Brands target Africa

15 September 2011

LAGOS: Brand owners such as Diageo, Nestlé and Unilever are heightening their focus on Africa, where consumer spending is expected to increase rapidly going forward.

Diageo, the spirits group, currently yields 13% of net revenues from Africa, having constructed its first foreign brewery in Nigeria, now a major outlet for Guinness stout, in 1963.

Moreover, Diageo is launching another brewery, based in Tanzania, this month, the first such addition to its portfolio for two decades, further demonstrating the continent's growing importance.

"It's a jewel," Paul Walsh, Diageo's chief executive, told the Financial Times.

Unilever has been active in Africa since the start of the last century, deriving annual sales topping €5bn from this area at present, and consistently racking up year on year growth of 15% or more.

Frank Braeken, its EVP, North Africa, Middle East, Central Africa, stated the region is treble the size of China, and has a combined land mass greater than the US, Europe, China and India combined.

However, he also suggested Africa is "of course, not one continent, not one story". In simple proof of this, organised retail takes 40% of sales for grocery and similar lines in Kenya, but just 5% in Nigeria.

Nestlé, the food manufacturer, believes between 300m and 400m African shoppers are able to afford its goods, a figure set to reach 600m in the near future. "It's all about purchasing power," said Frits van Dijk, its zone director for emerging markets.

The Swiss firm tailors goods to local tastes, such as adding blue onions to Maggi stock cubes in Mali, and has "finishing" plants in Africa that put constituents like milk powder in products at a point close to the consumer.

Such a model provides considerable flexibility in terms of meeting fluctuations in demand, and these simplified manufacturing facilities only cost around 15% as much as large-scale, traditional factories.

Woolworths, the South African retail chain, currently has stores in ten African markets, and is aiming to open 16 branches across the region this year, targeting nations like Tanzania and Uganda.

"Consumer spending accounts for more than 60% of the African GDP and this will increase with the growth of the upper and middle income groups," said Glenn Gilzean, Woolworths Group director for retail operations.

Data sourced from Financial Times/Woolworths; additional content by Warc staff