Download emerging consumer markets in west africa

EMERGING CONSUMER
MARKETS IN WEST AFRICA
FACT PACK
BUSINESS SWEDEN, SEPTEMBER 2016
” While the traditional view of Africa has been as a source of valuable natural
resources, it is quietly but rapidly becoming a significant market for technology-based
consumer products”
-
African Business Magazine
With 17% of the worlds’ population by 2020 and consumption spending per capita
matching that of India and China, Africa is the place to be to position oneself for future
growth in the consumer goods and services market. West Africa and Maghreb house 5
of the 10 African nations making up 75% of the continents GDP and offer a region
where companies can start their African journey, or continue it, by leveraging the
similarities between the nations for a sequential regional roll-out.
MALAK SEKKAT
Associate
+212 522 36 25 10, +212 522 97 95 80
[email protected]
EMERGING CONSUMER
MARKETS IN
MAGHREB AND WEST
AFRICA
Growing populations, increasing real incomes and underdeveloped consumer markets - Maghreb
and West Africa offer great possibilities for consumer goods and services.
OVERVIEW
Africa is experiencing an increasing
consumer population which is making the
continent a potential next step for consumer
product companies looking to grow.
According to the African Development bank
and Euromonitor, 17% of the world’s
population will live in Africa by 2020 and
consumption spending per capita already
matches that of India or China and is
expected to grow even further. On top of
this, urbanization is rapid and creating
opportunities for the development of retail
networks through higher consumer density.
Out of the ten countries accounting for 75%
of Africas’ GDP, five are located in West
Africa and Maghreb (Nigeria, Algeria,
Morocco, Libya, Tunisia).
estimated to go from 15.5 million
smartphone users in 2016 to 23.3 million in
2019. This progress will have an effect on
the consumer behavior and present new
means to penetrate the market and new
ways to design the business offer in the
region.
This development and forecast has attracted
private actors in the sector. Competition is
intensifying and
the opportunity to
successfully enter and shape the market is
becoming tougher with time. However, there
are still great possibilities. Due to growth,
Africa is a market on which creating new
consumption habits and building category
penetration are valid strategies. This
approach can sometimes even be quicker
than gaining market share in a more
established-category.
Communication and technology is a major
driver of the consumer goods and services
development. For example, Nigeria is
FACT PACK | BUSINESS SWEDEN | 3
SEGMENTS AND ECONOMIC DRIVERS
Consumer segments in emerging market economies in general will see significant changes
in the future as a result of falling birthrates and higher life expectancy. The middle youth
(aged 30-44) will remain the largest segment. The babies (aged 0-2) and kids (aged 3-8)
segment will decline, while mid- (aged 45-59) and late-lifers (aged 60) will increase rapidly.
Consequently, consumers will generally become older, but will remain relatively young
compared to more advanced countries. This creates a set of challenges and opportunities for
businesses. The middle youth will continue to offer a vast market base, while their rising
incomes will fuel spending. Many African economies are home to high numbers of costconscious consumers in their teens and twenties, who form an approachable audience for
affordable youth-friendly products and services. This segment remains important drivers of
consumer trends in West Africa and Maghreb as they will then become part of the middle
youth segment by 2030. Moreover, businesses targeting mid- and late-lifers will see growing
opportunities, especially in Algeria, Morocco, and Nigeria.
COUNTRY CASES
4 | BUSINESS SWEDEN | FACT PACK
ALGERIA
In Algeria, earning and spending had an unbroken real GDP growth between 2009 and 2014.
In the uppermost gross income bracket middle-aged Algerians are prominent (54.1%).
However, the high numbers of price-sensitive teens and twenty-somethings form another
attractive consumer segment that is suited for a market of affordable youth-friendly products
and services. The number of individuals in the top annual gross income bracket
(US$150,000+ ) is expected to more than double through 2030, providing opportunities for
upscale and luxury goods and services providers.
There are three categories of goods and services which are expected to more than double in
real terms between 2015 and 2030; Communications, miscellaneous goods and services,
and housing. On the other hand, clothing and footwear, leisure and recreation, and alcoholic
beverages and tobacco – will continue to struggle, as a result of competition from low-cost
fabric manufacturers; the migration of leisure activities to the online/mobile domain; and
greater health consciousness.
MOROCCO
Morocco has some of the lowest incomes of major Middle East and African states but is
expecting growth through 2030 which will in effect raise these levels. Similar to Algeria, the
nation has a large cohort of young, cash-conscious consumers, with over half of the
wealthiest individuals being middle age (45-54). The middle class will grow through
population gains, in a market that already has relatively low inequality by African standards.
On a regional level, Grand Casablanca is dominant in spending.
