According to a KPMG report entitled ‘Fast Moving Consumer Goods in Africa’, “Given Africa’s large market and the potential for rising household income, the FMCG sector on the continent stands to benefit immensely. Given that the sector provides either necessities or accessible luxury goods, the size of the market is not constrained by income dynamics in the same way as many other sectors.”
Within the East African region, the KPMG report Kenya was among the five countries signalled out to have the potential for growth over the next five to 10 years – taking the FMCG sector’s characteristics into account, and considering African countries’ demographic profiles, income levels, and economic growth potential.
Oxford business group further noted that Kenya’s rapidly expanding fast-moving consumer goods (FMCG) segment has been a major driver of industrial growth, benefiting from the particularly strong demand for food and beverages (F&B) and personal care products.
This is the second part of the interview with Chris Diaz, is the Group Sales and Marketing Director at Bidco Africa. He speaks on the opportunities in the FMCG industry in Africa.
Read: One-on-One with Chris Diaz on the future of Bidco Africa Group (Part One)
Bidco Africa marketplace has seen its brands available in over 17 African countries: Kenya, Tanzania, Uganda, Rwanda, Burundi, Ethiopia, Sudan, S.Sudan, Eritrea, Zambia, Malawi, Madagascar, DRC, Comoros, Zanzibar and Somalia.
Its 2030 vision is to become the number one African FMCG Conglomerate covering Eastern, Central and South Africa, West Africa and the North Africa by 2022.
How has urbanization shaped the nature of demand and distribution of FMCG products in Kenya and in the region?
In Kenya alone, urban centres account for more than half of the population. According to the Centre for Strategic and International Studies, there will be nearly 99 percent of urbanization between now and 2050. The accelerated shift has profound implications on food consumption and human progress.
As a result, the purchasing power of the people moving into the urban areas goes up and hence there is a growth in demand of products.
Urbanization also leads into industrialization which in the long run, makes distribution effective and more efficient. The move of people also leads modernization and changes in the modes of living. More tech savvy together with communication, infrastructure and other social amenities make people aspire to keep up with the need they aim to meet. This also raises the demand of commodities creating pressure for more robust distribution patterns.
How have import duties and non-tariff barriers affected your marketing strategy across the region, and how do you overcome these challenges? Given these challenges what are the opportunities in the FMCG industry in Africa?
Kenya still remains a leading example of how strategic distribution models work across Africa. Significant efforts have been put in place to curb any challenges to accessing the various regional markets ranging from quotas, subsidies, custom delays, technical barriers, complex/discriminatory rules of origin among other complex regulatory environment.
Our strategies have put in measures to overcome challenges that ensure we penetrate the international markets effectively. As a result, we have complied with the provisions regarding occupational safety and health regulation, attained all the import and export licenses, classified all our products, have all documents of certificate of origin and authenticity, the reasonable and justified packaging, labelling and product standards.
Through the regional integration, legal constraints have been eased up and the East African countries are able to trade as a block. This has eliminated lengthy customs procedures, over-valued currencies, the ‘buy national’ policies as well as eliminated state subsidies, procurement, trading and state ownership.
However, amidst the challenges in Africa such as integrity of brands, supply chain challenges, financial slowdown and political insecurity, there is a tremendous potential for growth in the sector. According to the World Bank, the GDP in Africa will stand at 4.8 percent in 2018. This translates to an improved purchasing power among the African consumer.
In the recent past, global firms have been seen to be increasingly keen on taking advantage of the sub-Saharan Africa’s growing middle class and its high-growth populations by acquiring stakes in the local FMCG companies. These partnerships bring a lot of advantages because the local companies are familiar with their markets both culturally and practically.
New entrants as well as the already existing FMCG companies can enhance their success by having an informed awareness of the current challenges such as those of distribution, the changing environments of politics and the economic uncertainty.
What are some of the local tastes and needs/preferences that drive sales of Bidco products in Kenya and in the East African region?
Sales is a science and an art of revenue generation, brand building and fostering customer relationship management supported by the demand creation and innovation to meet the customers at their points of needs, local tastes and preferences.
Our robust sales strategies are backed by thorough research which enhances strong customer concentration in our B2B and B2C sales and distribution pipelines.
Africa is a diverse market of over 1.2 billion people and with a population that is still growing and projected to stand at 2.4 billion by 2050, according to the UN’s Population Reference Bureau (PRB). This has raised the demand and sales are growing as the middle also increases its purchasing power.
The consumer behavior and tastes are fast changing in the African market. The local customer, especially the middle class, needs high quality products and that is why we do not take quality lightly. We live, practice and work around quality.
The modern day consumer is very cautious of their health and want to be guaranteed that whatever product they consume is of good health. Bidco lives in the mantra of happy healthy living, with focus on our processes. Our oils and fats are pure, natural and heart friendly and this guarantees the everyday consumer of good health.
Finally what role does branding play in consumer choice? Do traditional brands have a sway over relatively newer brands?
Bidco is not just a manufacturer but part of its operations are that of a company largely focused on marketing. One of the roles of marketing is to grow brands, increase customer loyalty as well as to make the customer experience as interesting as possible. According to Aaker, Loyalty and trust of the customers is very important for a company because it reduces the chance of attack from competitors.
The brand name in every consumer’s mind is characterized by a noticeable name or symbol which can differentiate any product from the rivals’. From the consumer’s perspective, it is a guarantor of reliability and quality in the products.
Additionally, the newer brands do not have a sway over the well-established because nearly half of impulse buys are as a result of the brand influences. When deciding which products to purchase, consumers would have their preferences, which are developed as a result of their perceptions towards the brands.
According to Doyle (1999), successful branding could make the consumers aware of the presence of the brand and hence could increase the chance of buying the company’s products.
Successful brands that have been built over time such as Mercedes Benz, Adidas, Land Rover, Coca-Cola, Pepsi, Nike and Apple have achieved perceived quality defined by the customers’ perceptions of the overall quality or superiority of a product or service.
The more loyal the consumers are towards a brand, the less vulnerable the customer base would be.