2050
62%
38%
Urban Rural
Source: UN Population Division, 2010
Urbanisation
Years
12
Figure 7: Trade Zones
Djibouti
Eritrea
Ethiopia
Sudan
UEMOA
($1,917 Exports 2007)
ECOWAS
($7,341m Exports 2007)
SADC
($11,952m Exports 2007)
CEMAC
($304 Exports 2007)
EAC
($1,587m 2007)
Comesa
($4,587m Exports 2007)
ECCAS
($385m Exports 2007)
Angola
Dem. Rep of Congo
Botswana
Lesotho
Namibia
South Africa
Mozambique
Malawi
Zambia
Zimbabwe
Swaziland
Tanzania
Comoros
Seychelles
Cape Verde
Liberia
Gambia
Ghana
Guinea
Nigeria
Sierra Leone
IOC
($204m 2007)
Reunion
Mauritius
Madagascar
Burundi
Rwanda
Kenya
Uganda
Benin
Burkina Faso
Coted’voire
Guinea-
Bissau
Mali
Niger
Senegal
Togo
Cameroon
Central African Republic
Chad
Congo
Equatorial Guinea
Gabon
Source: Unctad, Econonomic Development In Africa, 2009; Worldbank Africa Development Indicators 2010
Three key trends will further enable
consumer to buy more and allow
companies to reach these consumers:
Improving access to consumers
via mobile technologies. Consumers
in Africa are getting easier to reach
due to a remarkable uptake of
mobile services. By 2012 almost 50
percent of Africans (more than 500
million people) will own a mobile
phone, compared with 30 percent
in 2008.7 This significant mobile
adoption by consumers has made
it easier for companies to reach
consumers through mobile marketing,
competitions and promotions
(for example, M-Pesa for mobile
money). Consumers are more savvy
because they are now linked to the
rest of the world through their cell
phones and no longer isolated. In
addition to improving access to
consumers, the mobile revolution
has created a booming industry that
employs and provides income for
large numbers of people. Witness
the significant drive in Kenya to
open new business call centres.
A healthier and more stable
business environment. Fewer
conflicts, more democratic elections,
higher economic growth rates and
improved business regulation make
Africa more business-friendly every
year. This fact has been recognized by
the World Bank’s 2009 Ease of Doing
Business report, which highlighted
Africa as a continent that is making
strides toward becoming a business-
friendly regulatory environment.
A loosening of trade restrictions.
Trade among African countries in the
past has been slowed by the hefty
tariff barriers that countries imposed
on imports. However, the global
drive for rapid opening of borders to
regional and international trade is
forcing African countries to open up
their borders for imports. Africa has
fostered a number of formalized trade
blocs that have been the catalyst for
loosening trade restrictions between
member states and the global
economy in general.
As African consumers accumulate
wealth and steadily gain access to
global products and services, they
will form lasting allegiances with
companies offering these products
and services. For companies that
want to benefit from the size and
growth inherent in the African
opportunity, the time to act is now.
13
14
15
Figure 8: SSA Estimated Consumer Spend 2020 ($ Billions)
Where should companies focus?
Regional Champions
Eastern Hub (EAC & COMESA) Western Hub (ECCOWAS)
Southern Hub (SADC)
315 23 18 16 15 15
47
44 38 30 29 18
167 29 16 12 97
91 938
0
100
200
300
400
500
600
700
800
900
1,000
South
Africa
Zambia
Angola
Congo
Dem
Mozambique
Namibia
Other
Ethiopia
Kenya
Uganda
Tanzania
Other
Nigeria
Ghana
Senegal
Burkina
Faso
Mali
Niger
Other
Total
Source: Euromonitor Africa Consumer Spending 2010
$ Billions
The key to success in
Sub-Saharan Africa is the
ability to focus on specific
opportunity areas and
develop differentiated,
relevant offers that
address substantial,
unmet needs.
The size and diversity of the
continent's population makes it
difficult for companies to use the
strategies they have successfully
applied in other parts of the world.
The first step is determining where
in Sub-Saharan Africa the greatest
opportunities lie. Our analysis shows
that nine countries will account
for nearly three-quarters of total
consumer spending in Sub-Saharan
Africa by 2020. These countries
are Kenya, Ethiopia and Uganda in
the eastern part of the continent;
Angola, Zambia, and South Africa
in the south; and Senegal, Ghana,
and Nigeria in the west.
Within these attractive consumer
markets there are a wide range of
consumers for which companies must
tailor attractive, differentiated offers.
