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.
Cryptocurrency for Africans
George Gordon is on a quest to revolutionize the financial system. The director of Africa Master Blockchain Company talks digital currencies, blind risks and board games.
What is this new African cryptocurrency you are offering?
Where the majority of current digital currencies are based on speculative models, AfriUnion Coin (AUC) and the AfriNational Tokens (ANT)are designed for a transactional purpose allowing international payments, remittances, foreign direct investment as well as day-to-day transactions at local retail stores and other outlets. While the option for speculative trade is available with AUC, the focus is not around that.
Each African country will have a specially-designed ANT which will allow users to pay for goods and services and bills easily through completely digital means without requiring any bank account. AUC and ANT will be fully interchangeable to one another and there will be no fees for the user.
It’s the natural next step for digital finance from mobile banking which most Africans are accustomed to. The ability to freely have the power to send and receive money locally and internationally will allow the freedom of choice and spending power many Africans don’t have currently.
What is your own investment philosophy?
I am a gambler! I believe in taking risks and putting things on the line. That being said, blind risk or whimsical guesses don’t get you very far. Always acquire enough information to understand to a reasonable level what the thing you are planning on investing is or how it works and then trust your instinct and gut feel.
What advice would you give entrepreneurs wanting to invest in blockchain?
First, do some research in terms of what the blockchain technology is being applied for or created in terms of its application to an industry or project. Thereafter, check the white paper for the design of the platform as well as its functionality and applicability to what it is trying to achieve. If it aligns with your personal investment rules, then go for it,however, remember that blockchain is continuously evolving and thus you need to explore outside the usual and standard.
First cash-less, now card-less. What is the future of online banking?
If we are looking into what is currently science fiction, I would say the future is digital contact lenses that will be able to connect you to all your social media accounts, internet, news as well as make payments by just looking at QR codes or specialized barcodes to approve and accept payments.
Now, realistically we are not far off from such innovation and technology, but for the time being, I think the next step is scanning of QR codes at retailers and having the transaction automated from your wallet to the retailers digitally.
What is your most prized investment and why?
My mind. I believe that the work I have put into developing my mind, and continue to do so every day, is the number one investment that I have ever done. It allows me to look at things in a unique perspective as well as provides me with the tools to push boundaries and create new opportunities.
Money, success, fame? Which is most important to you?
I would have to say success… because it is most likely going to bring the other two as well, right? But success in the form of starting something and letting it grow and succeed and knowing that something new exists because of your efforts.
What do you spend your money on mostly?
Board games. I love board games and believe it’s a fantastic way to expand your mind as well as have fun with friends.
King Price CEO On Why He Invested On Insurance
King Price Insurance’s CEO Gideon Galloway, who built an insurance company in South Africa worth over $226 million in six years, talks investments, industry trends and how self-driving cars will change the entire car insurance landscape.
Offering The American Dream
Gar Lippincott and Daniel Ryan of Atlantic American Partners were in South Africa recently looking for high-net-worth individuals wanting to invest in the US.
It’s a warm spring day in September, and Gar Lippincott and Daniel Ryan have just arrived in South Africa. It is Lippincott’s first time in the country, and he is jet-lagged.
A little over two months ago, he was booked to fly here from the United States (US) but was turned back at immigration.
“At Atlanta airport, the lady looked at Daniel’s visa and let him through and she looked at my visa and she said ‘I am afraid you can’t get on the plane because you have to have a blank page on your passport’. I said ‘I have three blank pages’ and she said ‘no, it’s supposed to be the one that says visa on it’. She said it’s the rules in South Africa so I had to sadly go back home… now when I was coming, I was told that’s not an issue anymore so I am happy they have made traveling into the country easier,” says Lippincott.
With a brand-new passport, he’s here with Ryan looking for people who want to invest in the US in exchange for a green card.
Lippincott, the Managing Partner of Atlantic American Partners, says he has always been keen on South Africa for its growth opportunities and prospects.
“From what I understand, the things that are causing short-term decline in the economy in South Africa are set up to provide long-term growth and hopefully people will understand this,” he says. Ryan, the company’s Managing Director of Emerging Markets – Africa, agrees: “I lived in Malawi for 12 years and South Africa is still considered the shining one throughout the continent. Even with all the problems, everyone still wants to come here because of the opportunities.”
According to an AfrAsia Bank report, South Africa comes second to Mauritius in boasting the highest number of high-net-worth individuals.
These are the kind of people Ryan and Lippincott target through their work at Atlantic American Partners. The company has real estate investors and professional private equity fund managers that manage money for banks, insurance companies, and pension funds. In addition, they help people get US green cards and ultimately US citizenship through the US government’s EB-5 Immigrant Investor Visa Program.
“Basically we look for people who want to move to the United States and we help them do so legally by investing and the nice thing is, with our program, they are also able to get a nice return on investment,” he says.
According to Lippincott, for a $500,000 investment that creates 10 jobs for American workers, you could get a green card in about two years and be a US citizen in about six or seven years. “Twenty seven countries have an investor visa program but with most of them, it’s essentially a fee you pay, or you need to be actively engaged in the day-to-day operation of a business. For example, you invest $1.5 million in Australia, but you need to hire employees and generate a certain amount of revenue. One of the biggest advantages with our program is you actually invest the $500,000 into a fund. We act as a trustee of that money and within five to seven years, they get that money back with a bit of return on investment and you are a permanent citizen in the US.”
Atlantic American Partners invests the money in real estate developments like hotels, apartments and student accommodation.
“What’s nice about the program is it doesn’t only cover the investor; it covers the spouse and children under 21. Our biggest family was a Hungarian family with seven children so they got nine green cards for $500,000,” says Lippincott.
The company says it has had positive response in South Africa. “Two months ago, we were here and we had scheduled six presentations for 100 people and we ended up speaking to 450 people. Most were business people, people worried about the economy, people worried about the political future of South Africa and people concerned about the education future of their children,” says Ryan.
According to Lippincott, despite the news of the clampdown on immigration, the US economy is booming and will perish without immigration. In the era of Donald Trump and his anti-immigrant views, that’s heartening news indeed.
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