FMCG Companies Set Sights On Sub-Saharan African Markets For Growth

Even as the misery of last year’s Ebola outbreak in West Africa is still fresh in people’s minds, the long-term narrative of Sub-Saharan Africa (SSA) is one of youth, urbanisation, rising income levels, and optimism. The region is home to some of the fastest-growing economies in the world, and CPG/FMCG companies are taking notice.

Late last year, SCM World published a comprehensive report on the opportunities that exist in SSA for FMCG companies. 115 respondents to our Chief Supply Chain Officer survey selected at least one Sub-Saharan country as a key growth opportunity for their organisations. The weighted results are depicted in the figure.



Building a successful consumer supply chain in any of these countries depends on a host of factors and decision points, including:

• Viability of local supply sources for raw and packaging materials. Currently, some companies are importing 60% of packaging and raw materials into SSA owing to the lack of quality and reliability in materials received from local supply sources. Companies with experience operating in the region are investing in the local supply base to change this equation.
• Ability to scale production within market. CPG/FMCG companies need to be close to customer demand in SSA, since often the demand profile is based on frequent replenishment of small units. In order to justify local production investments, the volumes need to be there.
• Route-to-market challenges. The two primary trade channels in Sub-Saharan Africa are the modern trade channel, which is not very different from modern retail trade anywhere in the world, and the general trade channel, which is like nowhere else in the world. Guess which channel most goods in SSA flow through? Companies must be willing to take the time to “learn” and invest in general trade in the markets they want to access.
• Competencies of logistics and distribution providers. The strongest logistics presence is in South Africa, but elsewhere the provider community gets pretty fragmented. Outside of South Africa, companies should not expect to serve SSA countries through one or two partners unless they are willing to share the risk if the provider is to increase its footprint.
• Varying trade and tariff policies. Every Sub-Saharan African government says it supports free trade and wants the onerous customs procedures to be simplified. However, the different trade groups in SSA, such as the Economic Community of West African States (ECOWAS) and the Southern African Development Community (SADC), need continued support to drive meaningful change. Persistent trade barriers impact manufacturing location decisions and the associated logistics costs.
• Availability of supply chain talent. Talent exists in Sub-Saharan Africa, but it is scarce. Since many market development challenges are supply chain related, there is no way to simply ignore the scarcity: you have to participate in developing the supply chain talent of the future.
• Availability of insights into the “African consumer”. In most studies on Sub-Saharan Africa, you will read that there is no “one” Africa; it is a collection of diverse countries and peoples. The same goes for the rising consumer class in SSA. There is no monolithic consumer class, and it is incumbent upon companies looking to break into these markets to begin developing these insights.

Succeeding in Sub-Saharan Africa requires a gutsy, go-long strategy and tremendous resiliency to weather the inevitable challenges that will arise when trying to break into the exciting, dynamic markets on this continent.

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ABOUT THE AUTHOR
Barry Blake is Vice President, Research for SCM World. Barry leads research about distribution and logistics networks and supply chain transformation and talent development. His research cuts across all industries with a particular focus on the healthcare and life sciences value chain. He joined SCM World in 2013.