29 November 2012

Kenya: African Consumer Will Drive Some Global Growth


For the longest time Africa was seen as a dark and business hostile place. Opportunities for trade and business were portrayed as scarce or limited to mineral exploitation, humanitarian and disease management.

The African consumer has not been the subject of serious discussion. This has in many ways kept African markets protected for indigenous businesses that thrived in this vacuum of information.

McKinsey the global consultancy company has released a report on the current african consumers and what the report sees as future opportunity. "The rise of the African consumer" is a much needed look at the business opportunities provided by consumers in Africa.

The report begins by clarifying the importance of this consumer on a global scale. The report indicates that African private consumption is already higher than that of India or Russia and that consumer facing industries are expected to grow by about $400 billion in the next eight years.

Anyone who has been following the direction of investment and consumer focus knows that if India and Russia are smaller then a massive amount of investment will be directed towards Africa as the BRIC (Brazil, India and China) countries increasingly saturate in various markets and products.

Africa also has the World's largest population growth and the worlds's youngest population. This population where urban, has access to the internet and is largely aware about global trends and shifts in culture.

They are optimistic and confident of their future. Despite the gloom and insecurity in Kenya the report indicates that more than 50 per cent of Kenyans see their lives improving in the next few years. The report also indicates that they are brand loyal and seek quality at an affordable price.

To address this market, the report advises companies to take several factors into account. Despite cost sensitivity , African consumers seek quality.

Some are actually suspicious of low prices. They value brands and will be loyal to those they trust. Their value perception is also a strong driver of purchase and loyalty and brand owners must strive to deliver value for money.

The value of word of mouth is repeated in this report , with nearly half of consumers saying that they seek opinions on products they buy from their friends.

Traditional media remain important though digital media is a growing phenomenon. According to McKinsey , over 70 per cent of urban Kenyans have access the internet.

To serve this market, McKinsey advices that marketers segment it appropriately as individual country consumers and the urban and rural consumers are different.

McKinsey also provides interesting advise on timing entry. "When looking at the baby food category, our research shows that the take off point occurs at consumption per capita of $2700.

In the Kenyan market , average consumption per capita is $1526 leading us to conclude that baby food has yet to reach the take- off point.

However, if we focus on the city level, we see that the consumption per capita for Nairobi is $2827, putting it in the hot zone and offering an accelerated growth opportunity." The report can be downloaded from the McKinsey website.

Frank is lead consultant at FMC and CEO at mobile agency Sponge East Africa. Frank.Maina@spongegroup.com

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