With some of the fastest rising incomes in the region through 2030, consumer confidence will
be increased along with spending. This growing capacity for non-essential expenditure will
create opportunities for discretionary goods and services. Middle-aged consumers remain a
promising target for marketers of high-end products and services. With the overall population
on an annual gross income of US$150,000+ poised to jump from 31,600 to 82,000 between
2014 and 2030, the luxury market in Morocco is vibrant.
NIGERIA
Nigeria has the largest consumer market in the Middle East and Africa region. However, due
to economic instability the short-term prospects for growth of gross income and spending are
meagre. Essential spending constitutes a significant proportion of total expenditure by
Nigerian households, and the country’s income gap remains extremely wide. This income
gap leads to remarkable differences in spending patterns between the rich and the poor. In
terms of households, single persons are forecasted to record the fastest growth in total
consumer expenditure across household types through 2030. Over the period of 2016-2030,
communications is expected to remain as the fastest-growing spending category in the
FACT PACK | BUSINESS SWEDEN | 5
country, on the back of rising penetration rates of smartphone services and equipment, as
well as broadband internet services, both fixed and mobile, during this period.
As contrasted by Algeria and Morocco, Nigerians in the age segment 65+ make up the bulk
of the income cohort with an annual gross income in excess of US$150,000, which is
expected to accentuate in the long run. This will drive demand for goods and services in
categories like health goods and medical services, hotels and catering and travel services,
targeted at the premium segment.
Nigerian young adults are a mixed consumer group due to the relatively early age at which
they typically marry. Single individuals are an attractive market for communications, clothing
and footwear and fast food, while those that have already started a family focus their
spending on categories like education, groceries and household goods and services.
TUNISIA
Tunisia is set to accelerate in terms of growth in consumer income and expenditure in the
coming years. One of the reasons is greater political stability and economic reforms
supporting growth and consumer confidence. Expansion of the middle class, making up one
third of all Tunisian households, is affected by a relatively high income inequality, whilst high
rates of youth unemployment will broaden the lowest social class.
As with its regional neighbours, communications is expected to become the most robust
consumer spending category through to 2030. The growing and youthful population of the
country supports the expansion of consumer expenditure. Over the forecast period of 20152030, growth of Tunisia’s per capita annual gross income is projected to accelerate to an
average of 4.0% per year in real terms, higher than the regional average of 1.9%. Tunisians
aged 50-54 are most prominent among the country’s top income earners.
CÔTE D'IVOIRE
After a long period of turmoil the economy will continue to grow rapidly during 2016, as it has
during the past four years, and is expected to reach about 6.9% per year on average in
2017-2020. The real value of private final consumption rose by 9.5% in 2015 and gains of
8.6% are expected in 2016. Economic activity will be driven by public investment in basic
infrastructure, in the agribusiness industry (cocoa, rice and cashew processing) and in
housing and other services. Additional support will come from private investment. An
estimated 60-70% of the employed workforce is farmers.
6 | BUSINESS SWEDEN | FACT PACK
GHANA
Ghana’s economy is expected to rebound in 2016 after a slow performance in 2015. After
gains of 3.5% in 2015, Real GDP should grow by 5.7% in 2016. Thanks to modest but stable
gains in oil production the medium term outlook is relatively bright. The population is
increasing by more than 500,000 each year, a pace with which economic growth has not
been able to keep up. The proportion of the population living in poverty is declining, although
regional differences are apparent. The real value of private final consumption fell by 1.2% in
2015. Growth of 3.3% is forecast for 2016. Wages have risen in recent years, undermining
competitiveness and distorting the economy.
BUSINESS OPPORTUNITY DEFINED
Overall, the growing population in West Africa and Maghreb offer interesting business
opportunities. With growing real incomes, the expenditure on discretionary products will rise
and development of the consumer market will trail further. A tendency, mainly driven by the
composition of the populations in Algeria, Morocco, and Nigeria, but also a macro trend for
emerging economies, is that of an ageing wealthy middle-age cohort combined with a large
cohort of young, cash-conscious consumers. These segments and their characteristics
provide opportunities for businesses to tailor their offering and penetrate the market, possibly
starting with one country and having a plan for a regional roll-out. Communication and
technology based consumer products will be drivers of the development in the markets.
Smart-phone penetration is accelerating, especially in the younger segments, and will
provide a platform on which to introduce further consumer goods and services.
FACT PACK | BUSINESS SWEDEN | 7
BUSINESS SWEDEN Box 240, SE-101 24 Stockholm, Sweden World Trade Center,
Klarabergsviadukten 70
T +46 8 588 660 00 F +46 8 588 661 90
[email protected] www.business-sweden.se
Business Sweden’s purpose is to help every Swedish company to reach
its full international potential and help companies abroad to reach their
potential by investing in Sweden. The purpose is operationalised through
450 staff deployed at 14 offices in Sweden and at 55 offices in 49 key
markets abroad. Feel free to contact us for any questions regarding
Swedish international trade or foreign investments in Sweden.