Africa FMCG distribution challenges : reading the Nielsen report

Africa FMCG distribution challenges : reading the Nielsen report
March 6, 2018 Optimetriks

Identifying Africa’s FMCG distribution challenges 

Driven by Africa’s burgeoning middle class, demand for consumer goods and services in Africa is expected to skyrocket in the next decade. In total, it is estimated this will add $1.1 trillion to African GDP by 2019. However, although some companies have already attempted to mobilize resources to capture this opportunity, a report by Nielsen titled “How to Navigate the Retail Distribution Labyrinth?” exposes the difficulties that companies are facing to reap the benefits. By shining light on the reality behind the African consumer market and its dependence on multiple small retail outlets, the report argues that the underlying bottleneck limiting the future success of the incoming companies is fundamentally a distribution problem. In this blog post, we dig deep into the analysis and show how Optimetriks’ digital data gathering and management platform can be leveraged to unlock the full extent of the opportunities available in the FMCG market in Africa.

Key Insights:

  • Even top selling products struggle with product penetration

For a range of different products in Nigeria, the market leaders had an average product penetration of 65%. That is, on average, 65% of the 745,000 visited outlets had these top selling products. However, more surprisingly, for the remaining 10 best selling products, the average product penetration was merely 30%.

  • Consumers have a strong preference for products they know of or have tried before

Across these seven countries, about half of the surveyed 10,000 outlets said consumers had a preference for “trusted” brands. This may not be surprising given the tight budget environment most consumers live under.

  • Across Africa, except in South Africa, most sales are made through traditional outlets

In Ghana, Cameroon and Nigeria, more than 90% of sales are made through traditional informal outlets. Whereas in Kenya, often labelled as one of the most developed retail markets, 70% of sales are still made through traditional outlets.

  • Across the different African countries there is a varied mix of separate types of traditional outlets

In Ethiopia, Cote D’Ivoire and Cameroon, more than half of the traditional outlet types present are convenience stores. Conversely, in Uganda, Kenya and Nigeria, grocery stores/dukas are most common.

  • Consumers go to different outlet types for different purposes

In Kenya, most consumers who buy at table-tops do so because of their handy location. Whereas most consumers who buy at kiosks do so because they need a quick top-up of something. Conversely, purchases at dukas or supermarkets quite often occur because people need to stock up on various different products.

  • Inefficiency: sales are often concentrated on a small percentage of the outlets who stock the product

For instance, in Lagos, Nigeria, although laundry detergents are stocked in over 100,000 outlets, 50% of the sales occur in only 10% of these outlets (10,000 outlets). Similarly, 80% of the sales of beverages occur in about 40% of the outlets offering them.

So what?

Given the complexity of the consumer goods market in Africa, tailoring the distribution of a product by accounting for when and where it is usually sold, will massively determine its profitability and success in the market. Additionally, given the influence that trust has on consumer behaviour, as well as the fact that most sales occur in small traditional outlets, companies will benefit from establishing close relationships with the plethora of small retail outlets upon whom success will in large measure depend on.

Where does Optimetriks come in?

We have built an agile Sales Force Automation technology toolkit that is specifically tailored to help FMCG brands operating in Africa tackling those challenges. It relies on an Android app with a very simple user experience to equip either mystery shoppers, sales representatives and any field/sales staff, associated with live business intelligence reporting dashboards. Through these two interfaces we digitise the main distribution workflows, such as retail audits, outlet registration, order and stock management, deliveries, etc.

Using technology translates into enhanced transparency, efficiency and bottom line impact of the resources mobilised for the field operations that managing distribution in the traditional trade requires.

In view of the insights shared above, our solution could help in particular:

  • to measure precisely the numerical distribution and identify the outlets that are out of stocks on key SKUs
  • within the traditional trade, to segment the outlets based on the sales generated or their typology to ensure there is the right assortment of products
  • to calculate sales per outlets and ensure the coverage of the field ressources is linked to that KPIs.
  • to track the number of outlets visited per day per sales rep and their performance to ensure commission based payment

We currently work with more than 15 tier 1 clients in the FMCG space in Africa over 12 countries. If you are interested in knowing how our solution and expertise could benefit your company, please reach out to us !