With many of Africa’s economies amongst the fastest growing in the world, middle class urban consumers are increasingly changing the face of the food market in Africa. This evolving, more sophisticated market brings with it new challenges and opportunities.
This development is critically important for retail companies, with a McKinsey report – Rise of the African consumer – forecasting that annual consumer spending in Africa is poised to surpass €1.3 trillion during 2015, up from €810 billion in 2008. However, whilst urbanisation and rising incomes are an attractive prospect for food companies, urban areas cannot be viewed as a single, uniform market. Consumer preferences and needs vary significantly according to available income and geographical location, and the creation of relevant packaging and marketing strategies requires detailed market research.
The World Bank estimates that by 2030 Africa’s food market will be worth €0.95 trillion. Over the last 20 years, the food retail sector has been transformed by the rise of supermarkets and sales of packaged foods. This trend is showing no sign of abating, with packaged food sales enjoying double-digit growth during 2013-4. The largest market in sub-Saharan Africa (SSA) can be found in Nigeria, where a booming urban population is fuelling demand for convenience foods, such as drinking yoghurt, pastries and sweet and savoury snacks. The modernisation of urban consumer tastes in Nigeria, and a rising demand for standardised, packaged and better quality products has also coincided with the rapid growth of supermarkets and hypermarkets. Thus, whilst open markets and kiosks have been the traditional channel for packaged foods, as elsewhere in Africa, many consumers appear to be favouring the convenience of having all their household needs met by a single, large store which, through its high volumes of produce, can offer competitive prices and easy comparison between large numbers of brands.
However, as Africa’s dependence on food imports has grown and foreign companies seek to invest in the urban retail markets, many African countries are attempting to boost the availability of local products. Senegal, for instance, is one of the most food-import dependent countries in SSA, especially when it comes to rice, a main staple. In 2011, rice made up almost 40% of the country’s total agricultural imports by weight, with imported rice contributing around 60% of national rice consumption. In response, the Senegalese government have been increasing their focus and investment in local rice production, and the private sector has been working hard to develop appropriate packaging and branding for the product, which many consumers regard as inferior to imported rice.
A consumer preference research project found packaging to be a key factor in rice purchasing, with 47% of women identifying brands by colours and/or symbols rather than by brand name; consumers were willing to pay price premiums of 17% for their preferred brand. But urban consumers are not a homogenous group. In Senegal, local brands were more popular among poorer women, who were not really brand conscious, and who traditionally purchased local rice; international brands were preferred among wealthier women, who tended to be more brand conscious.
Appealing to consumers’ national loyalty by packaging only locally manufactured goods, Eastern Africa’s Nakumatt supermarket launched ‘Blue Label’ – its own store brand – in 2013, which was designed to provide product variety alongside ‘value for money’. The brand includes everyday products, such as beans, home baking flour and household cleaners, as well as more indulgent snack products, such as popcorn and chilli lemon crisps. Nakumatt has also adopted the strategy of marketing small-sized products by repackaging goods such as sugar, flour and grains under its Blue Label brand. By embracing what is popularly known as ‘the kadogo economy’ (kadogo meaning ‘tiny’ in Swahili), it is responding to consumer demand for products in large, medium and small packs.
In Zimbabwe, to attract consumers in the face of competition from cheaper, imported products, a government supported initiative, ‘Buy Zimbabwe’, was launched in 2011. At the time, the country imported €5.6 billion worth of goods against exports of €3.75 billion, the stimulus for the government to give priority to local producers of goods and services. The initiative has established partnerships with 60 companies who have embraced new marketing methods. For instance, Irvine, a local chicken producer, has repackaged its products with a new seal that keeps them fresher for longer. Olivine Industries (established in 1931) has taken a different strategy to marketing, re-introducing old and trusted product lines (cooking oils etc.) to appeal to urban consumers who will recognise the brand as providing quality.
Following the Buy Zimbabwe campaign, which has taken place in-store, as well as through road shows and online marketing, retailers have said that around 50% of their consignment is now local and, as a result, Zimbabwe reduced its import bill by €1.5 billion in 2014 compared to 2013. “Many of our organisations have understood the importance of packaging; how the products appear affects the buying habits of the consumer,” says Vandudzai Zirebwa, an economist with Buy Zimbabwe. “Some of our partners are now meeting world class packaging standards because they have been innovative and this has led to improved sales. However, some still have a way to go as they are operating on a tighter budget, but we encourage companies to aim high and invest in research and development.”
Opportunities for farmers?
Much of the packaging and marketing for food consumption is carried out at the top end of the value chain. But what about farmers who are endeavouring to tap into urban markets? In Zambia, the NGO Self Help Africa has supported small-scale farmers to set up a system for cassava processing and packaging in order to enhance their marketing opportunities. Before 2010, most of the farmers in Kaoma in Western Province sold pounded cassava in the market at a price that was dependent on what the buyer offered. However, in the past few years, training by Self Help Africa and Ministry of Agriculture extension officers has enabled men and women farmers to process and package their cassava in order to fix the price and quantity of their sales. Organised into Kaoma Cassava Processing, the farmers now package their processed flour into 2 and 5 kg bags which have a fixed price. And, due to the increasing demand for cassava flour by urban consumers, their attractively packaged flour is even sold by the supermarket company, Shoprite.
Through improved organisation, a greater number of Zambian farmers are now supplying grocery chains. Near Lusaka, for example, an independently owned packhouse, which supplies the retailer ‘Pick n Pay’, consolidates horticultural produce from about 60 farmers, who are trained in quality standards. At the packhouse, the vegetables and fruit are prepared and packaged (including trimming and wrapping) for supermarket shelves. For farmers in remoter areas, however, distance remains a problem, with fuel and transport costs from farm to packhouse still proving a significant drain on profitability. An alternative approach adopted by Farm Concern International in Kenya emphasises the creation of ‘Commercial Villages’, enabling smallholder producers to pool their efforts and their produce and thereby respond to increasing market demands, including in urban areas.
Small island struggles
In the Caribbean and Pacific, urban populations are, of course, much smaller than in Africa. Nevertheless, FAO has warned that retail food outlets in small island states are increasingly selling imported, processed foods that are pricing locally produced, healthier foods out of the market and affecting the long-term health of islanders. Over 30% of the Caribbean population is obese and the cost to the economy of obesity-linked diseases, such as diabetes and hypertension, is estimated at almost €1 billion per year. If local food producers are to supply expanding urban and tourist markets and reduce demand on imported products, a policy-driven, multi-sector approach (including public and private sectors) will be required. This will be a particular challenge in the Pacific, however, where most countries currently lack the technical skills and resources to process and package local foods into the ‘convenience’ products demanded in urban markets. In responding to this challenge, FAO has stated that revenue generated from additional tariffs and taxes on unhealthy imported food products should be invested in greater nutrition awareness campaigns and in improving the competitiveness and availability of nutritious local foods.