Top 5 food markets in sub-Saharan Africa

By Kurt Davis

The food sector is the focus of investors who are seeking to capture the opportunity of a rising middle class in Africa. 

They were lost in Luanda, Angola's bustling capital, until they found the McDonalds. Being American in a familiar place in a foreign country is home until you see the price for the burger meal: $14. 

This being Africa means there must be a local twist, says the American tourist John, and sometimes the twist is the price.

Investing in the sub-Saharan African market is the right move at the right time. Call it the “last frontier” or the “last big opportunity.” Either way, the numbers speak to great prospects.

The International Monetary Fund’s (IMF) latest Regional Economic Outlook for sub-Saharan Africa projects GDP growth to reach 5.5% in 2014 from around 5% in 2013. The accelerating growth is expected to be buoyed by large investments in infrastructure and mining, maturing investments in transport and telecommunications, and a rebound in agricultural output.

The sustained boom creates more consumers. Global management consulting firm Mckinsey & Company projects that more than half of African households will have discretionary income by 2020, rising to 130 million households from 85 million today. Restaurants want a piece of the pie.

Kentucky Fried Chicken (KFC) and McDonalds are the big first movers. Other American brands, including Burger King and Pizza Hut, are salivating at the growing opportunity. But franchises are not the only players as local brands, including South Africa's Debonairs Pizza and Nando’s, continue to expand across the region.

Here are the top 5 countries for restaurant expansion in sub-Saharan Africa:

Nigeria

It has a Johnny Rockets! But the entrance of lesser known brands Johnny Rockets and Dominos underline two big things about Nigeria: (1) its approximate 170 million-plus population (biggest in sub-Saharan Africa) and (2) its GDP, which stands north of US$520-billion - the largest in sub-Saharan Africa.

Nigeria’s population is likely to overtake the United States by 2045, according to the United Nations, and its GDP is likely to surpass US$1.6-trillion by 2030 with a yearly growth rate of 7.1%, propelling it into the top 20 for economies by GDP. In a similar time frame, global management consulting firm Accenture in a recent report projects consumer spending to grow to $167-billion by 2020.

Tapping into this market is obviously imperative to gaining market share in sub-Saharan Africa. But creativity is necessary – for example, throw in jollof rice or seafood okra to excite the local palate. Nigerian tastes span local delights to British adoptions and American transformations.

Kenya

Kenya is a favored destination for investment in Africa. It is sub-Saharan Africa’s sixth largest economy and population. And its birthrate remains in the top quartile globally. The IMF projects the Kenyan economy to grow 5% in both 2014 and 2015, compared to 4.7% in 2013. All this being said, the underlining numbers in Kenya indicate more spending consumers in one of Africa’s biggest food-loving countries.

Accenture projects consumer spending to grow to US$38-billion by 2020. back in 2012, an Africa-focused private equity firm invested in Nairobi Java House, a local Kenyan coffee house and restaurant, signifying a new focus of investment firms. A large expansion by Kentucky Fried Chicken (KFC) only further underlines the opportunity. And Subway has entered and likely confronting Subzone, a healthy eating alternative in Nairobi that has a similar look and appeal of Subway.

The Kenyan palate, to a distance observer, initially seems fulfilled by the simple presence of meat – ideally chicken. But locals will suggest that you have only tapped the surface if you leave with that belief. Asian influence, British and American influence (from Kenyans studying abroad), and a well-travelled middle class undoubtedly implies greater diversification.

South Africa

The former “largest economy” in sub-Saharan Africa is still trying to get its growth back on track. The IMF projects the economy to grow 2% in 2014, only barely surpassing the 1.9% growth in 2013. Weaker economic numbers worry investors and politicians alike. Yet consumer spending remains strong with untapped potential.

Consumer spending, projected at US$315-billion in 2020 by Accenture, will be approximately double that of Nigeria. The South African palate is nuanced accompanied by larger pockets. Local brands, including Spur and Ocean Basket, compete strongly against Western brands inside (and outside) South Africa. It is also easy to find a McDonalds and a KFC in country.

Skeptics routinely suggest that the food service business is approaching saturation in South Africa. Yet all the numbers indicate growing competition, but nowhere near any level where investors cannot snag great returns.

Uganda and Tanzania

This grouping will not excite Tanzanians and Ugandans – the countries are definitely different in many ways. But they do have a lot in common too. As the 5th and 7th most populated countries in sub-Saharan Africa, Tanzania and Uganda already possess large consumer bases. This base will only expand with birthrates in the top 20 globally – Uganda at the 3rd highest and Tanzania is the 18th highest.

Tanzania and Uganda embody the East Africa boom. Underpinned by recent natural resource discoveries, both countries possess fast-growing economies. The IMF projects the Tanzanian economy to grow 7% in 2014, compared to 6% in 2013 while the Ugandan economy grows at 6.25% in 2014, compared to 5.75% in 2013. As commercialisation of these resources take hold and pipeline projects mature, these growth figures may very much be higher in a few years.

