Africa holds potential for brands

08 November 2012

JOHANNESBURG: Companies could benefit from heightening their focus on Africa, where consumer spending is set to rise rapidly and shoppers are highly brand loyal, a study by McKinsey has argued.

The consultancy estimated that consumer-facing industries would witness growth of $410bn across the region from 2012–20, building on a $568bn increase in private consumption from 2000–10.

One driver of this trend will be the expansion of the working age population, or 15–64 year olds, by 2.5% a year from 2010–20, versus a 0.5% lift in North America and a 0.3% drop in Europe.

Based on a poll of 13,000 adults based in major African cities, the McKinsey also reported that 16–34 year olds currently account for 53% of total income, indicating their vast potential for marketers.

More broadly, it found that 58% of all respondents could be classed as brand loyal, while 39% typically bought items that were available on deal.

Further, fully 58% of contributors agreed with the statement that "well-known food brands are always better quality", rising to 72% for people from North Africa, but sliding to 44% in Sub-Saharan Africa.

Similarly, a 45% share of the panel were willing to pay a premium for well-known grocery brands, a figure standing at 51% when discussing mobile handsets and 35% with reference to clothing.

"African consumers demand quality products and are brand conscious, belying the view that the continent is a backwater where companies can sell second-rate merchandise," McKinsey said. "African consumers want the latest fashions and a modern shopping experience."

Turning to own-label grocery lines, some 14% of the sample chose to acquire these items "every time I can", and 24% "frequently" did so.

Nigeria logged the largest uptake of store brands here, with 59% of shoppers regularly buying them, as did 58% in Senegal, 36% in South Africa and 34% in Ghana. By contrast, scores on this metric declined to 8% for Moroccans and 4% for Ethiopians.

Only 29% of participants thought foreign clothing brands were "more fashionable" than local rivals, standing at just 11% in Ghana and South Africa, but leaping to 65% in Ethiopia and 74% in Morocco.

Television and word of mouth remain among the most widespread sources of product information, the analysis added, although mobile phones and digital media are of increasing importance in this area.

Data sourced from McKinsey; additional content by Warc staff