Five high-growth companies targeting African consumers

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Below is an excerpt from the London Stock Exchange Group’s Companies to Inspire Africa 2017 report.

Thanks to advances in technology, a growing consumer class and a boom in entrepreneurship, Africa is seeing rapid growth in demand for, and subsequently the supply of, consumer services and products. Whether it’s e-shopping, an iced latte or a good education, consumers across the continent are enjoying better service and a greater range of choice than they ever have before.

Here is a selection of dynamic, high-growth companies targeting African consumers, as identified in a recent report by the London Stock Exchange Group.

Java House: Bean machine

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Kenya has long been famous for its coffee exports, but the coffee shop culture that its beans have helped to create around the world has struggled to take off in the East African country. Thankfully for the nation’s coffee lovers, Java House is helping to change this. Since 1999, the company has been bringing the coffee shop back home. “When we established Java House in Kenya, there was only an export market for coffee,” says CEO Ken Kuguru. “Through Java, we were able to bring coffee culture to Kenya, Uganda and Rwanda.”

Five high-growth companies targeting African consumers - Brand Spur

A Java House outlet in Kigali, Rwanda

The company likes to think of itself as offering more than just a welcoming latte or cappuccino, though. “Java House is so much more than just a coffee house,” says Kuguru. “Our customers tell us they love Java House because it’s a home away from home and an office away from the office. Java House is a place to exchange ideas, a place to laugh and make memories and even a place for a first date with that special someone.”

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Africa’s growing population and emerging middle class has provided an ideal environment for the business to flourish, helped by the company’s business model. Its resource independence and local supply chain has protected Java House from the economic downturn that has hit many African economies, by insulating the firm from changes in commodities prices.

The company has now branched out beyond coffee, setting up a self-serve frozen yoghurt business called Planet Yogurt and a pizzeria called 360 Degrees Artisan Pizza.

Across its three brands, the firm now has 56 outlets around East Africa, from Mombasa to Kigali. Of those, 46 are Java House branches and the brand is at its strongest in Nairobi, where there are 34 cafés. The goal over the medium term is to substantially expand that footprint. “Our five-year goal is to establish a pan-African presence with 150 stores across the region by 2021,” says Kuguru. “We are building 15-20 branches per year and expect our base of around 2,000 employees to grow by about 30-40% per year.”

Awash Wines: Awash with success

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If you think African wine production starts and ends with South Africa, think again. From its Merti Jeju vineyard, 180km southeast of the capital Addis Ababa in the Upper Awash Valley, Ethiopia’s Awash Wines has been producing fine vintages since 1956.

The region’s soil and climate allow for two harvests a year, with Awash Wines’ internationally renowned grape varieties such as Petite Sirah and Chenin Blanc, as well as the native Dodoma variety, all grown on the 517-hectare site.

Five high-growth companies targeting African consumers - Brand Spur

An Awash Wines vineyard in Ethiopia.

In recent years, the company has transformed its ability to produce and sell those varieties. In July 2013 it was privatised, when London-based investor 8 Miles and local entrepreneur Mulugeta Tesfakiros teamed up to buy the winemaker. Since then, the company has made significant investments in equipment and marketing, as well as implementing a programme aimed at reducing costs by eliminating waste.

“Coming out of the privatisation phase, Awash Wines presented the typical inefficiencies that one would expect from government-run companies,” recalls Doug Agble, Partner at the company. “Putting capital, effort and human talent to work to resolve those inefficiencies has to date allowed the company to deliver impressive top-line growth and, at the same time, significantly improve its profitability. The priority has been to inject the team with fresh talent and motivation at every level of the organisation to drive the cultural change that was required.”

With a revamped product line-up of eight table wines – both red and white – the company is aiming to grow its sales further in the years ahead, both internationally and, initially, domestically.

“Ethiopia offers a large, somewhat urban concentrated and increasingly rich consumer market,” explains Doug. “The opportunity to reach a larger consumer base with attractive beverage products is simply immense.” Doug also has some advice for other budding entrepreneurs looking to build a business: “Persevere and focus on impeccable execution,” he recommends. “It will be worth it!”

Université Privée de Marrakech: Meeting the university challenge

As Africa’s population grows, so does demand for education institutions such as the Université Privée de Marrakech (UPM).

