Diamond in the rough

Potential

The African continent is currently home to more than 1.1 billion people, and will account for one-fifth of the world’s population by 2025, according to the McKinsey Global Institute. With a working population growing at a rate of 2.7% per year, expectations are that the continent’s GDP will increase by 6.2% in the next ten years, and reach $29 trillion (€27 trillion) by 2050.

Growth drivers

Several main growth drivers can be discerned: urbanization and the rise of mobile communications.

Urbanization

According to the McKinsey Global Institute, almost 50% of Africa’s citizens will be living in cities by 2025. In the largest African cities, consumption growth rates rival those of major cities in Brazil, Russia, India and China. What’s more, especially young Africans between the age of 16 and 34, are willing to spend money and try new products.

Mobile communications

Mobile penetration is growing fast in Africa, and the GSMA projects that 80% of sub-Saharan Africa will gain access to mobile phones in the next five years. Today, the internet’s contribution to GDP remains low, but it is likely to take hold on a much larger scale in the coming decade, with its contribution to GDP estimated at 8% by 2020.

Pet care

In terms of pet care, South Africa remains by far the most important market, but as urbanization fuels pet humanization, the pet markets in other sub-Saharan economies are expected to grow in the wake of GDP growth in the coming years.

According to Euromonitor International, growth in the South African pet food market is expected to continue in the next few years, which to a large degree will be driven by the pet humanization trend. Many Africans traditionally perceive pets as outdoor animals not needing the same level of care and attention as humans, but this is clearly changing. Currently, pets are increasingly regarded as family members where they receive equal care in terms of food and healthcare, as well as toys.

This translates into an increasing demand for product diversity, premium pet food, and larger packaging sizes in terms of pet food products, as well as pet care products, accessories and toys.

Challenges

You could state that the bigger the potential, the greater the risks. This is certainly true for a promising but unstable developing economy like Africa. The McKinsey Global Institute discerns several challenges to doing business on the African continent:

• Political instability and conflict
• Poor infrastructure (especially in rural areas – infrastructure around cities is being improved at an impressive rate) 
• Linguistic diversity
• A fragmented retail market
• Low data availability and quality

To overcome these hurdles and succeed, companies would be wise to learn from the failures and successes of others.

Cultural diversity

One pitfall to pay specific attention to is the variations in consumer behaviour throughout the continent. Africa cannot be treated as one country with a homogeneous culture, consumer need and stage of development. The continent harbours a great diversity in languages, cultures, and ways in which buying decisions are made. It is therefore essential to take a country-based or even city-based approach to the market, and tailor your offer to local needs and preferences.

Payoff

Pet food or pet care companies seeking to embark on an African adventure must be prepared to face a rocky road, and invest in technologies and services that allow their sales force to collect data to help them serve customers. However, the payoff can be well worth it in the end: African consumers reward brands they trust, and a brand that wins them over can thrive in the market for decades to come.