16
Figure 9: Africa Consumer Markets
Kenya
Nigeria
Zambia
Ghana
Ethiopia
Uganda
ECOWAS
EAC & COMESA*
SADC
Senegal
South Africa
Angola
Focus Countries Population 2009 2010 Spend 2020 Estimated
Spend
EAC & COMESA
Kenya 40m $23bn $37bn
Ethiopia 83m $20bn $43bn
Uganda 33m $15bn $30bn
ECOWAS
Nigeria 151m $115bn $167bn
Ghana 24m $15bn $29bn
Senegal 13m $10bn $16bn
SADC
South Africa 49m $215bn $315bn
Angola 19m $14bn $18bn
Zambia 13m $10bn $23bn
*Eastern Hub includes COMESA countries that are not covered in the Southern Hub
Source: Euromonitor Africa Consumer Spending 2010
17
We have constructed a broad
segmentation of Sub-Saharan
African consumers to understand
the consumer segments and
demand in greater detail. While this
segmentation is focused on high-
level groupings rather than granular,
detailed analysis of consumer types,
our analysis reveals the specific
challenges, preferences, behaviors
and needs of the largest consumer
groups on the continent (Figure 10).
While the majority of Sub-Saharan
African consumers are currently in
lower-income, more price-sensitive
groups, many will move up into
more affluent segments as they
urbanize and their incomes increase.
Such movement will create a large,
growing, and increasingly profitable
opportunity for companies. We detail
the needs, preferences, and behaviors
of each of these segments below.
Figure 10: Five Key Sub-Saharan African Consumer Segments
5
The Affluent
1
Basic Survivors
2
Working Families
3
Rising Strivers
4
Cosmopolitan
Professionals
Basic Survivors are the
largest consumer
group in Africa and are
characteristically low
income consumers.
They tend to live in
urban slum areas or
rural areas and make
day-to-day decisions
based on basic needs.
Working families are
the second largest
consumer group. They
focus their spending
on their children’s
needs and they value
stability and routine
in their lives.
Rising Strivers are
emerging from the
first two segments,
having built their
purchasing power
through access to
credit or other
resources. They value
upward mobility and
buy based on
convenience, quality,
or even more
“expressive” factors.
Cosmopolitan
Professionals are
typically located in
urban areas. They are
busy with work but
often have active
social lives. As a result,
these consumers value
pragmatic products but
are also brand conscious
and influenced by the
media.
The affluent of Africa
have disproportionately
high purchasing power,
and are considered
wealthy regardless of
where they travel
across the globe. This
group is extremely
small and very fickle.
Source: Accenture Analysis
18
19
Whilst Sub-Saharan African
consumers’ upward mobility is what
attracts attention, at present Africa’s
largest segment is also its poorest.
Basic Survivors, which we estimate to
comprise 50% to 60% of Sub-Saharan
Africa’s population, earn less than
$100 each month on average and buy
basic goods with cash from open-air
markets and street stalls. Living in
rural areas and urban settlements,
Basic Survivors pay cash for essentials:
food, shelter, and clothing. Basic
Survivors also spend money on alcohol
and tobacco, telecom products and
services, and public transportation.
Basic Survivors’ cash flow are
unpredictable; they might visit
markets several times each week
when they have enough cash on hand
to purchase the essentials. Basic
Survivors generally avoid formal retail
stores and believe they get better
deals from local, well-known, informal
vendors even where formal retail is
available. Local vendors are also more
convenient to Basic Survivors, who
typically lack reliable access to public
or private transportation.
While the challenges of reaching
these Basic Survivors and profitably
doing business with them are many,
the size of the opportunity makes
this segment worth the effort. In
addition, as the African economy
continues to grow, some Basic
Survivors will become more affluent
and their purchasing power will
increase, by which time their brand
allegiances will have been formed.
To exploit the opportunity at the
bottom of the pyramid, numerous
companies have managed to adapt
their products to Basic Survivors’
low incomes by reducing pack sizes,
for example, selling smaller tubes
of toothpaste or packets of washing
powder. In addition, foodstuffs such as
milk and sugar often are sold to Basic
Survivors in single-use packs that can
be bought when needed.
Basic Survivor Profile
Luis is a single, 32-year-old
man living in the Angolan
slum of Cambamba outside
Luanda, where he splits a
one-room shack with his
two brothers. Luis is a street
vendor who sells trinkets to
tourists. When he does well,
he might frequent the local
pub and have Cuca beer with
his friends. On slow days he
will buy a cup of rice as his
only meal. Luis’ most prized
possession is his knock-off
Barcelona FC jersey, which
took him almost two months
to save for.
1
Basic Survivors
20
21
Slightly wealthier than Basic Survivors,
Working Families make up between
20% and 30% of the continent’s
population. They generally earn
between $100 and $250 per month.
