Insight presentation June 2016

IGD 2016
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www.retailanalysis.igd.com | retailanalysis@igd.com | +44 1923 851 956 / +1 604 721 7064 | @retailanalysis IGD 2016
 INTRODUCTION
The grocery markets of sub-Saharan Africa are
attracting further attention from retailers and
suppliers alike. With growth rates for countries in
6.6%
Share of global grocery retail sales accounted for
the region outstripping those globally, sub- by countries in sub-Saharan Africa in 2021
Saharan Africa is set to account for a rising share
of grocery sales.
However, while the size of the opportunity is
clear, maximising the returns companies
10%
CAGR for sales in grocery retail market of countries
generate remains a challenge. In this in sub-Saharan Africa between 2016 and 2021
presentation we will look at what the prospects
for the regions countries look like and what
retailers and suppliers need to be aware of as
they look to benefit from the regions growth. US$640
Average grocery retail spend per capita in the
This report was prepared by region in 2021, underlining long term opportunities
Jon Wright, EMEA Research Manager
Jon leads IGDs research programme
for the region and conducts research
trips to markets across it. Please get in
contact at Jon.Wright@igd.com.
US$740bn
estimated value of the regions total grocery retail
market by 2021
Source: IGD Research IGD 2016
 FIVE THINGS YOU NEED TO KNOW
While the region provides massive opportunities, taking advantage of this is not

1 going to be simple nor short term. An informed, long term strategy that employs
local knowledge will be key for companies looking to win.

Traditional channels will dominate for the foreseeable future in many countries

2 and so new, unique solutions may be needed to help suppliers build brand
awareness and engage with shoppers given the fragmented marketplaces.

Urbanisation will be a massive driving force of change across countries. The

3 positive outcome of this will support growth, but put pressure on companies to
work out how to effectively meet demand in highly concentrated urban areas.

Previous, well-known and understood patterns of development, for stores,

4 digitally and supply chains, are unlikely to be followed, so do not expect to

impose existing global answers in the region.

Solutions that work on the ground will invariably be generated there too.

5 Employing a local team that can build specific country or city answers to
challenges will help companies to succeed and drive long term growth.
Source: IGD Research IGD 2016
 CONTENTS

1 Considerations for the future for suppliers

2 Outlook and predictions

3 What the region looks like today

4 Grocery channels in focus

Source: IGD Research IGD 2016

 FIVE KEY CONSIDERATIONS
Its likely to be a bumpy
1 ride, plan long term
Format evolution is
2 expected to be quicker
Engaging and paying
3 digitally will drive change
Finding the right people,
4 and keeping them
5 Supply chain optimisation
Source: IGD Research
Growth is unlikely to be in a straight line. Fluctuating
commodity prices will affect economies, requiring long term
planning and companies to be relaxed that growth cannot be
strong every year.
Lack of legacy issues provides opportunities. A lack of large
scale store estates means that fast paced change could occur,
especially as global inspiration is given a local twist.
Shoppers use of mobile phones and mobile payment
schemes, in some countries, will create the possibility for
retailers and suppliers to engage digitally.
Given the pace of change, staff retention will be key.
Continuous development, new and evolving formats and
digitisation will require new ways of training and keeping hold
of staff.
Supply chains need to keep up with fast changing demands.
For retailers and suppliers trying to work their way through
these changes, optimising their supply chains has become
increasingly vital to supporting sustainable growth.
IGD 2016
 1. PLAN FOR THE LONG TERM
WHEAT
With many sub-Saharan economies reliant on commodity exports,
the fluctuations in local economies can be sudden and dramatic,
both positively and negatively. In the good times, export growth can
lead an associated fast paced rise in sales as the effects, hopefully
and ultimately, filter down to shoppers.
The negative effects of the reliance have been clear recently.
Forecasts have been cut as demand and prices have dropped.
CRUDE OIL Confidence and spending has fallen as the expected 5% growth in
GDP at the start of 2015 ended at between 3% to 4%, with the same
for 2016.
2015/16 has seen import and currency restrictions put in place in
Nigeria, affecting small suppliers and distributors ability to pay for
products, while currencies like the Angolan kwanza, Malawian
kwacha and South African rand depreciated by more than 35%
against the US dollar in the space of a year.
GOLD
This depreciation has massively affected costs for companies, which
have had to be passed on, where possible, to shoppers. While not a
new occurrence for many countries in the region, it remains a
challenge. However, there is the possibility to learn from past
experiences and seek help and advice from people who have worked
in similar conditions previously.
Source: IGD Research, Nasdaq IGD 2016
 1. IS THERE AN EMERGING CONSUMER CLASS?
The need to think long term is underlined by the continued discussion around how big Africas middle
class is; how to define someone as being in that group; and finally, what that small difference can
mean to purchasing power and opportunity. Away from these questions, though, the long-term
trajectory of GDP growth is positive and so the group is growing, however it is defined.
Companies should not go too far, though, in adding premium products and should focus on providing
basic goods and services really well where possible. There are pockets of opportunity, especially
around health, but these will remain niche, high end products, rather than driving mass demand.

