Mike Simpson

SUPPLY CHAIN P ROFESSIONAL SERVICES FIRMS the world over are increasingly turning their attention to proactive strategies to manage sustainable risks and strengthen global supply chains. In 2008, for example, a PricewaterhouseCoopers report (‘From Vulnerable to Valuable: How Integrity Can Transform a Supply Chain’) highlighted the link between company performance and supply chain management. As PwC’s Donald Reed and Cope Willis noted in a 2012 article, the study of 600 companies that had experienced supply chain disruptions “showed that, relative to peers, their average share price declined by nearly 20%; share price volatility was higher and return on sales and return on assets were lower”. In Africa, where infrastructure and distribution challenges persist, the topic was addressed during the recent Africa Business Conference hosted by Harvard Business School in the US in February. The event did not focus on growth within Africa per se, but rather the arguably more critical issue of sustaining existing growth. For retailers, central to that focus is an understanding of the diversity of Africa’s consumers and their buying patterns. Present at the conference was Nielsen’s Managing Director for East Africa, Jacqueline Nyanjom, whose presentation (‘The Next African Consumer Wave: Drivers and Riders’) called for a deeper understanding of local shoppers across Africa. A Nielsen press statement Navigating Africa’s complex retail environment 18 strategicmarketingafrica Third quarter 2015 The story of Africa’s potential as a retail market has been driven in recent years by a focus on growth – growth of GDP, of the middle class, of consumerism, of mobile technology and bandwidth. The next evolution is sustaining that growth through proper supply chain processes. Brands can lose opportunities if they fail to get their products into the right outlets noted: “Brands can lose opportunities – a lot of opportunities – if they fail to get their products in the right outlets; even if they have the right product in the right market.” This is often easier said than done in Africa; in large part because the easy-tonavigate malls and shopping centres of the developed world are relatively nascent in many African countries, with the exception of South Africa. Notes Nielsen: “Modern trade is at such an early stage of development in this (sub-Saharan Africa) region that 80% of consumers still shop in traditional outlets – the most popular being a stall set-up at the side of the road or in a local market. And because these outlets are difficult to quantify and provide little data, it makes the market complex.” The firm offered more insights in a 2015 report entitled ‘Africa: How to Navigate the Retail Distribution Labyrinth’. The findings showed that table-top ‘convenience-type’ stores are prevalent throughout Africa, with countries such as Nigeria having no less than 200 000. Small grocery stores Noted the report: “In addition, Nielsen retail sales data shows that some 40% of consumers shopped in small local grocery stores, which account for nearly 50% of consumer goods spend. There are more than 550 000 of these outlets in the countries monitored (namely Kenya, Tanzania, Uganda, Angola, the Democratic Republic of Congo, Mozambique, Zambia, Ethiopia, Nigeria, Ghana, Cameroon, Ivory Coast, Senegal and South Africa).” Discussing the research findings, Allen Burch, Nielsen’s head of African business, highlighted the complex consumer environment on the continent and the challenges facing manufacturers and retailers, which need to get products into consumers’ line of sight in order to drive up volumes. The traditional retail structure makes a one-size-fits-all supply chain approach next to impossible and, says Burch: “As a result, even companies poised with the right products for the right market still often fail to get them to the right place.” This was highlighted by Nielsen’s Executive Director for Marketing and Communications in the Africa & Middle East, Alisa Wingfield, during a 2014 conference organised by emerging market research consultancy Frontier Advisory. Here she discussed the diversity of African consumers and noted that no debate around the different types of consumer groups and patterns was complete without understanding their buying habits. “How consumers access products ranges from kiosks to street vendors, from supermarkets to open-air markets. We are a continent that has more traditional trade than anywhere else in the world, although this varies between countries and modern retail is evolving more rapidly in some areas than others. We have consumers who shop two to three times a day. In fact, the Malagasy shop 72 times per month. That equals opportunity; that equals occasions for you to interact with consumers at a retail level.” This opportunity was noted by Burch too, who highlighted a study of new products in Nigeria which showed that the highest-selling new product in that country reached just 65% of consumers via 745 000 outlets. The next nine bestsellers were available in just 30% of Third quarter 2015 strategicmarketingafrica 19 SUPPLY CHAIN these outlets. “In what developed market would bestsellers two to 10 reach only 30% of possible outlets in six months?” asked Burch. “Consider the enormous launch potential if these products had only reached more outlets and consumers.” Aximuscia velestis que volor sequia doles aspidendae perum velluptat Get closer to retailers 20 strategicmarketingafrica Africa has more traditional trade than anywhere else in the world, although retail sophistication varies from country to country is, therefore, a key component of an effective distribution strategy.” Working with traditional retailers, even if supermarkets record higher volumes, was heavily emphasised in the report. This means understanding how these retailers work. For instance, said the report, “a table-top vendor selling a small range of everyday basics will often stock only a very narrow range of products. With no transport and limited or no storage, the vendor will probably not visit even one distributor or wholesaler. Instead, everything is brought to the stall either on a bicycle, boda boda (cargo-carrying motorcycle), in a motor vehicle, or perhaps even on a pushcart or by foot.” In light of this, Nielsen advocates a strategy of getting closer to vendors in an effort to bring a brand closer to its customers. “The vendors are masters at adapting their offerings to meet consumers’ immediate needs, which change at various points during their day. In the morning, the commuting Third quarter 2015 Like us on Facebook: Strategic Marketing Africa Magazine We have consumers who shop two to three times a day consumer may stop for breakfast – readymade tea served from a flask, freshly squeezed juice, slices of bread, a cooked sausage, a single teabag and a serving of sugar – and perhaps even super-glue for fixing a broken shoe. All of this must be understood by a manufacturer that wants to introduce its product to the table-top market and develop its success, particularly because it is the vendor and not a wholesaler intermediary that will make the ultimate decision.” As Wingfield noted: “I’d say that any marketing campaign [should] start with the retailer as he is the biggest ambassador for your brand. He’ll be a large determinant in the success of your product, simply [by] stocking your product amid limited space and understanding what sells.” For daily marketing news updates, go to www.africanmc.org PHOTOS: XXX Here the report outlines how companies operating in Africa need to get closer to smaller retailers in order to overcome distribution challenges. It starts, said Burch, by understanding where consumers shop, when and for what. Secondly, consumer packaged goods (CPG) companies need to identify the best channels and retailers for their given product category. Explained Burch: “In Lagos, we found laundry detergents distributed in no less than 100 000 outlets, which is an impossibly large number to reach. But further analysis showed that 80% of the sales value came from just 35 000 of those outlets, and a full 50% of sales value from a more manageable 10 000 outlets.” Nielsen also stressed the need to understand the importance of brand familiarity and word-of-mouth recommendations. “Companies must consider how to help build demand in an environment where consumers on limited budgets are ultra-cautious about trying new products, small retailers have little or no display space, shopper loyalty is sometimes to local manufacturers, and premium-priced branded packages are often split open and sold in unbranded singles or servings to meet consumers’ needs,” said Burch. This aspect of consumer behaviour differs between African markets, noted the report. “Our data shows that in Nigeria, for example, consumer willingness to try new products increased in the third quarter of 2014, but decreased in Ghana. This kind of data helps manufacturers understand consumers, of course, but it also spells out how important it is for manufacturers to get close to retailers and gain their trust. In young consumer markets, it is the retailer rather than the brand that is initially trusted by consumers. Getting close to the retailer