The new report from Nielsen says, for brands eager to tap into the growing African markets, relying solely on macro-economic data can lead to costly missteps.
The report adds that, for new entrants to tap into the estimated 350 million middle class consumers, they need to combine retail data from both modern and traditional trade and shopping behaviour with broader macro-environment indicators.
“Conventional knowledge has held that where there is growth in population and GDP, and a stable business environment, a brand can succeed by being launched in the market. Those insights alone don’t provide a complete picture of Africa’s consumer opportunities,” said Allen Burch, head of Africa for Nielsen.
“We found that successful consumer brands in Africa understand three key pieces of retail information: who shops where and for what, which retail outlets are the best for the product to generate sales, and how to build demand amongst retailers and consumers.”
In 2013 Nielsen began conducting a quarterly analysis of consumer, retail and business outlook data, as well as macro-economic data across seven sub-Saharan countries – Nigeria, Kenya, Ghana, South Africa, Tanzania, Uganda and Zambia – with plans to expand to additional countries over time.
Historically, one complaint has been the lack of market data within Africa. Without that insight, even companies with the right products for the right market can fail to get them in the right stores, leading to poor sales growth.
For most of Africa, the percentage of sales through modern trade is still small. While international retailers are making investments in modern trade formats, traditional retail, like the kiosk and table top – a stall set up on the roadside or in a local market area to capture passing trade – is where the majority of consumer retail transactions occur.
“Understanding the willingness of Africa’s consumers to try new products is also essential,” added the report.
“There is a strong preference amongst consumers for brands and products they know, have tried before or that have been recommended by a trusted source, but the level of openness differs by country.”
Nielsen analysis shows that, for example, in Nigeria consumer willingness to try new products increased to 73 per cent in Q3 2014, but decreased in Ghana to 53 per cent.