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Growing in Africa: Deciding what to sell, for how much - EY - Global

Growing in Africa

Deciding what to sell, for how much

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Questions to consider:

  • How will consumers use our products?
  • Which categories will need to be tailored to reflect local taste?
  • To what extent will we have to create new categories?
  • What is our strategy on pack size and price point?
  • How should we position our products in the marketplace — is there opportunity to reposition mid-market global brands as premium local brands?
  • What local products have the capacity to become global brands?
  • How do we get reliable market feedback cost-effectively?

Ethnicity, culture, affluence and religion play a major role in driving preferences and purchasing behavior.

Summary: You need to understand African consumers and overcome the difficulties of poor local infrastructure and lack of modern trade to reach priority consumer segments with a tailored proposition.

Understanding African consumers

Consumer product companies looking to increase consumer research can partner with local businesses to share their existing knowledge or hire locals to conduct market research.

Below are some key characteristics of African consumers.

  • Pro Africa - SABMiller tried to introduce its traditionally South African brand, Castle, into Kenya but failed to dislodge EABL’s Tusker beer which taps into the country’s fierce nationalism with its elephant branding and "My country, my beer" slogan.
  • Status conscious - Africans are keen to demonstrate status through wealth. For example, Unilever’s Handy Andy surface cleaner (Cif) is often left out in homes for guests to see. Similarly, premium spirits are consumed in bars, not at home.
  • Religious - Many consumers are influenced by religious practices (particularly in countries with a strong Muslim or variable ethnic contingent) affecting everything from clothing to personal grooming to eating and drinking practices. Ramadan has been the focus of a number of highly successful initiatives by consumer products companies; for example, P&G’s musk-scented Tide detergent for Ramadan.
  • Traditional - Clothing requirements are behind some key sales trends. P&G has seized the opportunity and launched a campaign for Pantene focusing on its strength and ability to combat hair loss, which is often an issue for veiled women.
  • Cost conscious - Single-use or low-cost products are experiencing solid demand. Products like SC Johnson’s individual mosquito coils for US$0.01 and returnable 200ml bottles of Coca-Cola’s drinks can be profitable, provided companies invest in research, planning and logistics needed to reach the US$0.5-a-day consumers.
  • Performance focused - Consumers will seek to maximize product use e.g., using one or two diapers a day, not eight. Efficacy and quality are key product attributes and companies should strive to optimize core functionality rather than seeking to "add value" as in more developed markets.

Developing the relevant portfolio

Established—and successful—companies strive to achieve an 80/20 or ideally 70/30 split between global and local products. These ratios help preserve economies of scale and boost profitability.

It is not yet clear if Africa will be similar to Asia where consumers favor local brands or like the Middle East and Latin America where consumers favor the global model.

Getting the right price point

Markets are highly variable in Africa and pricing is driven, amongst other things, by how consumers like to shop and what they can afford.A good rule of thumb, especially in rural areas, is that consumers lack transport and funds. So they’re likely to buying goods in smaller quantities and smaller sizes for immediate consumption. For example, in Egypt, P&G has launched smaller sizes of Tide and Bonnex to target less affluent consumers.

Counterfeiting and illicit trade remain a significant challenge across Africa and can have a negative impact on price points.

Tailoring the consumer experience

Consumers have different expectations of products in Africa than in developed markets.

For example, whereas Western consumers’ key expectations of a meal at McDonald’s are speed and convenience, many African consumers will see a trip to McDonald’s as a special event, not a routine occurrence. This means they want to enjoy the moment and not be rushed.

Developing a good understanding of consumers and expectations is key.

 Questions to consider:

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