Market Overview
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ONE OF THE FASTEST GROWING MARKETS
Household consumption has increased even faster than its gross domestic product (GDP) in recent years—and that average annual GDP growth has consistently outpaced the global average. In light of the increasing affluence, population growth, urbanization rates, and rapid spread of access to the internet and mobile phones on the continent, Africa’s emerging economies present exciting opportunities for expansion in retail and distribution.
Consumer expenditure has grown at a compound annual rate of 3.9 percent since 2010 and reached $1.4 trillion in 2015. This figure is expected to reach $2.1 trillion by 2025.
Consumer expenditure has grown at a compound annual rate of 3.9 percent since 2010 and reached $1.4 trillion in 2015. This figure is expected to reach $2.1 trillion by 2025.
Consumers are savvy and brand loyal. Local vendors are entrepreneurial and present key assets for distribution chains. At the same time, the vast majority of consumer spending on the continent currently takes place in informal, roadside markets. This signals enormous potential for growth as consumers shift from the informal toward more formal forms of consumption such as shopping malls, supermarkets, and eventually even e-commerce, a process that is already underway.
Already, Africa’s total consumer expenditure accounts for roughly 8 percent of all spending in the world’s emerging markets, roughly on par with that of Russia or Brazil.
Share and value of household consumption in Africa
*Source: Oxford Economics: HS, African Development Bank and McKinsey Global Institute Analysis. McKinsey&Company, 2016.
Brands Recognition
Industries supplying Africa’s consumer markets are expected to increase revenues, with the largest benefits expected to accrue in food and beverages, housing, luxury goods, transportation, and hospitality and recreation. The growth potential for Africa’s consumer market is bolstered by positive demographic forecasts. While the global population is aging, Africa’s workforce is increasingly young, urban, and affluent.
Brand recognition is highly important to African buyers, who often refer to products by an associated brand name, such as “Tide” for detergent or “Gillette” for razors. Multinationals providing recognizable international brands continue to report strong profitability in their African investments. More than 70 percent of the 50 largest packaged goods producers in the world are already tapping into Africa’s rapidly growing consumer market.
African customers want to buy the “look and feel” of western branded goods!