What do Working Families spend
their money on? Compared with Basic
Survivors, Working Families are also
driven by basic needs, but they are
focused on the needs of the family
rather than the individual, and are
strongly driven by African cultural
values involving the nuclear family.
The majority of families have three
or more children and may have elders
living with them.
Living in urban outskirts, Working
Families save their salaries until
month end and then visit nearby
open-air markets and street stalls.
They pay cash for groceries, clothing
and footwear, toys and games,
and educational products. Because
Working Families generally consist of
more than one salaried individual their
income is more stable than that of
Basic Survivors. However, the demands
of family and work make time precious
and increase the value of processed
and conveniently packaged food for
themselves and their children.
Overall, the family orientation of
this segment drives its purchasing
decisions, boosting the importance of
values such as security, convenience,
consistency, personal trust and, of
course, the survival and upward
mobility of the family.
2
Working Families
Working Family Profile
The Biya family resides in
a small city called Mbouda
in Cameroon and has four
children ages seven to 13.
Francis (the father) works
as a mechanic servicing
local farmers’ trucks, while
Calixthe (the mother) works
as a housekeeping lady in a
hotel. Due to both parents’
late working hours, they
often make quick prepared
noodle dishes for dinner
and give their children
small biscuit packets for
snacks. They spend extra
on laundry detergent
for school uniforms.
22
23
Some Basic Survivors and Working
Families manage to build purchasing
power through access to credit and/
or by developing in-demand skills and
become Rising Strivers. With survival
assured, Rising Strivers now value
upward mobility as well as intangible
brand qualities. Comprising an estimated
10% to 16% percent of Sub-Saharan
Africa’s population, Rising Strivers can
earn more than double what Working
Families earn ($250 to $750 each
month), which often leaves them with
a surplus to spend on consumer goods
such as cigarettes, clothing, and even
the occasional bottle of perfume or
cologne.
Typically either successful migrants to
urban areas or rural workers who have
benefited from booming commodities
industries (for example, mining), Rising
Strivers represent Africa’s emergence
from low-income to middle-income
economies and are the primary drivers
behind Sub-Saharan Africa’s consumer
growth. Rising Strivers also represent
a dichotomy between Africa’s past
and future as a consumer market. For
example, while many Rising Strivers have
bank accounts and use mobile phones,
they primarily transact using cash and
visit informal open-air markets preferred
by less-affluent segments. They also
occasionally visit supermarkets.
Most Rising Strivers have recent
direct experience with a lower-income
existence and, as such, value durable
products and transactions based on
personal trust. Members of this segment
strive to continue their upward mobility,
and will invest in their children’s
education as a means to do so.
Rising Striver Profile
Udofia is a 27-year-old father
of two living in Lagos, Nigeria.
Though he comes from a
household of fishermen, he
now works for a thriving taxi
business. Udofia moved to
the city center in his early
20s, purchasing a used car
through family support and
microcredit. He started out
living in a slum with no
running water, but with hard
work, connections, and his
good English skills, he found
a job with a dispatch service.
And while Udofia’s family
spends most of its income on
household needs, he also has
some personal money left over
for a new smartphone and a
Guinness beer after work.
3
Rising Strivers
24
25
Working and living in the city,
Cosmopolitan Professionals earn
between $700 and $1000 per
month, which they spend (using
cash, credit cards and, increasingly,
mobile services) at supermarkets and
shopping malls. They also still frequent
traditional, informal stalls and markets
for small, low value items such as
bread. Cosmopolitan Professionals
often reach these retail locations using
their own cars and motorcycles.
Representing between two and three
percent of Sub-Saharan Africans,
Cosmopolitan Professionals often
have worked or studied abroad and
have a high awareness of global
brands. They access content and
entertainment via a wide variety
of media, including print, radio,
satellite TV, and the Internet
(including social media). Growing
broadband penetration and falling
access costs are fueling this trend.
Driven by the need for convenient,
fashionable, high-quality products that
complement their busy, work-driven
lives, Cosmopolitan Professionals
spend money on things that reinforce
their professional image: business-
casual clothes (often purchased
abroad), hair care products and
footwear. Cosmopolitan Professionals,
often doing well in their careers,
support poorer family members
through cash remittances and
occasional purchases.
Cosmopolitan
Professional Profile
Abuya is a 35-year-old
married woman in Kenya with
a degree in economics from
the University of Nairobi.
She works as a financial
controller for a multi-national
corporation. Abuya and her
husband recently moved into
a new apartment and have
bought several new household
goods, including a vacuum
cleaner, a refrigerator and a
television. When dining out
for business or leisure, she
might have an Amarula (a
liqueur) over ice and check
Facebook on her mobile
phone while she waits for
her colleagues or friends.
