Africa Is the Next Big Consumer Market. Now Try Selling Something.
The continent has 1.5 billion people. That doesn't mean you can sell to them.
Welcome to Laughing Hyena's newest column on African consumer business. Today, we'll look at what actually happens after the PowerPoint slide promises that “Africa is the next big consumer market.”
But first, someone has to actually get the product onto the shelf.
Walk into a supermarket in Lagos and you will find something mildly confusing. There are imported drinks selling for prices that would make your accountant nervous, locally made products fighting for the same shelf space, and consumers standing in the middle trying to decide whether the thing they picked up is actually worth the money. Nobody in that aisle is thinking about “Africa’s emerging consumer class,” but everyone there is participating in it.
This is the part of the African consumer story that tends to disappear in PowerPoint presentations. We hear about a continent of 1.5 billion people, a rapidly urbanising population and a consumer market projected to reach trillions of dollars, and then someone draws a very convincing arrow pointing upwards. The arrow is real, but what gets lost is everything that happens between making the product and getting someone to buy it.
Africa is not a Market
There is a funny thing about saying you want to build a consumer company across Africa. It sounds ambitious until you remember that Africa contains 54 countries, and that even one of those countries can feel like several markets stitched together.
Nigeria is a good example. A product that sells beautifully in Lagos can struggle in Imo state, while something that feels expensive in one neighbourhood can be perfectly reasonable in another. Sometimes the difference is income; sometimes it is taste, distribution, culture or simply whether the product is available where people actually shop.
The continent's cities make the picture even more interesting. Africa is urbanising rapidly, and the African Development Bank estimates that the continent's urban population will reach about 1.5 billion by 2030. That sounds like an enormous consumer opportunity, and it is, but “Africa” still isn't where the consumer lives.
The consumer lives somewhere specific.
Usually, they have a favourite shop, a budget, a routine and a very clear idea of what they consider worth paying for. A founder who understands those four things may have a better chance than one who knows the size of the entire African market by heart.
A Good Product Can Still Go Nowhere
One of the crueler lessons of consumer business is that making something people like does not necessarily mean making something people buy. You can spend months getting the product right, agonise over the packaging, finally put it on the shelf and discover that the shelf is where it spends most of its time.
Distribution is an especially difficult problem in Africa because much of retail remains fragmented. In Nigeria, the person selling your product might be a supermarket buyer, a distributor, a neighbourhood shop owner or someone with a small stall on a busy road; each has a different incentive, margin and way of doing business.
And then there is the small matter of getting the product there. Roads, warehousing, fuel costs, electricity, import duties and fragmented retail networks do not make for particularly exciting investor presentations, but they can determine whether a product is available at all.
There is something almost funny about this. A consumer brand can spend thousands of dollars figuring out what its logo should look like, only to discover that the more important question is whether the distributor actually delivered the cartons.
The African Consumer is Price-conscious, not Necessarily Cheap
It is tempting to describe African consumers as simply “price-sensitive,” but that phrase can hide something important. People with less disposable income are often more deliberate about what they spend, not less interested in quality, convenience, status or pleasure.
Watch what happens around Christmas, weddings, football matches or a new restaurant opening and the idea that consumers only want the cheapest option becomes difficult to defend. People will spend; they just want to feel that the thing they are spending on deserves it.
That is why the same person can complain that a product is too expensive and then spend more on another product a few minutes later. The contradiction is not really a contradiction at all: price matters, but so does perceived value.
This creates an unusual opportunity for African consumer companies. There is room for premium products, but the premium has to mean something; there is room for affordable products, but cheap alone is rarely a brand strategy.
Sometimes the winning move is a smaller package, better branding, a local ingredient, better distribution or simply understanding a cultural habit that a foreign company would never think to ask about.
Then Reality Sends the Bill
Building a consumer business anywhere is difficult. Building one in a place where the currency can move sharply, electricity can disappear without warning and getting something from one city to another can become an exercise in improvisation adds a different layer of difficulty.
Nigeria's inflation rate has made the problem especially visible. When the price of raw materials, transport and packaging changes faster than the consumer's willingness to pay, a founder can find himself recalculating a product's economics long after the branding has been finalised.
And this is where the African consumer opportunity becomes slightly paradoxical. The same environment that makes it difficult to build can make the businesses that survive unusually resilient.
A company that learns how to manufacture reliably, distribute efficiently and manage costs through Nigerian conditions is not merely selling a product. It is acquiring operational knowledge that a competitor cannot necessarily buy with a cheque.
The obstacle becomes an asset, eventually, if the company survives long enough to turn it into one.
The Opportunity is Real. So is the Difficulty.
There is no shortage of reasons to be excited about African consumption. The continent has a young population, rapid urbanisation, growing middle classes in several markets and increasing access to digital commerce; the African Continental Free Trade Area also creates the possibility of a much larger integrated market over time.
But “possibility” is doing a lot of work in that sentence.
A company cannot sell to a trade agreement. It has to sell to somebody who is standing in a shop deciding whether to spend ₦2,000 on its product.
That is probably the least glamorous part of the African consumer story, and perhaps the most important. The continent is enormous, but consumer businesses are built in much smaller places: one city, one neighbourhood, one shelf, one customer at a time.
And that is the strange thing about doing business here. Africa can be simultaneously one of the world's most exciting consumer opportunities and one of the most frustrating places to build the machinery required to capture it.
Both are true.
The companies that understand that probably have a better chance than those that understand only the opportunity.
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