Ben Longman, Managing Director of marketing intelligence company Trendtype, spoke at Ceuta International Conference 2019, focusing on winning strategies for brands entering African markets and the mistakes to avoid. Here we share his thoughts on one of the most common questions for any company targeting Africa is: Which are the best markets to go after?
In this article we’d like to share some of Trendtype’s way of thinking about market attractiveness. Most companies tend to build a data model to assess market attractiveness, with information such as the size of the economy, population, income levels, ease of doing business etc. In fact, Trendtype has a similar data model. Although our business is built on data we don’t publish a market attractiveness ranking for Africa. Why? Because there is no one size fits all index for the best markets to go after.
There are lots of types of risk: political risk, economic risk, legal and regulatory risk, supply chain risk, corruption risk, currency exchange risk. No market in Africa is low risk. Sure, a country’s risk profile is less important if you’re shipping goods into a market as opposed to, say, signing a contract with a government to develop an oil field. But they can burn even experienced players. Shoprite, the leading South African supermarket chain that operates in 15 countries, has seen revenues in Angola fall by 38% even though sales are increasing. Why? Currency devaluation. Not all risks are as catastrophic. Most consume time, energy, and profit margin and have the capacity to bog you down.
When we talk about risk we’re asking how much time you want to spend managing risk and how important it is for your Africa strategy to play in a high risk market. From a practical perspective, the main considerations for fit are things like how easy it is for you to operate in a country, whether you already trade in markets that speak your language, whether you have to change a product’s packaging or marketing materials, whether your markets are in the same trading bloc or region. Fit also comes down to whether a commercial team are familiar with a country, comfortable travelling there, and if the head office ‘likes’ a market.
When we talk about fit, we’re asking a company to analyse its reasons for wanting to play in a specific market and its own strengths, weaknesses and institutional preferences. The internal conversation about “what is our Africa strategy for the next five years?” is critical.
Competition is more comfortable territory and perhaps the easiest thing to factor. Nonetheless, our experience is that the granular analysis of competition tends to come too late. There are good reasons for this. Data is hard to come by. Brand sales and channels are fragmented. Parallel trade and ad hoc importing are rife. Brand owners have to wait for a distributor to work through a value chain analysis to establish how price competitive a brand will be.
When we talk about competition, the two points we’d make are “in which channel” and yes, while it is important to know who the main competing brands are it is critical also to gauge the extent of parallel trade and ad hoc routes to market.
Which brings us back to opportunity and market attractiveness. Most clients want to know about reasonably well travelled, medium risk markets like South Africa, Egypt, Morocco and Kenya. There are still risks and route to market challenges, including a more open competitive landscape. The largest immature markets we get asked about most – Nigeria, Ethiopia and DRC – all carry significant commercial risks and are high friction markets. There are several small markets with lower risk profiles, among them Mauritius, Botswana and Rwanda. And there is a long list of small, high risk markets where opportunists and specialists thrive.
The list of ‘best’ markets is not objective – their attractiveness has to be considered within the context of a brand owner’s internal capabilities, resources, and appetite for Africa specifically and risk more generally.
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