4
Cosmopolitan
Professionals
26
27
The Affluent have much in common
with Cosmopolitan Professionals:
They mainly live in cities, have
studied or worked abroad, prefer
malls and upscale retail stores,
access a wide variety of global
media, and use credit cards to a
greater extent than other Africans.
Their income is substantially higher
than the Cosmopolitan Professionals
segment, typically more than $1,200
per month. They have a pronounced
preference for luxury brands such as
BMW, Mercedes & Gucci. This group
represents just one to two percent
of Sub-Saharan Africa’s population.
The Affluent travel often for both
work and pleasure, and may even
own homes on other continents.
Vacations, hotels and flights absorb
a large proportion of their spending.
The Affluent also spend money
on clothing, cosmetics, cars, and
household goods, seeking items that
are fashionable and prestigious.
Affluent Profile
Osagi is a 45-year-old father
of two living in Lagos with
his wife. His two children
attend universities abroad.
Osagi is a director of a
multinational oil company
and oversees the company’s
operations in Nigeria. He
often travels abroad on
business trips as well as
within Africa, and spends
time in hotels and dining
out for business meetings.
Osagi owns a lavish five-
bedroom house in Banana
Island, an upmarket area of
Lagos, and employs several
servants, including a driver
for his daily commute.
5
The Affluent
28
2015
Population Size (Millions)
100
200
300
400
500
700
800
900
0 200 400 600
* Market values equal total segment income and not disposable income
Source: Canback 2010, Accenture Analysis
Market Value ($Billions)
600
0
2000
2000
2000
2000
2000
2015
2015
2015
2015
Cosmopolitan ProfessionalsWorking Families Rising Strivers AffluentBasic Survivors
Figure 11: Segment Income Market Value (2000 to 2015 in $ Billions)
29
What are the opportunities
by segment?
How do the opportunities within
these segments compare with
each other?
While the spending power of Basic
Survivors will grow slightly, the potential
for doing business with Rising Strivers
and Working Families will increase
substantially as the segments grow and
continue their upward trajectory.
Accenture estimates that Working
Families will represent 33% of the total
Sub-Saharan African market opportunity
by 2015. The largest group will remain
Basic Survivors at 45%, followed by
Rising Strivers (16%), Cosmopolitan
Professionals (3.1%), and the Affluent
(2.8%). Even though Cosmopolitan
Professionals and the Affluent still will
constitute a relatively small portion
of the market, their spending power
translates into a significant opportunity
for luxury products and services. As the
African economy continues to mature,
these segments are likely to grow more
rapidly.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2000
1.9%
8.7%
21.2%
66.2%
2.2%
2.6%
12.3%
29.2%
53.8%
2.3%
2.7%
13.3%
30.5%
51.1%
2.8%
3.1%
15.8%
33.3%
44.9%
2005 2010 2015
Basic Survivors Working Families
Rising Strivers Cosmopoliton Professionals
Affluent
Source: Accenture analysis based on segment market value
2.1%
Figure 12: Consumer Segment Size Evolution
30
31
How can companies unlock the potential
in Sub-Saharan Africa?
Our consumer
segmentation clearly
illustrates the potential
Africa holds for a variety
of businesses looking to
gain a foothold on the
continent.
A company’s market entry plan must be
explicit about the role Africa will play in
its broader corporate strategy, on which
African countries it makes sense to
enter, and in what sequence and with
what timing they should be entered.
The market entry plan also should
illuminate the company’s specific goals
for market entry and the ways in which
progress against those goals will be
measured.
Regardless of the markets or segments
on which a company chooses to
focus, companies need to consider a
simple framework that can help most
effectively execute an entry strategy.
As shown in Figure 13, our framework
encompasses the full lifecycle of
doing business in Sub-Saharan Africa,
from gaining insights on the biggest
opportunities to deploying effective
marketing campaigns that support the
company’s offers.
Figure 13: Seven key steps to build a business in Sub-Saharan Africa
Strategy Execution
1. Market
Research
2. Value
Proposition
3. Market
Entry Strategy
4. Sourcing 5. Manufacturing 6. Distribution 7. Marketing
and Promotion
Develop a deep
understanding of
the market,
competitors and
consumer by
using creative,
cutting-edge
methods to tap
into local
networks and
local knowledge
Do we understand
our target market?
Deliver a holistic/
innovative
offering which
responds to the
needs of their
target consumers
-encompassing
product/ service,
price, promotion
and place
Do we have the
right product/
service to offer?
