Post-Covid rebound provides positive outlook for Africa’s food retailers
By our News Team | 2022
Renewed interest and investment from retail chains, including multinationals, will grow the sector. But informal retail isn’t going anywhere, just yet.
As Africa enjoys a post-Covid economic rebound, led by strong recoveries in North Africa and East Africa that are expected to bring these regions back to pre-pandemic levels during 2022, the continent’s retail sector is looking extremely positive too.
This upbeat outlook was one of the main themes to emerge from the recent Retail in Africa webinar organised by Trade Intelligence, an African-based FMCG retail research and insights company.
In his introduction and overview, Mac Mabidilala, the Head of Research at Trade Intelligence, noted that poverty levels were decreasing and per capita incomes rising across Africa. These factors, along with trends such as urbanisation, meant the outlook for retail growth and modernisation was very promising.
Photo by Laura James from Pexels
However, there were still challenges such as high inflation, currency volatility, lack of infrastructure, and the difficulty of repatriating funds from countries such as Nigeria. The latter had been a major reason for Shoprite’s decision to exit the Nigerian market after 15 years.
Big chains are seeking African expansion
In general, though, the big retail chains were continuing to show interest in pursuing an African expansion strategy. These included the likes of Carrefour – which is using a franchise model – and Walmart. While some South African-based retailers had retreated to countries closer to their home market, SA’s Pick n Pay group had reversed the trend and entered Nigeria through a partnership model.
Mabidilala emphasised that big international retailers and major food-product brands had to come to terms with the dominance of the informal retail sector in most African markets – as much as almost 70% in Kenya and a massive 94% in Nigeria, for example.
But informal retail was not necessarily a competitor to modern retail and, rather than just being focused on selling fresh food for daily consumption, these traders also stocked products from the major FMCG brands and could therefore not be ignored, but should be part of the route-to-market strategy.
He believed food retailers intent on cracking the African market needed a clear plan, patience and a long-term view. Mabidilala cited the example of the Singapore-based Tolaram Group, which entered the Nigerian market in the late 1980s with Indomie instant noodles – at a time when noodles were an unknown product. That segment has since exploded, with Indomie being the dominant market player.
To read more of this article, go to page 42 of the latest issue (Issue 1 2022) of Strategic Marketing for Africa, the magazine of the African Marketing Confederation. You can access the Digital Edition here.