by Brenda Koornneef. Finding growth in the poor economic environment we are facing in South Africa is the biggest challenge for marketers today. Organic market growth is too low to satisfy investor needs, so marketers must pursue alternatives.
- Gain market share through brand building and leading innovation, in order to gain advantage in the sector. Competing only on the basis of price promotion alone is not a long-term strategy for market-share gains.
- Expand the business or brands into adjacent or new market sectors. Always remember, though, that you need to compete based on your business’s differentiated capabilities that apply to the new sector, and that your brand identity and benefits are desirable against your new competitor set!
- Extend the business or brands across borders into new geographies.
But marketing across borders comes with its own challenges and Africa is definitely not for the faint-hearted. Hopefully, some of my observations from the FMCG sector, learnt through trial and error, may come in helpful for marketers brave enough to seek growth opportunities elsewhere on our continent.
While the rest of Africa has, in general, also experienced economic downturn, led by low oil prices and impacted by slow global economic recovery, the basic numbers in Africa still represent growth opportunities for businesses which offer African consumers true branded value. Some of the key factors which will underpin medium- and long-term growth are:
- The continent’s younger age profile and continued population growth
- Improving levels of education
- The strong urbanisation trend, which in turn drives new consumption behaviour
- Modernisation of trade — even within the informal trade segments
- The increasing attraction and availability of branded goods
- The continued attraction of investment capital into Africa, albeit at lower levels than in the previous decade
The opportunity for branded consumer goods lies mainly in the income groups from C1 to A. C2 and D income groups live (on average) off less than US$2 per day, and basic, unbranded commodities make up the majority of their daily purchases.
Make no mistake, though — the rest of Africa is no ‘virgin territory’ in terms of branded offerings. Every market throughout Africa has a plethora of branded goods. Local manufacturers, the few die-hard multinationals and, most significantly, distributors importing cheap branded offerings all represent strong competition. So, getting it right and offering differentiated branded value is critical.
Observation 1: It’s all about availability!
Don’t even start thinking about marketing and brand building before you get your distribution right. The ‘route-to-market’ is the first, and maybe the most important, criteria for success. This is easier said than done!
Consumer goods distribution remains mainly through the informal trade channels. In some countries, for example in Kenya, the modern supermarket trade — both large and smaller supermarkets — already accounts for some 40% of FMCG sales. But the traditional trade remains the critical distribution channel for success. In countries such as Nigeria, Cameroon and DRC, the informal trade contributes more than 95% of total sales. And all consumers, even higher-income consumers, continue to shop in the markets every week. I remember during a consumer immersion in Lagos — accompanying a housewife from B1 income group, her two small children and her housemaid (who had to carry all the shopping!) on her weekly market shop — the trip was a social event!
The distribution channel is differently set up in every country in Africa. Typically, the distribution channel starts with key distributors; these are major businesses which own large warehouses and either import directly themselves, or on-sell goods on behalf of local or multi-national manufacturers. They tend to specialise in certain types of goods. Unless you are a leading brand it is difficult to obtain an exclusivity agreement with distributors. Key distributors are professional traders who scour the globe for a good ‘deal’, often in competition to your own brands. Beyond the key distributors are the smaller distributors or wholesalers. Wholesale outlets are not what we know in SA. These are small ‘hole-in-the-wall’ storerooms, and goods are sold over the counter, or delivered out the back door. Between the final small retailers and the wholesaler, are the ‘runners’ — who may be independent, or employed by the wholesaler or the retailer. These runners do not generally take ownership of goods but are critical in the distribution channel, and take a markup on the goods they distribute. Retailers may be either small shops (‘dukas’, kiosks or ‘boutiques’) or open-table retailers on street sides or in the markets. Beyond the retailers, one also finds the ‘hawkers’, who are mobile street vendors who buy either from the retailers or from the wholesalers.