2012 2013 2014 2015 2016

8,000

7,000

6,000
Nominal GDP/capita

5,000

4,000

3,000

2,000

1,000

0
Angola Cameroon Cape Verde DRC Ethiopia Ghana Kenya Nigeria South Africa
Islands

Source: IGD Research, IGD Datacentre IGD 2016

 1. SOURCE LOCALLY

Sourcing as much locally as possible is becoming AVERAGE APPLIED MFN TARIFF*

increasingly important and will help with long
term planning. On the softer side, showing local
shoppers that companies are supporting local
small and medium sized enterprises has a
positive effect. The harder economic benefits of
buying and selling as much as possible in the
same currency has become clear following
depreciation of some, and the imposition of
import and currency restrictions in others.
These pressures are only likely to grow as
governments across the region become more
strict about the importing of ingredients and
completed products.
For suppliers and retailers this means sourcing
as much from local producers as possible or
having a medium term strategy about how they * Map shows agricultural products only. MFN
tariffs are what countries impose on imports
will be able to do that. from other members of the WTO.

Source: IGD Research, World Trade Organisation IGD 2016

 1. TO HELP CREATE LOCAL SOLUTIONS
Employment is a key issue, considered later, but sourcing locally extends to the need to employ
local staff where possible. Although a global team can help start or support the establishment of a
local business, transitioning to a local team with associated knowledge will be key to benefit from
countries medium term growth. Again, preparing ahead of changes in laws will help companies
transition and evolve as they want to, rather than having it imposed on them.
Local knowledge is becoming progressively more important as the pace of change urbanisation,
channel development, category management etc. increases, while retaining knowledge that
helps underpin and develop local, country or city-specific solutions will be important for
companies long term, sustainable growth prospects.

THE IMPORTANCE OF LOCAL UNDERSTANDING

An example of not adopting local knowledge in the
region is Vodacoms attempts to roll out its mobile
payment infrastructure, which succeeded in Kenya, in
South Africa, assuming a similar solution would work in
both countries. This turned out not to be the case.

Source: IGD Research IGD 2016

 2. FORMAT EVOLUTION WILL OCCUR QUICKLY
Grocery retailing development will neither follow the same pace or model of evolution as that seen in
other regions, nor be uniform across sub-Saharan Africa either. While more developed markets like
South Africa could follow similar paths as those seen in Europe or North America, macro-trends like
mass urbanisation and the fast paced digitisation of markets is expected to create disruptions earlier
and more often in the evolution of grocery markets in other countries.
Country-specific solutions for country-specific or city-specific challenges, which will likely see
entrepreneurs, not always locals, drive change in the grocery retailing industry local to them. This
could lead to concentration at a local level - as small chains build clusters of stores to minimise costs,
or traditional channels build expertise and focus on specific products or ranges to maximise returns -
but fragmentation at a national level. This will be potentially harder for suppliers to interact with.

INDUSTRY DEVELOPMENT

Source: IGD Research IGD 2016

 2. CHANGING FORMATS TO SUIT CITIES

The pace of urbanisation and the sources of population movement both within countries and across
the region more widely will require planning from central government. Where this does not occur
cities expansion will be irregular, which will make it difficult for retailers to plan where to invest and
where to build stores and place supply chain infrastructure.
Local knowledge and being adaptable will be increasingly critical to success as populations flex and
change, creating huge contrasts in affluence levels and enormously varying demographics within very
small distances.

THREE POTENTIAL OUTCOMES

Traditional channels to remain key: Growing potential for franchising: Flexing fascia to target shoppers:
Impulse street stalls pop up at high Empowering store owners to adapt Providing a range of fascia to enable
footfall, transient locations, such as formats and ranges to target local them to grow brands that shoppers
bus and train stations. shoppers will meet changing needs. identify with at an emotional level.

