Ethiopia is one of Africa’s fastest growing economies with GDP growth of 10.3% in 2014. Coupled with a population of over 90 million, this is prompting many consumer-focused companies to look at Ethiopia with fresh eyes. How we made it in Africa spoke to Addis Alemayehou, managing partner of Ethiopian advertising agency 251 Communications, about the opportunities in the market.
How would you describe the opportunities in Ethiopia from a foreign investment perspective?
Ethiopia is a country that just cannot be ignored anymore. You’ve got a population of 95 million, most of them young people. Other than Nigeria, you can’t get much better than Ethiopia in terms of numbers. The economy is also one of the fastest growing in the continent, if not the world. In addition there is significant growth potential in terms of consumer spending. So for these reasons a lot of FMCG multinationals are investing huge resources in Ethiopia.
What do foreign companies need to do to be successful in the Ethiopian market?
The most important thing is understanding and respecting the market. Second is your distribution channels. Third is your marketing, packaging and branding. A company such as Coca-Cola has done an excellent job in terms of distribution and reaching the masses. You can find Coca-Cola in places where you can’t find water. They have also localised a lot of their packaging and branding.
Ethiopia is a very unique market in the sense that the vast majority of the population don’t speak English. We have our own language, and our own look and feel. We have never been colonised so in a sense Ethiopia is an island within the region. Success in Ethiopia takes quite a bit of time and effort, but if you respect the market the payback is there.
Is the capital Addis Ababa the main market companies should target, or are there also opportunities in the rest of the country?
It depends on the product. If you are selling a $1,500 television, there might not be much of a market outside Addis Ababa. However, if you are selling a bottle of Coca-Cola, a bar of soap or beer, there is a huge market throughout the country. Addis Ababa only has four million people out of a total population of 95 million. There is more demand than there is supply for anything that is produced locally.
Should foreign entrants expect to face tough competition from the established domestic players?
The international brands are only just starting to enter the Ethiopian market. So I think the local brands that have been here for a while still have a bit of an advantage in terms of branding and market know-how.
But I also see a huge change in that private equity funds are coming in and snapping up these local brands. I think many of the local guys have realised there is a window of opportunity for them to scale up and sell equity stakes in their firms. About two years ago one of the major bottled water brands got bought out by a private equity fund out of Kenya. It is interesting to see the local brands that are now being targeted by major international resource. It’s just a very exciting time.