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Is Africa the next BRIC market?


May 28th, 12:57

Africa has become the next springboard for FMCG (Fast Moving Consumer Goods) companies due to strong African GDP growth, an increasingly urban and growing middle class, and a strong consumption drive in the African economy.  

With home grown markets in Europe or North America
growing in low single digits the key challenge for global FMCG companies is how
to fuel growth and remain an attractive investment prospective for
institutional investors.

In the last 20 years growth was fuelled by entering and
growing their business in developing markets: the BRIC(Brazil, Russia, India,
China) markets being those with the most impressive growth. Most of these
companies have fought bitterly to gain market share and most of the successful
companies were `early in’ these markets.

As growth begins to slow down and entry becomes more and
more expensive in these BRIC markets, global FMCG companies are turning to
other developing markets to fuel growth. Many are looking to where a similar
“early in” entry strategy would work, or where there are still opportunities to
carve out market share.

The reality is that today there are very few developing
markets left. That’s why Africa is currently generating so much interest.

The concept of being “early in” in many African markets
should not exist as these markets have been open for many years and in-fact
multinationals like Unilever, Nestle and Coke have been there for decades. The
reality is that in many African markets, in many categories, the business is
still under-developed and offers brand builders the same or similar
opportunities to those they have had in developing markets like the BRIC
markets 20 years ago.

If we look at Africa GDP growth since 2000 it has been
impressive, ahead of world growth and is now almost on a par with developing
Asia markets. In 2012 markets like Angola grew in double digits and Nigeria,
Ghana, and Tanzania all grew at over 6%.

This growth is accelerating, fuelled by investment into
Africa: FDI (Foreign Direct Investment) in Africa. In addition, Africa has a
fast growing, young, increasingly urban population and a growing middle class
which means demographics are fuelling the African growth.

What’s interesting is that there is a strong GDP growth
per capita in Africa. This has resulted in the emergence and growth of a middle
class on the Africa continent and high urbanization rates, currently at 40%
across the continent.

The emergence of an African middle class means there is a
strong consumption drive in the African economy. Urban African consumption of
consumer goods is at a much higher level than most other developing markets -
45% of GDP growth from 2000 has come from the consumer goods sector. Over
300 Million people are today classified as middle class in Africa and since 2000
this middle class has contributed massively to private consumption growth, FMCG
food, beverages and non-food consumer products will account for 50% of
household consumption by 2020.

The African continent presents high growth opportunities for
FMCG companies, however Africa is a complicated, challenging and difficult to
enter market and succeeding in Africa requires a focused strategy. This
strategy needs to focus on where to play, how to connect with consumers, the
right route to market and strategies for overcoming business complexities.

If FMCG companies have the ambition for growth, the
appetite for some risk and can get some expert help to define and develop their
African business, the opportunities can be endless. 



at Aperio FMCG Consulting

Michael Wood is co-founder and Director of Aperio, a business consulting company focused on the FMCG space in South and Sub Saharan Africa. Michael has many years international experience where he held the positions of Marketing Director, Sales Director & Managing Director with the Gillette company and Procter & Gamble....