If not for the supply chain challenges, many investors think these two countries would rise to the top as investment destinations for the food service industry. Yet a lack of commercial quality inputs, ranging from potatoes typically for French fries to meats (i.e. chicken and beef) stymie operators and create deficiencies throughout the value chain. Focused efforts on agriculture from central governments and local investors will continue to improve the industry’s prospects.

Honorable mention: Angola and Ethiopia

This article is re-published with permission from Frontier's content partner, Ventures Africa.

Ventures Africa chronicles business and investment news, and the success stories of African entrepreneurs and business leaders.

How to succeed as a franchisee

Turning a start-up franchise business into a success is tough, but possible. Learn from an expert the keys to striking gold.


By Jeremy Lang

If you’re the kind of guy who likes to go to sleep early, don’t buy a restaurant franchise. I am stating the obvious? Perhaps, but you’ll be surprised how many first-time franchisees make the mistake of buying a franchise that simply does not fit their lifestyles.

In the world of start-up franchising, it can easily be a fatal mistake to make, because there is so little room for error. Very few people who buy their first franchise have the resources for a second chance once they’ve found out that the franchise they had set their heart on is actually not the right fit.

Lifestyle preference is only one of three pillars which prospective franchisees must consider to make sure that the franchise they choose is the right fit for them. The other two are skills and personality.

The skills set of the entrepreneur is the most important. First, there is the technical know-how related to the specific industry, such as a beauty salon or a service station. You’ve got to be able to choose a franchise for which you either have a natural skills set, or one in which you’ve had previous experience in.

Irrespective of the industry, a franchisee will always have to be a jack-of-all-trades to a certain extent - the HR person, the salesperson, the office-manager person and the tea lady, so you’ve really got to have a good general hybrid of skills such as:

• Good management ability, which is the core of what the franchisee is signing up for
• Sales skills, because your whole enterprise revolves around your ability to secure business
• An eye for detail and practical problem solving skills. Because you will be fulfilling multiple tasks in your business, you have to know as much about all the different systems as possible
• Networking and relationship-building skills for forging ties with your clients, staff, suppliers and franchisor, and
• Practical problem-solving skills. You are going to be faced with many challenges every day. You will have to be decisive, and think quickly to find solutions to problems.

This list is true for any start-up business, franchised or not, but there is one set of skills particular to franchising: the ability to follow the rules of the concept. Franchising is a recipe that requires strict adherence by franchisees, otherwise the service or product will start differing from branch to branch, and the collective power of the brand will suffer. If you are not somebody who likes to operate your business under a strict set of rules that you have not created, then franchising may not be for you.

Being a successful franchisee not only has to do with skills, but also with personality. Prospective franchisees need to be honest with themselves about their personality. A generally introverted person should shy from retail or service-heavy businesses such as restaurants. Similarly, a sociable, outgoing personality will become frustrated in a desk-bound business where there is little interaction with clients.

Although nothing can replace common-sense self-knowledge, I would suggest doing a personality test such as the Myers Briggs test, more to help you think through what you already know about yourself rather than teach you about aspects of your personality that you didn’t know.

The unknown usually lies on the side of the franchise. A first-time franchisee who knows himself well could still be in for a nasty surprise when it turns out that the franchise requires an approach, attitude or trait that he simply isn’t comfortable with.

There are two methods of avoiding this mistake. First, speak to the franchisor that you have your eye on. A reputable, established franchise group will have a very clear idea of what kind of personality and skills set are required to make a success of their concept. Some will have formal descriptions and even tests as part of their assessment process.

Most importantly, speak to the franchisees in the group that you want to join. If possible, work-shadow franchisees who are hands-on involved in the management of their businesses for a week or two. The exercise should leave you under few illusions about whether you are up to the task, and whether the work and lifestyle suit you.

Jeremy is regional general manager of Business Partners Limited.

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Below are links to some franchise opportunities on the Frontier platform

International financial services company is seeking a master licensees in Africa

Investors sought for expanding popular fast food franchise in South Africa

Eight emerging agriculture opportunities in Africa

Do you want to invest in Africa's agriculture sector?

Download Frontier's free report on eight specific agricultural opportunities with strong potential for growth.

The prospects for agribusiness in Africa are bright, and according to the World Bank report “Growing Africa: Unlocking the Potential of Agribusiness, farmers and agribusinesses could on the continent could create a trillion-dollar food market by 2030 if they can get more capital, electricity, better technology and irrigated land to grow high-value nutritious foods.

The sector will play a big role in Africa's determination to maintain and boost the current high growth rates. More governments are putting in place proper policies and attractive incentives to private investment into the sector.

There are many business and investment opportunities along the value chain, from farming and processing to retail. 

Download this free report to learn more about eight emerging and potentially lucrative agricultural opportunities in Africa.

Click here to access Frontier's comprehensive database of investment projects and business opportunities in Africa's agriculture sector.

What and how to export to Sweden from Africa

There are great opportunities for fruit and vegetable exporters to sell to Swedish stores.

Sweden is a rich country with a well-educated and sophisticated population, but its supermarkets don’t have all the quality products that consumers want. Agricultural producers in Africa - particular in the food and beverage sector - have a great opportunity to export to the Scandinavian country and to its Nordic neighbours.

