In the coming decade, at least 80% of new food and beverage consumers are estimated to come from emerging markets. But while ‘increased consumption’ tends to automatically conjour up images of more cosmopolitan places like Bangkok, Thailand or Shanghai, China, the fact is that in terms of quantity, less mature markets are likely to anchor a lot of this growth moving forward.
One such market that is often less mentioned — and part of far fewer MNC growth plans — is Africa, which could be a costly mistake for those who underestimate its potential.
“Africa is particularly important to food firms dealing in consumer packaged goods (CPGs) because in this market, many of its staples are actually processed, packaged foods,” African CPG firm Tiger Foods MD Don Ebubeogu told the floor at a recent panel discussion in Dubai, United Arab Emirates.
“Many foreign companies and investors tend to miss out seeing that there is actually a rich market in this region, and back away due to policy and operational challenges, but these are not impossible to overcome and the rewards are immense once successful.”
According to data coming from the World Economic Forum, by 2050 Africa will contain an estimated 1.56bn consumers, around double its current population. Some 40% of the global young population will come from this market by 2030; and by 2050 it will make up 85% of the projected increase in working age (15 to 64 years of age) worldwide as well.
So what will it take for food forms to not only enter but also establish a sustainable and successful presence in a market like this one? Here are three top tips from industry experts.
Don’t mistake price sensitivity for cheapness
Just because Africa as a whole is still a developing market does not make its consumers any less sophisticated in their tastes and demands, so any company looking to gain a foothold here needs to ensure their product and portfolio strategies can keep up.
“Africa is what we call a frontier market like Pakistan, where many consumers here are younger risk takers that love innovation. The myth is that they are bargain hunters - they are in fact value-seekers, and companies need to provide value to them in their innovations,” one of Pakistan’s largest bakery firms English Biscuit Manufacturers (EBM) MD & CEO Dr Zeelaf Munir added.
“One mistake that many manufacturers tend to make is in assuming that affordability automatically means cheapness - very deliberate design architecture is needed to ensure that consumer needs are met all the way throughout one’s portfolio, whether it is casual or luxury.”
This would mean putting some serious investment into developing local portfolios that not only meet consumer demands at a surface level, but creating multiple products at multiple levels and use occasions to ensure multiple types of needs are met.
“The portfolio cannot just be copy pasted from other markets, or a one-size-fits-all structure - there needs to be both horizontal and vertical development to satisfy different functions and levels of need states, whether this is nourishment, joy, wholesomeness, indulgence and so on,” she said.
“Pakistan is a very price-sensitive market and we have seen this strategy of different pricing for different pricing work here, so I believe there is a strong likelihood it will be the same in Africa.”
Deep understanding of the market in advance is needed - patience and respect are crucial
Africa may be an immense opportunity for food firms worldwide, but it is undoubtedly one of the most complicated due to existing bureaucratic complications.
As such, it is not only important but vital for firms to gain a deep local understanding of the market and how it works in advance, and not rely on any perceptions or assumptions.
“The number one point to remember is that a lot of patience is needed due to existing bureaucracies and other factors - there are many success stories, but the common thread is that these successes need to support the governments’ national policies and regulatory frameworks, as this is how it works here,” Africa Food Systems Forum (AGRF) MD Amath Pathé Sene said.
“Many foreign companies have this perception that in Africa the food system is chaotic and unstructured. This is not true, as there is structure here, just that it is informally structured and there is a system that works locally, just that most foreigners are not privy to it.”
So to succeed here, the other key component needed is to unlock entrance into this informal system.
“For many companies that have established themselves here, they either aligned themselves with trusted local family or brand names, integrating themselves within this informal system,” he said.
“There are many players along the supply chain in Africa, maybe more than what foreigners may be used to, but it is still important for collaboration to be instilled all along it in order for the value chain to work. Working in silos has been shown to lead to insecurity, which in turn costs jobs and opportunities - reaching the next one billion consumers here depends on making this entire ecosystem work.”
Preconceptions of how things work in Africa have also resulted in many negative foreign interactions previously, so moving forward respect is going to be crucial to unlocking the market.
“One thing food firms absolutely cannot do is to dump products that have been rejected elsewhere to Africa or other emerging markets. Not only is this disrespectful, local consumers will know and it is the company brand that will suffer in the end,” Marco India Head Global Regulatory, Public Policy and Advocasy Prabodh Halde said.
“This is completely opposite to what should be done instead, which is to know local nuances and regulations, ensure food safety and also attach labels printed in the local language - all this is crucial to establish consumer trust and decleoping a positive presence in the market.”
Major challenges ahead but the rewards are rich
The bureaucratics alone are challenging enough, but Sene also highlighted other areas that foreign food firms must consider and assess when entering Africa.
“One other major gap Africa faces is in terms of infrastructure, and this is closely linked to investment challenges - many existing investments are dormant due to the perceived risks involved, so we cannot deny that there is a strong need to demonstrate derisking in order to revive this,” he said.
“This is absolutely crucial as the infrastructural gaps cover various vital functions across the supply chain such as energy, storage and transport, so the crucial point here would be to then show these investment needs are actually opportunities, not just leave them as risks.”
To do this, Africa needs to first showcase its potential to the world, and Sene stressed that there are many factors which would make the region very attractive in the eyes of foreign investors.
“First of all, Africa is very rich in natural resources and the population is growing rapidly, especially our young population,” he said.
“More importantly for food manufacturers, consumption here is not as linked to income as one might think - many low-income Africans also consume like the rich, so the opportunities one might see as limited to a small demographic in other markets could reach much further here. It’s a complex market, and our Gen Z’s are changing things rapidly, so the gains will be immense in the future.”
