A continent goes shopping

Friday, August 17, 2012

AFRICAN consumers are underserved and overcharged, reckons Frank Braeken, Unilever’s boss in Africa. Until recently, South Africans who craved shampoo made specially for African hair, or cosmetics for black skin, had little choice besides costly American imports. Unilever spotted an opportunity: its Motions range of shampoos and conditioners is now a hit.

The Anglo-Dutch consumer-goods giant is making a big effort to tailor products for African customers: affordable food, water-thrifty washing powders and grooming products to fit local tastes. It is also helping other businesses. Last year Unilever opened the Motions Academy in Johannesburg. Each year it will train up to 5,000 hairdressers who want to open their own salons. It is also a laboratory to test products and to try out new business models. If it works, Unilever plans to replicate it elsewhere in Africa.

Africa already has a $1.8 trillion economy and is forecast to have a population of 1.3 billion by 2020. “Lion” economies such as Ghana and Rwanda have grown faster than South Korea, Taiwan and other East Asian “tiger” economies in five of the past seven years, albeit from a low base.

Unilever is not the only consumer-goods giant moving in. Africa accounts for only 3% of group sales of Nestlé, the world’s biggest food firm, but the Swiss behemoth is betting big there too: its African investments will total SFr1 billion ($1 billion) in 2011 and 2012 against a total capital expenditure of SFr4.8 billion last year. It has 29 factories on the continent and wants to build more. SABMiller, the world’s second-largest beermaker, is planning to invest up to $2.5 billion in Africa over the next five years to build and revamp breweries. In the year to March 2012, the continent (excluding South Africa) was SABMiller’s fastest-growing region, with volumes up by 13%.

Source: The Economist (link opens in a new window)