The Nordic region (Scandinavia plus Iceland) has a population of about 25 million, most of whom share tastes in food, have high incomes and long life expectancies. With the Swedish market for food alone being worth about $1-billion, there clearly are incentives for African exporters to sell their products into the region.

But barriers for entry into the European Union are high. Health and safety standards are high and consumers are discriminating in terms of quality. However, the rewards are great for farmers and food manufacturers who can get their products accepted. 

Swedes spend about 14% of their income on food, and many of them, about 34%, live alone so there are that many more people buying the groceries than might be the case in a society where large families are the norm.

Charlotte Kalin is the CEO of Chamber Trade Sweden. Speaking at an investment conference in November, Charlotte pointed out that every kilogram of coffee consumed in the country is imported, as are large percentages of the country’s fruit (95%) and vegetables (60%).

“That represents a big opportunity”, says Charlotte. She noted that a delegation of South African stone fruit producers had recently visited Sweden. “They know what Swedish companies are looking for when they import from SA”.

And what Swedish companies are looking for apparently is high-quality goods, and choice.  She pointed out that shoppers in South Africa have great variety when it comes to fruit and vegetables. “In your shopping here, you have a very sophisticated diversification in what consumers can buy. Shopping here is so much fun, there is so much to buy, you could really revolutionise the consumer choice, be it in spices, be it in fruits…”

Charlotte expanded on the shopping experience for a Swede in South Africa - which was something of a surprise for the South Africans in the audience!  Said Charlotte, “Shopping here is like in California, you just have it all, I am very impressed actually“.

Charlotte made a specific call to African exporters, “There is a lot you can do in engaging the Swedish consumer in persuading them to buy new brands.”

Trends in Swedish food retail

In encouraging African agri-producers to export to Sweden, Charlotte pointed out that there are certain key trends that are guiding the food market now. These trends are for;

• Exotic foods (including spicy sauces)

• Organic foods

• Gluten-free foods

• Energy bars and drinks

• Ready-to-eat dishes

A member of the audience at the conference, a Swedish manufacturer, suggested that exporters had a real chance to make inroads into the ready-food market, what with lower input costs for the packaging of food in Africa. South Africa, with excellent refrigeration facilities, has a particular advantage.

Retail specialist Nils Tunebjer, of strategic brand and design agency BAS, pointed out that exporters must also have something to distinguish them from the rest of the pack.

“There must be something more,” said Nils. “If you just come with a product and regular packaging, you will have a tough time!”

“South Africa is a premium country for fruit and vegetables and food and you can answer the question, ‘What should I use when I step in?’”

He stressed that Swedish consumers are very quality-aware and urged potential exporters to tell their story, be it of the process that goes into making the product or the story of the people involved in the making the product.

“Be transparent and open about what you are doing, tell your history,” says Nils. “It can be online, or it can also be in the packaging, which is an important touch point between the retailer and the customer.”

Sweden represents really ‘tough competition’. “The big retailers appreciate if you give them something more: how you merchandise in the store, how you interact with the consumer, how you give information. There must be something more!”

Continuing on the theme of trends as mentioned by Charlotte, Nils pointed out that there is a pizzaria and a sushi store in just about every village in Sweden. “There is great interest in foreign foods and new ways of consuming.”

He mentioned Asian and Thai speciality stores that sell spices like cardamom and saffron. In the health market, South African tea brand Rooibos is very popular. Nils loves Rooibos but complains because he can’t get his favourite tea in the morning. “In our office, even though we have 50 different kinds of tea, I can’t get English Breakfast! Swedes love lots of green teas, red teas, all sorts …”

Other trends highlighted by Nils that are driving customer choices in Sweden are:  

• fair trade

• ecological quality

• openness and information

• interesting back stories.

Nils pointed out that South African wines had created a lot of trust in the Swedish consumer, and generally Swedish consumers were very educated about the country they are importing from.

Price is still important according to Nils, but if producers are able to differentiate their product in one of these ways, then they will increase the chance of success.

Free export advice

Open Trade Gate Sweden is a section of the National Board of Trade of Sweden that offers a one-stop information centre for exporters interested in the Swedish market. It helps traders and aims to increase exports from developing countries to Sweden. Open Trade Gate Sweden specialises in trade rules and regulations, covering areas such as labelling, packaging, health and sanitary requirements and customs procedures.

The organisation has its headquarters in the Swedish capital, Stockholm.

If problems occur in the process of exporting, Open Trade Gate Sweden investigates and acts to overcome the problem. Open Trade Gate Sweden’s services are free of charge.

In 2003 the Swedish parliament decided that the entire government shares the responsibility to contribute to the objective of achieving an equitable and sustainable global development. All future policies would take into account the effect of policies on developing countries.

As outlined by Open Trade Gate Sweden, ‘within the area of international trade it [the policy] specifically says that the Swedish government should work for improved market access for developing countries and remove trade barriers to facilitate trade and try to increase exports from developing countries to Sweden.’

Information about Open Trade Gate Sweden services and general information about exporting to Sweden and the EU can be found on the website www.opentradegate.se

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