A robust market
entry strategy is
essential for
successful
operations in
Africa, based on
your level of risk
appetite and
reward select
whether to go it
alone, acquire or
partner
How do we enter
the market with
minimal risk?
Partner and build
trusting
relationships with
local producers
who can provide
intelligence into
tastes and
preferences of
local communities
and provide a
stable, less costly
supply chain
Do we source
locally or import?
Develop close
partnerships with
local producers
or build own
manufacturing
capacity close to
your markets
vertically
integrating when
necessary to
reinforce your
supply chain
Do we use local
manufactures or
do we do it
alone?
Last Mile
distribution is
extremely costly.
Look for existing
innovative
mechanisms in
the market to
leverage (e.g.
Using local
women and men
to distribute to
rural areas)
How do we reach
our customers?
Traditional routes
to market do not
work, direct
personal selling
and visibility in
the informal
sector are key
How do we ensure
that there is
demand for our
product/service?
32
“MXit (Free online mobile chat service) has
applied three key strategies in accessing
lower income African consumers. Firstly,
MXit has kept its product simple, minimizing
customization. Secondly, MXit has improved
reach through accessing early adopters in
communities and ensuring that users are
constantly educated about new services. And
lastly, MXit ensures that it understands and
appeals to its target consumers’ most basic
needs, which can often be misunderstood if
there is not sufficient research.
Herman Heunis (Founder and MD MXit)
33
Understand the target
market
The first step to entering the
African market is to develop a
deep understanding of the market,
competitors and consumers. Due to
a large informal economy and the
prevalence of cash transactions,
accurate and representative data on
consumer spending is sparse.
How can companies bridge this gap?
They must get creative, tapping into
local networks to gather insights,
partnering with academia and
companies that possess usable
customer data – for example, banks
and telcos - and designing market-
facing pilot “experiments” with risk
mitigation mechanisms such as “seed
loans” to test methods for accelerating
future expansion. Company managers
need to be prepared to walk the
markets and gain insights from
talking to street vendors, watching
consumers and building a qualitative
model of how the market operates.
This approach is very different from
that used to understand a developed
market with large volumes of
quantifiable data. Together, such an
approach can help companies gain
the market insights they need to craft
differentiated, relevant offers for the
African market.
CfC Stanbic, a division of
Johannesburg-based Standard Bank
Group, provides an example of how
this is done. One of the key aspects
of doing business in Africa is the
predominance of individual, self-
employed vendors, for instance,
Nairobi alone has approximately
100,000 such businesses. For banks
such as CfC Stanbic, the challenge is
loaning money to the most promising
of these entrepreneurs, many of
whom have little or no credit history.
To tap into this opportunity while
reducing its loan default risk, CfC
Stanbic used a tool that enabled
portable psychometric testing of
potential loan recipients, rapidly
assessing their risk tolerance, ethics
and honesty, intelligence, and business
skills. CfC Stanbic also deployed a
mobile workforce to complement its
local banking branches, and further
mitigated risk by using “seed loans”
with “graduation plans,” which allowed
the bank’s business with a given
customer to grow as the customer’s
credibility was established.8
Understanding the Target
Market: CfC Stanbic
• CfC Stanbic sought to build its
business with African entrepreneurs,
but little data was available on their
creditworthiness.
• The bank conducted psychometric
testing of potential loan recipients in
the field, thereby reducing its risk of
loan default.
• CfC Stanbic created a mobile
workforce to address this market and
reduced its risk through “seed loans”
to small businesses.
34
Develop the right value
proposition
With a solid understanding of the
opportunity, companies seeking to
do business in Africa must deliver
a relevant, differentiated offering
tailored to their target consumers,
as they must do in any geography.
African consumers have unique
requirements that companies must
take into account. For example, price
remains the key consideration for
the majority of African consumers,
and all offerings should take this into
consideration. In addition, community
and family are strong elements of
African culture, so companies need to
ensure that branding and promotional
efforts resonate with these values—
for example, through corporate
social responsibility and sustainable
development programs. As we showed
in the previous section, distinct
segments of African consumers have
unique needs and preferences that
companies must incorporate into their
value propositions.
Consumer goods giants such as Unilever
and Procter & Gamble have excelled
in understanding and meeting the
unique needs of African consumers.
Unilever, which aims to serve all
African consumers (including the Basic
Survivors, those living on less than
$1 each day), had to find a profitable
way to make its products available and
affordable for the poorest of Africans.
To achieve this goal, Unilever created
the "small unit packs/low unit price"
concept: for example, selling small
sachets of detergent or salt. This strategy
has allowed Unilever to deliver the
volumes required to support expansion
whilst capturing the loyalty of lower-
income customers. This strategy has also
prevented the margin-eroding resale of
its bulk products in smaller portions.
