African Retail Needs To grow up

Published 8 years ago
African Retail  Needs To grow up

Various consumer brands are facing overwhelming challenges. Slowing global sales are placing pressure on companies aiming to expand their footprint and achieve real sales growth in sub-Saharan Africa, a region boasting a growing middle class and strong economic growth.

Financial results of two of the world’s largest breweries, SABMiller and Anheuser-Busch InBev, show declining global sales, and many other companies are feeling the pinch as well. These consumer brands are affected by getting their products to the African consumer and inefficiencies in the supply chain is a thorn preventing them from succeeding on a continent with over a billion people.

Some other challenges could be that despite strong distribution strategies, products are simply not available and brand visibility is inconsistent due to stock exchange. South African food and clothing retailer, Woolworths Holdings, cited difficulties in their supply chain among other reasons for closing down three stores in the continent’s most populous nation, Nigeria, in 2013.

According to Jeremy Haysom, the Vice President of Business Development and Supply Chain Solutions for DHL in the Middle East and Africa, the greatest challenge facing consumer brands as they venture into Africa is establishing an efficient route to the consumer.

“With growing urbanization, city populations have shown exponential growth in recent years and are expected to grow by over 25% over the next 10 years. There has been an explosion in the number of supermarkets and convenience stores established in cities to serve the customer,” he says.

“While these stores are located in prime locations, the back-end of the supply chain serving this retail revolution is in its infancy. This results in inconsistent stock availability and regular outages, a lack of brand visibility and most importantly product availability.”

Retailers handle their own international supply chain, which is managed from a distribution center, quite well. But the problem lies at the back of shop where manufacturers have to manage their own deliveries into the retail outlets. This causes a number of issues, including multiple deliveries from multiple suppliers at any given time causing considerable congestion at the back of retail outlets.

“Unless there is collaboration between a retailer and a consumer manufacturer you will continue to see inefficiencies at the back of shop and you will continue to have the knock-on effect that has on congestion and other issues around these developing cities,” says Haysom.

He adds that this is a general challenge seen in sub-Saharan Africa, excluding South Africa. The South African market is mature and has ironed out many challenges and multiple deliveries into retail outlets do not occur anymore.

“You’ve got consolidation, collaboration between consumer manufacturers and retailers to ensure that multiple deliveries of one vehicle going to a retail outlet. Therefore pretty much the brand and the brand market can be taken onto the shelf, where you’d expect everything to arrive at the shop and there would be a certain high percentage of on-shelf availability in the retail store,” says Haysom.

“What you see outside of South Africa is different. Consumer manufacturers are having to undertake a part of the supply chain deliveries from their side onto a retail side and inefficiencies occur and on-shelf availability is affected.”

So what must be done in 2015 for retail to deliver on Africa’s promise? Haysom says there is little or no collaboration between the supermarket and the supplier which results in regular out-of-stock situations. Retailers, both multinationals and regional, need to invest in bolstering the back-end or supply chain serving this retail revolution. Consumer brand companies that are keen to translate Africa’s latent potential into real success need to recognize the relative immaturity of the African supermarket industry and put in place strategies that will successfully navigate inventory management.

In his book, Africa’s Future Darkness to Destiny – How The Past Is Shaping Africa’s Economic Evolution, Duncan Clarke says the state of Africa and its economies today marks the departure point for the future. We know the past has shaped the present: for the future, what do we really know? And those words couldn’t be any truer.

The key to winning in Africa is through the little things that are done in 2015 which will help retailers overcome supply chain inefficiencies.