How to reach 200 million people by bicycleFollow @MadeItInAfrica
We have a special preference for the African food and beverage industry. The reason is very intuitive: this is where most of the African household budget goes. If you are an investor that believes in the rise of African mass consumption, the food industry is probably one of the best ways to capture the long term opportunity.
A good example is Fan Milk, Ghana’s leading manufacturer of ice cream and yoghurt. Their story began in 1960 when a Danish entrepreneur created one of the first dairy businesses in Ghana. During the 1980s, the West African region was thriving after gaining independence.
Ghana – with its strong sense of national pride, a developing industry, and a well balanced infrastructure – presented the ideal climate to build a successful business.
After gaining independence, the region faced many political and economic challenges. Fan Milk’s resilience coupled with brand loyalty fuelled their success story and cemented their place in West African culture.
Initially the company only produced pasteurised milk, which they distributed through a unique system of bicycle vendors, pushcarts and kiosks. Today, Fan Milk has expanded and supply products to over 200 million people over seven West African countries. Innovative distribution techniques have been developed to keep up with the changing economic climate, adding motorbikes and solar powered kiosks to the network.
Although the company has already developed a strong presence, their strategic position in Ghana will further enhance their potential for growth and expansion. They have built a strong brand and a way to ensure capacity so their boat can float on the rising tide of mass consumption.
Gold and cocoa are the main export items from the country and have helped contribute to Ghana’s economic activity. With the onset of oil production, GDP is expected to move into double digits. The benefits of a growing economy will increase the disposable income available to Ghanaian consumers, who will increasingly seek more high end branded food products.
Studies by the US Department of Agriculture show that as income grows, consumers shift their food purchases from basic staple foods, to more expensive food products. Subsequently, under-developed countries facing periods of significant growth, will change their spending habits to reflect this trend.
As a result of changing trends, Fan Milk has widened their product portfolio to include ice cream, yoghurt, ice lollies and fruit juice. Fan Milk is, in our opinion, a unique opportunity to tap into Ghana’s successful growth story.
Investors are afraid of the unknown with challenges and issues that are sometimes not easy to understand. To be successful in these relatively new markets, we need to approach them with a fresh perspective, preferably a local one that has room for creativity.
After all, these are frontier markets, they require frontier thinking.
Funmi Akinluyi is investment director for sub-Saharan Africa at Silk Invest.