Unilever collaborates closely with
local wholesalers who not only assist
Unilever to supply Africa’s informal
market but also provide the company
with market insights and customer
feedback. Unilever has embedded
corporate social responsibility in its
strategy to further boost the brand’s
relevance with Africans.9
Develop the Value Proposition:
Unilever
• Unilever sought to reach Africa’s
poorest consumers profitably.
• To do so it developed small packets
of product at low prices, worked
closely with local wholesalers,
and worked to become relevant to
Africans.
• The company has had double-digit
growth in the region during the past
decade.
35
Enter the market with
minimal risk
Although Sub-Saharan Africa has
shown tremendous improvement
as a consumer market in recent
years, many barriers to entry,
ranging from corruption, to a lack
of infrastructure and local talent, to
bureaucracy remain. To choose the
right strategy for overcoming these
hurdles, companies must assess risk
and then decide whether to establish
a stand-alone business, enter via
an acquisition, seek partnerships or
joint ventures, or licence its products
and services to another company.
Each approach has its pros and cons:
Entering via a Greenfield (i.e. going
it alone) investment can result in the
biggest payoff if entry is successful,
but also is the riskiest choice for
companies that lack local market
knowledge, access to distribution
channels or political connections.
Conversely, entering Africa via an
acquisition can be expensive and
time consuming, but can provide
immediate access to existing networks
and distribution channels and the
opportunity to gain deep market
insights that can be scaled. Partnering
provides a faster way of gaining
access to local market knowledge and
distribution channels, but selecting the
right partner requires careful appraisal
of ownership, control, pricing and
local partner capabilities. Licensing
offers the least risky and lowest cost
option to expand market reach, but
carries a high brand risk and limits the
potential to exploit potential market
opportunities.
Ultimately, the right strategy must
reflect the company’s goals and
priorities, the state of local market
development and regulation, and the
specific nature of the entry barriers
to be overcome.
Overcome the challenges of
sourcing and procurement
Another key to success in Africa is
developing a stable, cost-effective
supply chain that enables a company
to meet local needs and overcome
local challenges whilst maintaining
profitability. This is no small feat:
Importing raw materials as well as
finished goods into Africa is hampered
by many of the same challenges that
make market entry difficult, including
corruption, complex regulations, high
taxes and substantial import fees.
Companies must choose sourcing
partners that have strong links with
the community and a high level of
intelligence on local preferences and
challenges. Companies must invest in
the capacity and capabilities of these
partners, establishing training and
incentive programs that enable them
to fulfill the company’s brand promise.
Figure 14: Africa Market Entry Mode
Strengths Challenges
Acquire
Gain ready-made
local market position/
share and assets
Accurate valuations in
Africa are challenging and
many contracts might be
relationship/ or culture
based
Risk/
Reward
Partner
High degree of dependence
on partner, whose goals
might not align
Less risky option, due
to the ability to leverage
partner presence and
local market knowledge
Low
Greenfield
(Go it alone)
High degree of
control and no
reward sharing
More risky due to lack
of local market
knowledge
High
Licence
High degree of brand risk
due to loss of control, and
less opportunity to exploit
market opportunities
Least risky and low
cost option to expand
market reach
36
One company that has been able to
overcome the challenges of sourcing
in Africa is SABMiller, which has set
up cooperatives with local farmers to
supply barley and cassava to suit the
tastes of Basic Survivors and Rising
Strivers. SABMiller has signed long-
term contracts to buy crates from
a local producer, as well as locally
produced cans. By 2012, the company
hopes to source from and work with
up to 45,000 African farmers.10
Overcoming Sourcing
Challenges: SABMiller
• To address the challenges of
sourcing in Africa, SABMiller set out
on an aggressive strategy to build
key relationships with local suppliers.
• The company is now working
directly with local farmers and
producers to source key inputs.
Develop the right
manufacturing strategy
In addition to solving sourcing
challenges, a company must develop
a robust and relevant manufacturing
strategy which should feature strong
partnerships with local producers
or the development of in-house
manufacturing capacity close to a
company’s targeted markets.
While the right manufacturing
strategy must be specific to each
company’s context, capabilities, and
goals, a few general guidelines can
be useful. For instance, companies
doing business in Africa should
be sure to improve the stability of
key resources via term contracts,
upstream acquisitions, and investment
in diversified geographical sources
to minimize supply disruptions and
improve the quality and availability of
materials. Trusting relationships with
local producers are important as well,
as is the provision of technical support
and training to local manufacturers
to ensure high standards for locally
sourced raw materials.
DUFIL, the largest manufacturer of
instant noodles in Nigeria, provides an
example of how foreign brands can be
manufactured successfully in Africa.
