FMCG manufacturer taking on multinationals with localised products
Kenyan-headquartered diversified manufacturer Flame Tree Group (FTG) built its business producing water tanks – targeting homes and companies that need storage facilities for use during water shortages.
But in recent years the group has made several investments in the fast-moving consumer goods (FMCG) segment to satisfy demand for everyday products. Its strategy is to be an alternative to foreign multinationals, offering affordable quality products designed for the African consumer and fitting their unique preferences. FTG has operations in Kenya, Rwanda, Ethiopia, Mauritius, Mozambique and Dubai.
The company first ventured into the FMCG market in 2005 when it started manufacturing hair care products and body lotions under the brand name Zoe.
“As we started growing our water tank business across the region we saw the growth of the population, people were getting wealthier and wanted other products,” says Heril Bangera, chief executive of FTG, discussing the motivation to develop the Zoe brand.
“We saw in these countries most of the multinationals were European companies. Sometimes the price points were too expensive for the locals in Turkana (town in the northern Kenya), for example. But these are our people – and our people throughout the continent want a good, affordable product.”
Over the last 12 months, Flame Tree has made several acquisitions of local FMCG companies. This week it announced it will acquire Kenyan cosmetics company SuzieBeauty.
Five months ago FTG also bought four hair and skin care cosmetic brands from Beauty Plus Trading East Africa. And earlier in 2015 the group acquired snacks and spices brands of local manufacturer Chirag Kenya. The recent acquisitions came after FTG listed on the Nairobi Securities Exchange (NSE) in 2014.
Affordability is vital for FMCG companies targeting mass market consumers in Africa, but Bangera adds there is also an opportunity to localise the product offering. Western multinationals, he says, often sell products that are “not totally right for the local market”.
“When a product is designed in Europe for a global market, they are not localising it.”
A 2014 report, titled Feed the Lion – FMCG Opportunities and Challenges in Africa, by global consultancy Arthur D. Little, noted that while the continent holds significant opportunities for FMCG companies, there are also challenges such as “disparities and different preferences of African consumers compared to their more developed counterparts”.
For FTG, localising the product offering involves considering factors such as price, weather conditions, customer habits and package sizes.
“In some markets here, the climate conditions are drier so we need more moisturiser in our products,” says Bangera. “The consumer wants a cream she can use on herself, her husband, her 12-year-old and her new-born baby. In Europe they have a different lotion for every age. They have anti-wrinkle, day cream, night cream… and those are not necessarily what we need here. We are still at the basics, so let’s make what people here need – and let’s make it here in Africa.”
The group’s cosmetics and foods brands cater for a variety of income brackets. There is a 50ml packaging for skin and hair care products, for example, aimed at lower-income buyers. According to the Arthur D. Little report, as purchasing power of buyers increase, they will migrate from smaller to larger packs.
“We also have a 600ml body lotion bottle that parents mostly need for children attending boarding schools,” says Bangera.
Internationally emerging trends such as healthy eating and natural hair preference among black women, are starting to influence the respective industries. But locally, Bangera says these new trends are yet to have a significant impact on the group’s potato snacks and hair extension businesses.
“In the future we will try to see where we can have less oil content in our snacks. At the moment we are just expanding the business as it is because demand for the product is there,” he explains. “In hair additions our business is still small. So we are at a point where market changes will not affect our growth. But we actually see changes in hairstyle preferences as an opportunity.”