Demand for FMCG and Foodstuff in Africa

African represents a huge market for Fast Moving Consumer Goods (FMCG) as a new middle class emerges with more disposable incomes

The fast-moving consumer goods (FMCG) sector, also called the consumer packaged goods (CPG) sector, is one of the largest industries worldwide. FMCGs are generally cheap products that have a short shelf life, and are purchased by consumers on a regular basis. Profit margins on these products are usually low for retailers, who try to offset this by selling large volumes.

The FMCG sector in Africa has significant scope to expand as food and other necessities dominate consumer budgets, especially in Sub-Saharan Africa. As a result, the food sub-sector of FMCG has a very large market to cater for.

Demand for FMCG and Foodstuff in Africa

FMCG retailers generally operate in a low-margin environment. Therefore, the existence of a large market is crucial to their success.

Despite Africa having a population of around one billion, the continent remains relatively under-served by FMCG companies. Nigeria’s estimated population size in 2020 was roughly equal to the sum of the next two most populated nations on the continent, Ethiopia and Egypt. Nigeria is forecast to widen the gap with Ethiopia due to the former’s fertility rate, which is projected to decline at a slower pace. For the same reason, the DRC is expected to surpass Egypt, and Tanzania rises above South Africa. Kenya and Uganda also move up the rankings due to high population growth rates.

The density of the population is another important point to consider. FMCG retailers need a steady flow of consumers purchasing their products on a daily basis, so they have to operate in a local market with a large enough size.

In 2020, there were approximately 65 urban agglomerations in Africa with a population of one million or more, of which three had a population of five million or more. By 2025, the UN expects there to be 93 agglomerations in Africa of at least one million, of which 12 are forecast to have a population of five million or more. Nigeria accounts for around a quarter of these (in terms of the number of agglomerations, not the population size).

Cairo was among the top 20 largest urban agglomerations in the world in 2020 (12.5 million), while Lagos (11.5 million) was not far behind. By 2025, Lagos is expected to move up to the 11th position globally.

The agricultural and manufacturing sectors are key for a country’s FMCG sector, as it is important to have a predictable and trustworthy distribution channel. This is also why many foodstuff importers in Africa and retailers opt for vertical integration, and this is particularly relevant for African countries, where distribution channels are generally weak. The strength of local agriculture and manufacturing, the quality of transport infrastructure, and the scope and extent of tariffs on imported goods are crucial issues that FMCG retailers need to consider before entering a new market.

Spending Power

Since FMCG retailers generally sell products that can be classified as necessities, income per person is a less important consideration than for retailers of luxury or durable products. The trend in income levels is however still important in order to establish what types of FMCG products can be offered to a specific market.

In addition, over time, retailers would want to benefit from shifts in consumer spending patterns as they move up the income chain, so a high growth market is still preferable. According to the African Development Bank (AfDB), 184.8 million Africans had daily per capita expenditure of between $3 and $5 in 2020, while 77.9 million spent between $4 and $10.

Currently, food dominates African consumers’ spending, but this will gradually change as incomes rise. The African population presently remains heavily dependent on cheap staple foods, while the increased inclusion of meat in the diet has barely begun. For the large majority of the African population, the nutritional transition is still focused on quantity increases rather than quality increases.

For these reasons, the FMCG sector on the continent presents retailers with lucrative opportunities, with a wide range of products expected to see a sharp increase in demand over the next few decades as African consumers continue to move up the ‘food curve’.

Once basic needs have been met, consumers will start focusing on quality improvements, e.g. including more meat in one’s diet, or buying a higher-quality brand of the same product. It is important for FMCG retailers to establish a footprint in a country at an early stage so that they can benefit from both quantity and quality shifts in consumers’ spending behaviour.

Informal markets dominate food retail at present. This should slowly start to change as the number of shopping malls rise, and consumers increasingly prefer the convenience that is offered by one-stop shopping at supermarkets. The latter trend is partly being driven by the growing expatriate population in Ghana, especially Accra.

In addition, the shopping mall experience has proved to be very popular in countries like Ghana: Accra Mall attracts around 25,000 shoppers per week. Currently, the most important supermarket chains in Ghana are Shoprite, and two domestic players, Melcom and Maxmart. Shoprite entered the Ghanaian market in 2003 and currently has shops in Accra, Accra Mall, and Tema. Shoprite is also the anchor tenant at the West Hills and Junction projects.

Africa Foodstuff Importers Directory: Database of Foodstuff Importers in Africa

In a bid to help foodstuff suppliers find importers, wholesalers, dealers and agents in Africa, the African Business Pages has compiled a special directory that lists foodstuff importers in over 24 African countries. The Africa Foodstuff Importers Directory is now available as a a digital download at a nominal price and has played an instrumental role in promoting direct B2B contact between African foodstuff importers and foodstuff suppliers from all across the world.

The Africa Foodstuff Importers Directory has been adapted for online distribution and is now available in Excel format as an instant digital download from Africa Business Pages. The Africa Foodstuff Importers Directory has served as a useful database for those wanting to export food items to Africa and reach potential buyers in Africa. You can download the directory HERE.