Building Demand for Domestic Brands
By 2050, Africa’s population is forecast to have doubled to 2.4 billion. Cities are growing, and middle classes emerging. What does this mean for African agribusinesses? Are there untapped opportunities for local brands here, and how might they be scaled up across the continent?
Many global brands certainly see potential. According to the World Bank, urban food markets in Africa are set to quadruple and exceed US$400bn by 2030. With abundant natural resources, unrealised agricultural potential and favourable investment conditions, it’s unsurprising that major global players such as Coca Cola and Nestle are already well established on the continent.
But how many of the top brands in Africa today are actually African? The non-profit organisation Brand Africa, which researches the brand landscape there, includes just 14 African brands in its top 80. Those 14 are in turn dominated by South Africa, with Nigeria’s Star Beer and Kenya’s Tusker also represented. Clearly there are still opportunities for home-grown brands on a national and regional level.
Agricultural production remains a key sector in most African countries, averaging 24 percent of GDP, so it’s natural that we might see agribusiness as fertile ground for brand-building. The Grow Africa Investment Forum held in Cape Town recently addressed this topic with a panel of experts sharing their experience of building local and pan-African agribusiness brands.
Catering to Local Tastes
Beer is a rapidly growing market in Africa, and Andy Wales, director of sustainable development at SABMiller, reminded the audience of a quote attributed to the musician Frank Zappa, who once said: “You can’t be a real country unless you have a beer and an airline.”
It may be an exaggeration that every country needs its own beer, but branded drinks are certainly a growth area in Africa and one that SABMiller is successfully pursuing with brands such as Hero in Nigeria, Balimi in Tanzania and Club lager in Ghana.
Is it worth the effort of localising beer to such an extent? Absolutely, according to Wales.
“Different countries have different expectations,” he said. “Beer is primarily a local product, and a lot of effort has to go into getting the taste profile right.”
The same can be said for many products, including cashew nuts, which Donald Larson, chief executive officer of Mozambique’s Sunshine Nut Company, has introduced in different, unfamiliar flavours.
“We do plain, salted, herbed and spiced flavours,” said Larson. “They’ve been a big hit in South Africa and the US, but in Mozambique it’s all new. There everything is always peri-peri, or plain. We added garlic, which I think is our secret ingredient and makes it a variation on what they’ve been having for centuries.”
Whether it’s cashews or beer, businesses will gravitate to areas where there is a competitive advantage in production. Beer is proving an interesting market for Africa partly because of the opportunity for local production from a variety of different crops . Often brewed from barley or wheat in Europe, it can just as well use indigenous crops such as cassava or sorghum, which is precisely what SABMiller is doing.
“We launched the first cassava-based clear lager in Mozambique four years ago,” said Wales. “In doing so we drew on learnings from our sorghum-based beer in Uganda, for example. And it can mean working with tens of thousands of smallholder farmers.”
Done carefully, this can deliver sustainable value chains with improved incomes at the agricultural base. But setting this up is also a lot of work, and it will require good partnerships with government in particular, according to Guillermo Machado, Director-General of the Export Marketing Company, based in Mozambique.
The Role of Government in Building Domestic Markets
“In my experience in Mozambique and Tanzania, the most important thing is dialogue between the private sector and government. They have a common objective: the private sector wants profit, the government wants to create jobs and collect taxes. You have to keep talking, sometimes covering the same issues over and over again. But eventually you can get it right.”
One challenge, in SABMiller’s experience, is persuading governments to be patient. Domestic brands can be great drivers of economic growth, and SABMiller’s strategy is to attract people who might previously have consumed illicit alcohol. Creating a bona fide brand provides a new excise pool for government, but those brands also need time to establish themselves.
“Partnership with government is critical but not always easy,” said Wales. “Sometimes when a product is in the market and growing, the stability we were hoping for in terms of excise rates has changed. In a few cases, African governments have moved too fast. Governments should expect it to take time to build these consumer brands, and create the jobs.”
Building Local Distribution Channels
Brand-building and distribution can also be a challenge. Agribusinesses might consider creative approaches here, given the size and sprawling nature of the continent. Coca Cola has been successful with a micro-distribution model, for example, and Unilever has taken a similar approach in India with its Shakti system of micro-entrepreneurs.
“In Africa we’ve historically focused a lot on the agricultural supply chain, but we are now looking to learn from our Latin American business,” said Wales.
“In 2013 we launched a programme there with the Inter-American Development Bank to work with 30,000 micro-retailers to help build their business skills and support them to be leaders in their community. It’s led to significant improvements in the quality of life and income for those micro-retailers. It’s led to an uplift in our sales too, and so we’re now looking at how we can bring that into Africa.”
The potential cost-effectiveness of social media marketing channels might also be a boon, in a population increasingly skewed towards younger demographics and high mobile penetration.
All of this doesn’t mean the African market is a get-rich-quick opportunity for brands. Sustainable growth – benefiting those at the bottom of the pyramid – will certainly require patience and care. But the panel agreed that the potential right now is remarkable.
“We have enormous opportunities here,” said Machado. “If you have a dollar to invest today, it’s better to do it in Africa. You have faster, better returns, in almost every country. It’s really the land of opportunity now.”
Photo credits: Banner - SAB Miller; Feature Image - African Food Company