How to capture Africa’s $152bn consumer packaged goods opportunity
Despite rising incomes and changing consumer lifestyles across the continent, the consumer packaged goods (CPG) industry is still a relatively untapped growth opportunity with room for first-mover players looking to re-invent the wheel.
Recent research by professional services firm Accenture estimates CPG companies can capture US$152bn in accumulative value by 2020 in Africa by leveraging digital ecosystems and mobile applications along the value chain.
“In Africa, the next growth frontier for CPG companies, the potential to engage consumers digitally is monumental. Yet African CPG companies have been slow to apply digital strategies,” notes Roze Phillips, Accenture’s management consulting business lead for sub-Saharan Africa.
She argues that simply focusing on products and traditional business models is not enough to capture the next billion consumers on the continent. To ensure the long-term survival and relevance of CPG companies, consumers will need to be engaged digitally.
Social media is one way of doing this, but companies can also introduce their own platforms. For example, Procter & Gamble created the Beinggirl.com page which provides advice to South African teenagers, from dating to how to deal with body changes. It also shares tips around its products, such as cosmetics and sanitary pads.
In a report titled In flavour of digital, Phillips highlights three ways companies can leverage digital strategies to unlock a $152bn market opportunity.
CPG companies can both improve and lower the cost of research and development (R&D) by crowdsourcing product ideas on open innovation platforms. It allows them to better give consumers what they want, resulting in more engaged and brand-loyal customers.
“This can improve their revenues by up to 1.5%, which equates to an accumulated industry value of $14bn by 2020,” estimates Phillips.
One successful example of this can be seen with PepsiCo’s Frito-Lay chips brand, which has been running a crowdsourcing campaign that invites US consumers to submit innovative flavour suggestions for its chips. The public can then vote for the flavour they want to see in the shops and the winner either gets $1m in prize money or 1% of the flavour’s sales, depending on which is more.
“The annual competition, which the $14bn brand cites as a key contributor to its growth, attracted 14 million submissions in 2014, and created enthusiastic consumer engagement,” she highlights.
2. Digitising supply and distribution
By connecting small suppliers and farmers via digital platforms, companies can enhance sourcing, reduce supply risks and achieve greater consumer trust through product traceability. This could result in an additional $9bn for the industry in the next few years.
With the penetration of mobile phones, farmers can be provided with data such as weather forecasts, market prices and input tips to improve yields. In Kenya an Accenture-backed mobile information service, called iCow, sends texts to smallscale farmers containing relevant data like the best time to feed and milk cows, and the crop types that keep them more productive.
These strategies do not only secure a steady supply of quality produce, but can also considerably reduce the cost associated with having to resort to imports. Local sourcing can also secure tax incentives for CPG companies and increase cost savings, continues Phillips.
In addition, digital solutions can improve the effectiveness of distribution management and put an end to products constantly being out of stock. “Previously at the mercy of poor visibility across distributor channels, CPG manufacturers can implement distribution management platforms that can lift sales by $91bn by 2020.”
3. Sales analytics
Similar solutions could be used to allow CPG companies to have direct relationships with thousands of small independent grocers.
“Digital platforms could enable collaboration through which CPG manufacturers could offer training, sales support services and even financing in exchange for uninterrupted availability and active sales of favoured brands.”
And leveraging channel sales analytics will help companies improve assortment optimisation, opening up an estimated $38bn opportunity for the market, adds Phillips.