Meeting Africa’s Surge

April 23rd, 2015 - Insights on Retail Value Chains in Sub-Saharan Africa

The big economic and demographic changes now underway in Africa will require importers to re-think logistics and distribution systems across the continent.

Current annual economic growth of 5% is expected to continue for the next half decade. That expansion will fuel the emergence of nearly 130 million middle class African households by 2020, compared to 85 million in 2008. 

Those families will be consuming larger numbers of products across all fast-moving consumer goods lines. Increasing consumption already boosted freight traffic to the continent by over 10% last year alone. Meanwhile, demographic concentration means nearly 60% of all Africans will be living in major urban centers by 2050.

But getting those products quickly to eager customers presents a challenge – especially with distribution structures, habits, and histories across Africa differing significantly.  

“Consumers have jumped the entire traditional distribution chain by purchasing goods online via computers and telephones, and getting direct delivery”

As a result, importers and logistics providers must adapt current strategies to new and evolving factors in sub-Saharan Africa -- South Africa being the exception to that rule. They must also anticipate continuing changes arising from surging internet purchases of consumer goods.

According to the maturity of markets, global retailers have traditionally relied on one of several franchising strategies – as has Casino through Prosuma in Ivory Coast -- or partnerships arrangements in African distribution, says Xavier Personnic, FMCG & Retail Industry Director for Bolloré Africa Logistics in Paris.

One recent model has emerged among internationally known retail brands in Africa. Their significant purchasing power vis-a-vis major FMCG suppliers, and their ties to famous brand names helped differentiate these distribution actors from local retail players. According to country maturity, those international networks have managed to develop using their own corporate stores like Mr. Price in Nigeria. This model corresponds to the growing demand of end-consumers for more brands and product references available in stores.

The basic way of supplying these stores involves shipping pre-prepared container supplies from home countries to individual African outlets based on demand of individual stores. Given the expected boom of both affluent African customers and distribution points necessary to satisfy their demand, that approach of moving pre-packed containers to local stores may be less viable over time. For that reason, development of local distribution centers is already underway, and likely to expand with time.

In parallel with that activity, well-established local retailers are extending and operating their own chains supplied by FMCG distributors. Large retailers like Nakumat in Kenya have been built on this model by implementing direct sourcing logistics, bypassing other FMCG distributors.

The latest approach has emerged with the rise of internet retailers like Cdiscount, Jumia and Kayayo. Their rapid growth has been fueled by consumers in countries where mall distribution is still under-developed, often hampered by limited construction capacity in cities and towns.

“Consumers in this case have jumped the entire traditional distribution chain by purchasing goods online via computers and telephones, and getting direct delivery,” Personnic explains.

Internet vendors vary distribution from home delivery, drop-offs at often-frequented venues like post offices, gas stations in Africa similar to practices in Europe.  They also organize transfers directly with customers at agreed upon meeting points or homes when possible. This African e-commerce retail trend is also accompanied by the growing use of mobile payment.

Retail chains are clearly affected by the parallel evolution of major FMCG companies in African markets from a pure distributorship model to the establishment of African corporate affiliates. That process enables full control of sales, stocks and distribution in countries, and the emergence of hubs serving entire regions -- as Colgate Palmolive uses Ghana to provide for a number of western Africa countries, for example.  

“We are continuously investing in our warehouse equipment, management systems and track and trace capabilities”

As time passes and markets mature, these more ambitious supply chains are increasingly replicated across suitable countries, such as Kenya, Nigeria and Ivory Coast. The spread of those more complex and adaptable models should lead to the drastic decrease of pre-prepared containers being shipped in from retailers’ base country within the next five years.

Despite the vast variation in how importers can get goods to final destinations, it’s evident accelerating activity in Africa will continue fueling more importing, storage, and local distribution of goods. That volume will make the role of logistics partners capable of facilitating all current and future transport and delivery methods using Africa’s contrasting distribution patchwork all the more vital. 

“This is where Bolloré can really help, given our history and resilient presence in Africa,” Personnic says. “We propose Pan-African Route To Market insights. We excel at transporting goods into the country and through customs, and managing storage of products until they are delivered to end-clients. We are continuously investing in our warehouse equipment, management systems and track and trace capabilities. We similarly continue enforcing our local distribution networks to be able to serve the needs of the most stringent companies. This will be a great asset as the inevitable growth of imports and storage in Africa develops.”

Looking forward raises questions about the balance point of future African retail chains. One focus will be how principle markets become structured for local distribution between agile e-commerce solutions and mall-centered retail. Another will be satisfying the desire of consumers seeking in-store shopping experiences in African major megalopolises confronted by scarce real-estate opportunities.

Key Figures
  • 20%

    More fuel-efficient for the Boeing 787 and the Airbus A350

  • 70%

    of Urbanisation is expected by 2050

  • 27

    mega-cities are expected by 2050, with at least 10 million people, compared to 1...

  • +18,4%

    of growth for E-commerce retail market in Europe in 2015

  • 82%

    of goods are moved by road

  • 1 billion

    Population in Africa

  • 60%

    of Africa’s population will be urbanized by 2050

  • 7,5%

    of growth for Indian GDP in 2014

  • 4,9%

    of growth for African GDP in 2016

  • 6,1%

    of growth for East Asian GDP in 2015, the world’s fastest-growing region

  • 19 224 teus

    transported by the MSC Oscar, the largest container ship in the world

  • 396 m

    is the size of the MSC Oscar ship

  • 120 h

    is the Non-Stop Flight Record done by Solar Impulse

  • 4,5%

    of growth in 2015 for Global Airfreight demand