“The education sector in Morocco is poised for robust growth in the future on the back of the increasing population and income levels, as well as the increased willingness of parents to invest in high-quality education for their children,” says Mohamed Kabbadj, Founder and Chairman of the private UPM. “The public university system in Morocco struggles to offer effective training and job opportunities to its graduates. UPM offers degrees focused on the government’s major economic development programmes, thus enabling its graduates to better access the job market.”

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Five high-growth companies targeting African consumers - Brand Spur

The university, which is one of the leading private higher-education providers in Morocco and Senegal, offers courses in engineering, hospitality, business studies and medical sciences. The courses are taught at a number of sites across the two countries, which include a 32-hectare modern campus on the outskirts of Marrakech, a business school in Casablanca and two facilities in Senegal’s capital, Dakar.

More than 3,500 students are enrolled on UPM courses, but the firm’s initiatives include “…broadening the target student population to include those from all over Africa as well as more mature students, through an executive education offering,” says Kabbadj. “The higher education industry needs to adapt to the changing needs of the corporate world and ensure the employability of its students. Smaller and discipline-specific schools will struggle to survive in this environment.”

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UPM is determined to achieve the scale it needs in order to continue to prosper, and meet the demand for young people to develop skills that appeal to employers – and perhaps become Africa’s entrepreneurs of tomorrow.

Mouka: Springs in its step

A true test of a company’s strength is how it fares in tough times, and it is one that Mouka has passed with flying colours. The business, which is one of Nigeria’s leading mattress manufacturers, has not only come through difficult economic conditions but used them as an opportunity to improve the way it operates.

Mouka manufactures own-brand foam and spring mattresses, as well as other bedding products at its three production facilities in the south west, south east and north of Nigeria. The company has also developed an extensive distribution network, with more than 1,000 branded sales outlets and over 250 third-party distributors across the country.

Five high-growth companies targeting African consumers - Brand Spur

“One of the biggest opportunities over the past year has been to use the challenging operating environment to demonstrate the strength of our operations, by ensuring product availability in a marketplace where our competitors are struggling to do the same,” explains Raymond Murphy, CEO. “We have been able to do this due to our solid relationships with our offshore suppliers. As a result, we have been able to gain market share.”

Murphy continues: “In order to grow our business we have adopted a number of key tactics. We have focused on rationalising our product offering and now concentrate on a higher-margin product mix of mattresses that can increase sales. In parallel, we have been in regular discussions with our distributors to adjust prices and trading terms. And, lastly, we have challenged all areas of our operations to find cost reductions and improve our productivity and operating efficiencies. “We see the opportunity to capitalise on the current market inertia and grow to have undisputed market share leadership within a relatively short period of time.”

Fan Milk International: Cream of the crop

With its range of ice creams, yoghurts and juices, Fan Milk International is helping customers across West Africa to keep cool. The company, which sells its refreshing products in Ghana, Nigeria, Côte d’Ivoire, Togo, Benin and Burkina Faso, was founded in 1960 by Danish entrepreneur Erik Emborg. The business still retains a link to Denmark, where it has a team of technical staff but, since 2013, the firm has been owned by France’s Danone Group and the UAE-based Abraaj Group.

“The group maintains an unparalleled frozen distribution chain in its operating markets and sells the majority of its product via a dedicated network of agents and street vendors,” says Edouard Spicher, CEO of Fan Milk International. “Given the strong levels of urbanisation we are witnessing across our markets, we have focused on optimising our distribution system to ensure product availability in high-density areas.”

Five high-growth companies targeting African consumers - Brand Spur

A Fan Milk vendor in Ghana.

Challenging economic conditions in recent years have had an impact on consumer purchasing power, and the company has taken steps to improve its own productivity to ensure it can continue to provide high-quality products to customers at affordable prices. The firm has also revamped its executive management team and invested in production capacity, while increasing the number of distribution agents and vendors to 23,000.

Fan Milk International still uses bicycle vendors, but it’s experimenting with other methods too, such as solar-powered kiosks. Spicher expects changes ahead. He says: “Fan Milk will continue to be a household name and a leader in the dairy and juice space, but the mode of distribution is likely to change as the indoor channel matures in our markets and we’re adjusting for this impact on our business model.

 

 

 

(Howwemadeitinafrica)

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