Brand success in sub-Saharan Africa

Brand success in sub-Saharan Africa

Can experience in China help crack the African market?

Since the global financial crash of 2008, the traditional markets for many international brands have become severely diminished, if not completely devastated. Yet two markets have emerged to offer salvation to those companies who have parlayed the risk of expanding their vision into the unknown.

 

Much has been made of China’s rise to dominance since the turn of the century, but as historians will tell you, this is nothing to be surprised about; China has been the world’s number one economy for eighteen of the past twenty centuries. However, only recently has it opened its doors, and wallets, to western brands to the extent we now see.  Meanwhile, sub-Saharan Africa has long been an open market for international companies, though few have chosen to take the risk amid unstable and corrupt conditions. Now though, we see an almost uncontrolled scramble to exploit the opportunities that these two markets present, but while many brands see one or both of these markets as their future, only a few have been successful. In a recent review by BBC Business reporter Ian Rose; “How to win in China” he examines how China’s top foreign brands have succeeded where so many have failed, a pattern that is also evident in Africa. So, are there any parallels to be drawn and are there any lessons to be learnt from how to succeed in China in order to succeed in Africa?

 

The BBC commissioned research company Millward Brown to find and analyse the 20 most successful foreign brands in China. Amongst them are Coca Cola, Nike, Apple, Samsung, Unilever, Adidas and McDonalds and their successes were broken down into six factors:

  • The new middle class
  • Getting in early
  • Understanding the market
  • Being bold
  • City strategy
  • Building their team

 

The New Middle Class

According to Millward Brown, “Chinese consumers once valued low prices above any other factor when making purchasing decisions. But a mix of high living standards and falling trust in local brands means people are looking to international brands more”. This is certainly something we have seen in sub-Saharan Africa, where a traditional “trading” environment has led to decades of price and quality erosion leaving a gap at the higher end for quality international brands – backed up by heavily promoted brand values.  In both markets, a substantial growth in the middle class and aspirational purchases has created an ever growing appetite for these brands, but success only comes if you deliver what you promise. After decades of declining quality, international brands commanding higher prices need to earn, and keep, the trust of African consumers.

 

Getting in early

All of the 20 brands identified by Millward Brown entered China before 2000. Indeed, by 1948 Shanghai was Coca Cola’s largest city outside of the U.S, selling over one million bottles a year. Nike, Volkswagen and KFC were all established by the end of the 1980s and McDonalds entered in 1990. Similarly, if we look at successful foreign brands in sub-Saharan Africa, it’s the ones that have a proven history there that come out on top. The first pint of Guinness poured in Africa was in 1827 and the continent now accounts for around 40% of worldwide sales, with Nigeria being the third largest market after Ireland and the UK.  Nestlé entered in the 1880’s, setting up its first African factory in 1927, and Toyota South Africa began in 1961. These companies have built equity in their brand values by proving consistent quality over a long period of time. Simply turning up with 20 years history in Europe just isn’t enough these days. As far as African consumers are concerned, it’s irrelevant to them, they need to know that your products will work for them.

 

Understanding the market

The markets in China and sub-Saharan Africa are quickly changing and successful brands need to consistently listen, learn and evolve. McDonald’s in China recognises that they need to learn how to work with “changing social attitudes” and “continuous aspirational trade ups” says Rose. Leaving your ego behind is essential, “Never assume what works in your mature markets will work in China” McDonalds say, “Success comes for those who stay relevant to the needs of the Chinese consumer”.  This is so true for Sub-Saharan African markets. When the Financial Times reported on Nestlé’s cutting back its workforce in Kenya last year, it prompted one response from a reader identifying themselves as Rharawi to comment that “the more important aspect is that European and American multi-nationals underestimate the savviness and skills of local competitors. Local industrialists and business owners know how to manage their cost base, understand their markets inside out, have localised and nimble distribution channels, generate great returns on capital, and have a well-engrained understanding of the labour dynamics. They also are generally backed by large and diversified conglomerates that have entrepreneurial and patient capital that would allow them under-price and outgrow Nestlé or most large manufacturers in those specific markets”. Rharawi then goes on to cite an example of a local producer running Nestlé out of town in Cote d’Ivoire. Where most international companies fail in sub-Saharan Africa it is because of their arrogance. Having built a successful brand elsewhere, they assume they know best and railroad their way of doing things, their corporate thinking and their interpretation of their brand values onto the market. Successful companies listen and learn from the market and change their  approach accordingly, pitching the values of their brand that are relevant to that particular market.

 

City Strategy

Many of the brands in the BBC’s report stressed the importance of looking beyond the obvious major cities of Shanghai and Beijing. Samsung, L’Oréal and Adidas have all done this and have found “very different attitudes in the north and south of the country” although everywhere “consumers are increasingly looking to buy aspirational foreign brands”. While similar trends can be found in sub-Saharan Africa, it is on a much larger scale. There are opportunities throughout the continent, but the first, and most common, mistake made is to approach Africa as a single market.

 

Most companies will set their sights on “Africa” and decide how to approach the “African” market. The next logical step is then to overlay their current (successful) marketing onto their new African Market. Twelve months later they’ll be sitting in their HQ boardroom wondering why “Africans” aren’t falling over themselves for their superior products and clever marketing! Successful companies realise early on just how disparate and diverse even neighbouring countries can be. With further research they understand how this is also the case within each country, across states and counties and how city life contrasts so much with country living. The crucial thing is that they then act to qualify their brand to each individual market that they choose to target. One thing is for certain; what works in Nigeria won’t work in Tanzania! Companies that have proven to succeed in sub-saharan Africa have understood this, made their brand values relevant, and acknowledged that, although successful in other markets, they were novices when it came to Africa. To address this they spent time and resource……

 

Building their team

As in China, running a business is difficult to do from outside the country, so China’s top foreign brands built their businesses with local talent and with local joint venture partners. Says Rose, “KFC, L’Oréal, VW and Adidas all say that hiring and then training the best local talent helps them to understand their customers better” and no one understands the locals better than a local. When Vodafone entered South Africa, it did so in a joint venture with Telkom, Coca Cola partners with local bottling plants, and Apple appoints local distributors. What we’re beginning to see with new entrants to the market is a shift in strategy from a traditional sales model of selling their products to anyone who’ll buy them, to employing local talent to build the brand in a way that will appeal to the local market and using that local talent to understand the market.

 

Is it too late?

Although separated by almost nine thousand miles of land and sea, the Chinese and sub-Saharan African markets demonstrate remarkable similarities in their opportunities and challenges for international brands. What is particularly striking though, is the speed at which these markets are changing. In sub-Saharan Africa, local brands are gaining traction, creating high quality goods and services which have more relevance to their consumers than foreign brands. Governments are using legislation to promote home grown industries, and patriotism works in favour of local brands. MTM is Brand Africa’s most admired African brand and, valued at $5.4billion, most valuable. Even the internal landscape is changing, with Nigerian brands overtaking South African brands for the first time in October’s Brand Africa Awards. Glo, Dangote, Zenith and First Bank can all compete with better funded international brands and rated particularly well as admired brands. This is a new era for African brands, driven by technology and services. The scene has changed, and continues to evolve daily, with the scales of balance tipping in favour of local marques. For international brands not yet cutting their teeth in sub-Saharan Africa the window of opportunity may be closing fast.

 

Simon Pogson, Marketing Director at African Supplies

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