Every part of the distribution channel is critical, and you need to ensure that you have a route-to-market into every informal market area.
Remember also, that the right pack size in the right retail channel is very important. In most of the rest of African countries, consumers purchase FMCG goods on a daily basis, or at least several times per week. Only a small portion of consumers earn monthly wages, and the majority of consumers live from hand to mouth, based on their daily income. That is why single-serve, smaller pack sizes dominate in a lot of African markets. In Nigeria, I saw toothpaste sold in the informal market in ‘single-brush’ sachets!
Observation 2: Build the brand
While a lot of consumer goods sales in Africa are all about commodity trading at the lowest price, the option to create and build brands is where the long-term opportunity lies.
Consumers are hungry for brands they can trust. Brands that will not just disappear overnight. Brands that will deliver on the benefits they promise. To consumers, this is part of their improving standards of living and a status symbol on their consumer journey.
Some of the large multinationals such as Nestlé, Unilever, Beyersdorf and Heinz, as well as some local manufacturers, have done well to establish and build their brands as market leaders and household names across the continent. But, in several FMCG categories, brands tend to come and go — as manufacturers fail to persevere in the brand-building journey, and other brands appear on shelves — imported by distributors — but disappear again within months.
What fascinates me is that the same global brands which have succeeded around the world also do well in Africa. There is definitely value in the belief that, if a brand is built on a basic human truth, which applies to consumers across the world, it is likely to also apply to consumers in Africa.
In my personal experience I saw how, when Tiger Brands tested the Tastic brand proposition across key regions in Africa, the response was unanimous — ‘this must be fantastic!’. Brands such as Royco, Omo, Nivea, Indomie and Heinz are further proof that global brand propositions work across continents.
This immediately raises the perennial question: “Are countries in Africa the same or different?” In my view, the answer is not simple. While there are definitely clear differences between countries in terms of culture, language, food and consumer-consumption habits, food and flavour preferences, and different routes-to-market, there are also profound similarities in terms of consumer needs and basic insights. In the recent research survey done by UCT Research Institute, the similarities between consumers were pronounced. Similar needs and consumerist development are notable, and the drive for improvement of quality of living and independence and status for women are profound.
Of course, the brand proposition needs to deliver consistently in the in-use experience to consumers. Later in my piece I talk about the consumer perception of VALUE. This will always be key.
Building the brand requires significant resources and fortitude. The principles of brand-building are the same as across the world. Brands are built through consistent marketing across years. In Africa, this is even more valid: the marketer will find many practical and logistic obstacles to building brands, but consistent brand support and availability over years is most important. Consumers, though, are keen to try new brands, and advertising and marketing are important recommendations to African consumers. Although consumers are keen to support locally produced products, the attraction of global brands is strong, and consumers generally believe that imported brands offer better quality.
Beyersdorf, with its Nivea brand, is probably the one of the best examples of how to build a brand consistently across a continent. The brand proposition, product and packaging, and brand messaging are the same across the globe. Consistent investment in marketing over a decade, ahead of sales and market share, has paid off for Nivea — now the leading hand & body brand across the continent!
Observation 3: Marketing touchpoints in Africa
What, then, are the best marketing touchpoints for brand-building on the African continent?
Firstl let me say that the requirement as regards traditional ratio of marketing spend ATL and BTL (60:40, dare I say?) is very different in the rest of Africa. Although traditional ATL media remains very important, and highly regarded as a ‘recommendation for a popular brand’ by consumers, building your brand on the ground takes on greater importance.
In terms of traditional media, radio has the largest coverage and frequency in most countries. I also firmly believe that radio, with its more-local content, remains one of the best media to provide consumer ‘intimacy’ and credibility. So this is probably my favourite traditional media type to use in the rest of Africa! TV, of course, continues to have the advantage of impact and immediacy, both visual and audio. TV coverage is improving across most countries, although in general, there are fewer TV channels with national coverage. A mix of different TV channels will prove to be your best bet. Outdoor media remains very popular, with a common problem being the proliferation of outdoor media in major cities and towns. Some cities are cutting back; in Lagos, for example, the state has curtailed the availability of outdoor media sites, and stiff tariffs have been introduced. Print media has limited reach in most African countries. Whil newspapers and magazines do exist, these do not in general offer wide coverage.