Indomie, originally an Indonesian brand
of instant noodles, has been a runaway
hit in Africa, and in Nigeria in particular.
In 2008, the company introduced a
new flavor tailored to local tastes,
which was very popular among Nigerian
consumers. However, challenges
related to importing key ingredients
made it difficult for the company to
meet demand for this new product.
To overcome these challenges,
Indomie embarked upon a backward-
integration strategy. The company
invested in world-class local
production facilities and tapped local
sources and its own manufacturing
capabilities to source raw materials.
37
38
Today, the brand is being produced in
nine ultra-modern factories in two
key locations in Nigeria, with plans to
expand aggressively. Due to its ability
to respond quickly to local demand,
Indomie has captured 70 percent of
the Nigerian instant noodle market.11
Developing Manufacturing
Strategy: DUFIL
• Indomie, an Indonesian brand of
instant noodles, had become very
popular in Nigeria.
• Due to challenges associated
with importing raw materials, the
company struggled to meet demand.
• Indomie integrated backward,
developing local manufacturing
capabilities for all raw materials.
Reach customers
effectively
Given that more than 60 percent of
people in Africa live in rural areas and
have limited access to transportation,
simply covering “the last mile” to
reach the final consumer can be
extremely costly and difficult. Poor
roads and limited infrastructure can
make delivering products or services to
consumers a daunting task. Companies
must build strong sales and distribution
networks by leveraging a mix of third-
party, wholesale, and direct-distribution
models. The route to market, in our view,
is the greatest obstacle that companies
must overcome to build a successful
business in any African market.
This is especially the case with Basic
Survivors and Working Families, whom
companies can reach most effectively
by employing locals to act as agents, or
by partnering with local organizations
that have links into the rural market.
Mobile operator, MTN is a seasoned
veteran of doing business with
rural consumers, with operations
in 21 markets across Africa and
the Middle East (plus Afghanistan).
To boost its market share among
rural, low-income Africans, MTN
has created services tailored to
their needs through a network of
local agents, established kiosks in
rural areas, and has given agents
motorbikes to reach the most remote
areas. MTN has also developed lower
denominations when selling airtime,
reflecting the low and unpredictable
income of many African consumers.
Through such innovative distribution
and promotional activities, MTN has
been able to capture a significant
proportion of the Basic Survivors
segment, which is a critical entry point
to the African market.12
Reaching Customers: MTN
• 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.
• The company has established a
leading position within the Basic
Survivors segment.
39
Stimulate demand through
marketing and promotion
Companies used to supporting demand
through Western-style marketing
and promotional approaches must
adjust their strategies—and their
expectations—for the African market.
Traditional media, namely television and
radio, does not always reach all market
segments, particularly people living in
rural areas or urban slums. In much
of Africa, weak infrastructure limits
access to electricity, telephones and
the Internet, making access to media—
whether TV, websites, or social media
erratic. While tailoring messages and
offerings to specific market segments is
critical to success, most companies will
struggle to obtain useful market insights
on Africa’s largely informal markets.
Companies must identify strong
local partners through which they
can access informal markets and
obtain information they can use to
refine their offerings and messages.
Companies must also spend their
marketing budget wisely, being
mindful that TV, radio and print
campaigns will not have the same
impact as they would in developed
markets. In particular, when
attempting to reach lower-income
segments such as Basic Survivors and
Working Families, companies must
ensure their promotions and marketing
are focused on the community and are
visible in the market through relevant
media such as radio and competitions.
East African Breweries Limited (EABL)
has tailored its marketing approach
to become East Africa's leading
branded alcohol beverage company.
Tusker Lager, one of its beers and
the biggest brand in East Africa, was
initially perceived as old-fashioned
by young adults. While EABL was
determined to rectify this perception,
the company had a limited marketing
budget, and knew that the impact
of traditional TV- or radio-based
advertising would be limited within
East Africa. To maximize the return
on its marketing resources, EABL
focused on a single, high-impact
platform that would resonate with
young adults: Tusker Project Fame,
a reality show focused on regional
talent. To overcome limited access
to TVs, EABL sponsored “viewing
bars” where the show was screened
in conjunction with promotions on
EABL drinks. Competitions were held
to boost audience engagement. EABL
provided training and branded material
to retailers to ensure that the brand
was delivered successfully to target
consumers and leveraged mobile and
Internet technology: the company
generated more than one million SMS
votes and Web traffic of approximately
70,000 hits per week.13
Effectively Marketing and
Promoting: Tusker Lager
• Tusker Lager was perceived as old-
fashioned by East African Brewery
Limited’s (EABL) target consumers.
