Over the last decade the rise of Africa has been a buzz word for many FMCG companies. Several market studies and featured articles highlight a rapidly growing urban middle class. Increasing discretionary income make it an ideal consumer market. It is therefore not a surprise that many internationally renowned brands are currently establishing or enhancing local structures.
With more than 15 years’ experience in establishing FMCG brands in African markets we can fairly summarize that success does not come easy nor in the short term. For your company to be successful, you will need dedication, a clear strategy, local expertise and ideally substantial funds.
We have identified the following five steps which should be on any FMCG company’s agenda that envisions to enter African markets:
- Identifying the right country – Analysing a country’s current political situation and its overall economic development can be a good starting point. However, ensuring that there is no import ban on your products shall be your highest priority. To encourage local production and to strengthen the economy, some countries introduced import bans on individual products or product categories. These lists are mostly accessible online and get updated frequently. Furthermore, it is advisable to size your market potential based on your identified parameters which enables you to prioritise markets before you start gathering all other relevant information such as duty, registration requirements, freight costs etc.
- Knowing your competitors – No matter which country you intend to enter, you will face competition! Do not expect African countries to be your El Dorado. Certainly, you will likely face less competition than in your home market, but do not underestimate the different local market dynamics. Competition can be local and you might want to take the extra mile and elaborate how your company might be able to incorporate an existing local company into your country strategy. Likely you will also face competition from Asian low-cost-product companies, as well as from the expected global players. Hence, it is crucial for you to define your position within this environment, both from a price-point and from a brand positioning perspective.
- Understanding your target market – Let’s assume you want to sell a personal hygiene product or a food product, in any case it is advisable to gather as much local insights as possible. Understanding market dynamics, your target group, your product segments, and cultural differences is key to success. Also, be prepared to localize your product and pay close attention to the market needs. If the market demands small portions, or local language description then do not hesitate to serve the market. Depending on the market a large proportion of your products might be sold in a typical market environment in oppose to a western style supermarket that you might be used to. Ensure that you understand the distribution channels and decision-making processes before you enter a relationship with your preferred distributor.
- Identifying a capable distributor – The key challenge for most foreign companies in Africa is to identify a trusted local business partner, who believes in your brand, who is experienced, who has the logistical capacity and the motivation to build your brand locally. This can become a very time-consuming, expensive and hugely complex process. Be aware that you will most likely find a ‘distributor’ on one of your first country visits. Ensure that this ‘distributor’ ticks all the required boxes and do not simply trust in the spoken word; go and visit the promised warehouse for instance. At the same time you might be surprised that some distributors receive several requests or are already distributing products for other international companies within your product category, which eventually might cause a conflict of interest. The game is on, do not hesitate to ask for their current list of clients.
- Expecting the unexpected – African markets in general can be challenging and at times surprising. Nigeria as an example recently showed that an economy, with a very promising FMCG consumer base, can be hit hard by unforeseen circumstances. Such situations threaten not only the local consumer but eventually you as a supplier when your products become unaffordable for your local distributor. On the other hand, African countries promise high returns once your brand is well established in the market. So, calculate the risk, take informed decisions and do what you do best; sell your products!
In conclusion it can be said that the potential to enter your preferred African market and to be successful in the long-term is tremendous. All it takes is a dedicated market entry strategy, local market knowledge, the right networks and a long breath. Do not believe that just because you made it in other parts of the world you will be successful in African markets. However, if you are in it for the long-run chances of being successful are very high and your efforts will be rewarded.
About the Author:
Christiane Firnges Dietrich & Holger Vogt – on behalf of AMENA Trade & Investment GmbH, a company that enables European companies to successfully access global markets.
Christiane Firnges Dietrich is a Business Development Consultant with more than 15 years of experience in advising international companies entering African markets.
Holger Vogt is a Market Entry Strategist, Managing Partner & Co-founder of AMENA Trade & Investment GmbH.