Digital marketing is, of course, a great opportunity across the continent. But remember, that this is mobile-phone-based! And, while broadband is reasonably well available, the cost of data remains an issue for consumers. But mobile communication has become the common currency for consumers, and marketers are well-advised to include digital media in their marketing mix.
But brand building through market shopper promotions, visibility at POP, and stimulating trial on the ground remain the most-critical components of the marketing mix. Fortunately, retailers are still very open to point-of-sale material and in store promotions. And the concept of ‘buying marketing space in store’ is foreign in most countries and channels, so costs are not prohibitive.
BTL shopper marketing, sampling, consumer endorsements through word of mouth are the marketing touchpoints that are essential for brand building.
Observation 4: The right to do business
I cannot help but issue a warning: the regulatory environment in Africa does not make it easy to do business.
So, do your homework. Legal and regulatory requirements are stiff, and compliance is essential to market your brand in every country. Advertising requirements, and brand claims clearance, are surprisingly onerous.
Changes to duties, import regulations and advertising requirements happen regularly. This is a big watchpoint for marketers wishing to build brands across the continent.
Observation 5: Value
My final and perhaps most-important observation is about the African consumers’ search for VALUE.
We are all aware that the pressurised economic environment across the globe has raised consumer awareness and need for value delivery from all consumer goods.
But, in Africa, this search for value is more pronounced and driven by the low GDP per capita, even for the middle-income consumers. The constant striving for improvement of living standards for most families and individual consumers has underpinned the desire for branded goods, which are gradually replacing commodity purchases for basic requirements. Consumers want to be seen to be buying branded products, but the budgetary constraints that they have to consider on a daily basis make the need for in-use delivery of value of primary importance.
For example, there is the innovative mode of transport developed in the Cameroon: three-to-a-bike represents true value for money for daily transport. And the inventive rain cover is remarkable!
So, functional product differentiation and in-use delivery must be a primary consideration for marketers when planning their brand’s marketing mix. The price: value ratio for consumers has to be carefully considered. Consumers will not necessarily go for the most-affordable brand (except for consumers in the C2 and D income brackets, where affordability remains key). Rather, they seek to choose brands which offer value for money — brands that they can trust to deliver consistent quality and positive value during usage.
Understanding the consumers’ product delivery requirements and the value considerations in your market segment is of critical importance.
Getting to know consumers and markets across Africa is exciting and rewarding. The growth opportunity is definitely there! But getting it right is hard. It will require perseverance and understanding of the requirements of the route-to-market and consumer expectations.
I hope my learning will help as a guideline to success!
Brenda Koornneef is a seasoned marketing professional, recognised in the industry as one of the leading brand and marketing experts in South Africa. Having obtained her BCom, she started with Unilever and spent 17 years there locally and internationally, progressing to marketing director. She left to join the SABC as GM for SABC 2 (formerly TV One), spending several years successfully commercialising the channel. Next, Brenda was appointed MD of Games Africa and Moribu, which developed and managed the successful national lottery games Ithuba, Viva and Zama-Zama. From there she joined Tiger Brands, as business executive for group marketing and corporate strategy. After 17 years, she retired to set up her own business consultancy, specialising in brand strategy and business-segmentation modelling. She serves on several NPO and industry boards.
The article first appeared in the 2018 edition of Brands & Branding in South Africa, an annual review from Affinity Publishing of all aspects of brand marketing — consisting of case-studies, profiles, articles and research — also accessible at Brands.MarkLives.com. Order your copy of the 2018 edition now!
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