• EABL had limited marketing
resources and advertising effectively
in East Africa would be difficult.
• EABL focused its resources on
a reality TV show and brought it
to viewers without TVs via
“viewing bars.”
40
41
Companies are building emerging
markets into growth strategies as
consumer demand in more mature
markets struggles to reach pre-
recession levels. Perhaps the most
promising emerging market is
also one of the least understood:
Africa. The continent offers the
last frontier for consumer growth.
Until recently, doing business on the
continent has been hampered by
an unstable political and economic
environment, a lack of infrastructure,
and widespread poverty. At the same
time, the predominance of informal
markets and cash transactions in
Africa has prevented companies
from uncovering the types of
consumer insights that have helped
companies penetrate other markets.
Clearly the African continent
is now open for business. The
business environment is improving,
infrastructure is being strengthened
albeit slowly, and growing numbers
of consumers are earning more and
purchasing products and services
that support their aspirations. As
the African opportunity becomes
more attractive, companies are
devising creative ways to gather
important market insights in order
to craft compelling consumer
propositions that meet the needs of
African consumers whilst generating
robust revenue and profits.
Focus and discipline are key to this
goal. Companies must target the
right consumer segments, from
Basic Survivors to Rising Strivers
to the Affluent, and then apply a
structured approach to understanding
consumers and how to do business
with them. It is also critical to
move quickly. Companies that enter
early, and even create new product
categories, stand to gain a significant
advantage over competitors that
wait until the African market is
more mature, when allegiances have
already been formed and competitive
pressures are more intense.
By focusing on the distinctive needs,
behaviors, and preferences of the
consumer segments described in
this point of view, and by applying
a systematic approach to market
entry and ongoing success,
companies can tap into the African
opportunity in ways that protect
their margins and grow their
revenue—thereby accelerating the
pursuit of high performance.
Conclusion
42
Acknowledgements
The authors wish to thank the
following people for their contribution:
Wayne Borchardt, Roze Phillips,
Clemence Grasset, Lindsay Smith,
Joelle Kana, Tlangelani Mageza, Jon
Jaaback, Rolf Moes, Tamara Parker and
Henry Egan
Special thanks are owed to the
following company representatives
who provided detailed market insights:
• Stephen Van Coller (ABSA Capital)
• John Gachora (ABSA)
• Dr Dieter Kovar (ABSA or ABSA
Capital)
• Baker Magunda (EABL)
• Dr. Henk Greeff (JD Group)
• Noah Naidoo (Standard Bank)
• Mike Conway (Tiger Brands)
• Herman Heunis (MXit)
Accenture, its logo, and High
Performance Delivered are trademarks
of Accenture. This document is produced
by consultants at Accenture as general
guidance. It is not intended to provide
specific advice on your circumstances.
If you require advice or further details
on any matters referred to, please
contact your Accenture representative.
About this study
This study was prepared from
sources and data which Accenture
believes to be reliable but it makes no
representation or warranty, express
or implied, as to their accuracy
or completeness. Any figures and
statistics used in this study were up
to date at time of writing and are
subject to change without notice. The
views and opinions expressed in this
publication are those of Accenture
only and do not necessarily reflect
those of any of the companies
researched or surveyed or any other
third party referenced in the report.
Such opinions should not be construed
as providing professional advice,
recommendations or endorsements, or
relied upon as such. Neither Accenture
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reliance on the information contained
in this publication.
Appendix
43
References
1 Euromonitor 2011
2 UN Population Division, 2010
3 UN Population Division, 2010
4 Maxim Pinkovskiy, Massachusetts
Institute of Technology Xavier Sala-i-
Martin, Columbia University and NBER,
2010
5 Maxim Pinkovskiy, Massachusetts
Institute of Technology Xavier Sala-i-
Martin, Columbia University and NBER,
2010
6 UN Population Division, 2010
7Africa Mobile Fact book, 2008
8 Standard Bank Group – Kenya SME
Pilot. http://www.hks.harvard.edu/var/
ezp_site/storage/fckeditor/file/pdfs/
centers-programs/centers/cid/el/gem-
2010/presentations/Standard_Bank_
Group_SME_Pilot.pdf
9 No whitewash: Unilever's drive to
dominate Africa, Jasson Nissa, April
2003
10 African group brews new
customers - http://www.ft.com/
cms/s/0/c55f7318-f957-11de-80dc-
00144feab49a.html#axzz1En8JK3ob
11 Noodles War: Indomie and the
competitions, stocknewsline, December
2009
12 Distribution is the name of the
game, Mats Thoren, Ericson Business
Review, February 2007
13 EABL Annual Report, 2010
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For further information, please
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