Companies tackle African challenges

20 August 2012

LAGOS: Multinational companies are continuing to develop their business models in Africa, where rising affluence and enormous growth potential are often combined with a highly nascent infrastructure.

Diageo, the spirits group, is an example of this trend in practice. In Nigeria, the firm shares deliveries with Nigerian Breweries, a major rival, while in Kenya it sells 50-litre kegs and handpumps rather than bottles, as "pop up" bars are the norm.

"Bars come and go. Often they are literally a few pieces of metal on the side of the road. So we need to know the market well: where are these bars? What route to market do I need to get drink to these venues?" Mark Taylor, Diageo's commercial director for Africa, told the Financial Times.

"The normal thinking is: ‘How do I piggyback on my normal distribution?' Here, you have to think, 'What's my best option?', and that probably does not exist, so you have to create something."

Danone, the French dairy specialist, delivers its products to 8,500 points of sale in South Africa twice a week, a rarity on a continent where levels of infrastructure development are highly diverse.

"We cannot do this in Angola, Nigeria or Gambia," Mario Reis, Danone's CEO in South Africa, said. In many countries, he added, companies must identify their own ways to access electricity and water.

Pick 'n' Pay, the South African supermarket group, has expanded into markets like Botswana, Namibia, Mozambique and Zambia via "Africa creep", or consolidating in one nation at a time. "We need the supply chain," said Gareth Ackerman, its chairman.

Unilever, the consumer goods giant, opened the Motions Academy in Johannesburg last year, testing bespoke products and business structures. It is also trialling a new scheme, Project Shakti, in Nigeria.

Project Shakti was first established in India, where Unilever hired and trained local women in villages to sell its brands. They now provide everything from health advice to financial services.

This effort aims to boost Unilever's local revenues of €3bn, and reflects rising levels of affluence in the region. "We have a sense that things are really getting better," Frank Braeken, Unilever's executive vice president, Africa, said.

Elsewhere, Nestlé, the packaged food manufacturer, plans to invest $1bn in Africa over 2011–12, while SABMiller, the brewer, expects to spend $2.5bn in the next five years. Alongside better production and distribution, creating low-cost goods also be key.

"Brands matter less than price in most of Africa," Simon Crutchley, the chief executive of AVI, the South African consumer goods company, said.

Data sourced from Financial Times; additional content by Warc staff