Source: IGD Research IGD 2016

 2. WHERE COULD THIS LEAVE THE HYPERMARKET?
For markets where hypermarkets have already come to dominate or become a key part of retailers
sales mix, stores will have to be changed as the formats global challenges are borne out in sub-
Saharan Africa. The ideal solution could be for retailers to skip hypermarkets, but where they exist,
using the real estate and maximising the investment made in the stores will be key and could provide
opportunities for retailers to target new and existing shoppers in innovative and engaging ways.

THREE POTENTIAL OUTCOMES

Large stores as distribution points:
Repurposing space as distribution
centres could provide the chance to
support local small store
development and/or ecommerce
solutions in key urban locations.
Conversion to cash & carry stores?
If franchising and flexibility are set
to drive growth in small stores,
transforming space to support small
and independent retailers could
provide new growth opportunities.
Expanding services, offering unique
ranges: Creating destinations that
provide a real point of difference
will be key. Flexing services and/or
products, potentially through third
parties, should help drive footfall.

Source: IGD Research IGD 2016

 2. TARGETING THE CONVENIENT GROWTH
With independent, traditional and forecourt stores accounting for a substantial share of sales,
especially within specific categories, the importance of small stores cannot be underestimated in
2016. Going forward the channels should grow in importance as markets evolve and their scale
builds, while retailers invest more time and money into them to both benefit and drive this growth.

THREE POTENTIAL OUTCOMES

Supporting traditional channels
modernisation: If governments
identify benefits of supporting the
modernisation of traditional
channels, improved structures are
likely to be put in place in the
medium term to formalise
relationships between businesses.
Extending todays presence to
smaller stores: A majority of the
regions largest chains, by revenue,
do not operate large-scale
convenience store chains.
Broadening their reach with
convenience stores will enable
them to target new shoppers.
Meeting on-the-go needs: Whether
full meals to eat there or take away
or single items, existing operators
have the opportunity to meet new
shopper missions. Maintaining the
same price point to larger stores
will be key in certain markets where
digital price comparison is possible.

Source: IGD Research IGD 2016

 3. DIGITAL: TRIAL QUICKLY, FAIL POTENTIALLY
The opportunity provided by the
digitisation of certain parts of the OPPORTUNITIES EXIST ALONG THE SHOPPER JOURNEY
shopper journey is clear.
While full blown grocery 2. Clarification
eCommerce is a long term
prospect, the chance to engage,
target and market to shoppers is
benefiting manufacturers and 3. Selection
retailers in 2016 and will only grow
in the medium term. 1. Inspiration
Building brand awareness or buzz
around a new launch will
increasingly be driven through
mobile technology, while moving 5. Loyalty
coupons or offers to a digital
medium will help increase loyalty,
but require parties to consider the
demand implications of the step.
4. Fulfilment
Finally, given its relative cost,
standing out and cutting through
the noise will become harder.
Source: IGD Research IGD 2016
 3. ENGAGING AND INSPIRING

With online selling and SMARTPHONE DRIVEN SOLUTIONS: ONGAIR, KENYA

engagement set to skip PCs in many
countries, thinking and planning
has to move straight to mobile.
However, while smartphone best-
practice can be shared from other
countries, their penetration rates
are and are set to remain low into
the medium term, requiring
international brands to generate
local, more low tech solutions.
Simple text messages can help
drive awareness, while getting
shoppers to reply is relatively easy
and can help build engagement. Kenya-based Ongair has developed an instant messaging
They can also be used to attract service that it believes could smooth the way brands
new shoppers, if the enticement is interact with shoppers. Ongair enables companies to
big enough to get someone to try a send bulk messages to individuals even cheaper than
new product. However, coupons or SMS and says that its messages enjoy a 98% open rate.
money off offers can help here too.

Source: IGD Research IGD 2016

 3. BENEFITING FROM DIGITAL PAYMENT: SOMALIA

One trend that could spur further levels

of digital engagement is the adoption of
digital payment solutions. While not a
success everywhere - it failed in South
Africa where banking is well developed -
digital payment has flourished in
underserved countries.
Somalia has become a success story for
mobile money accounts, with the World
Bank estimating that around 40% of
adults use them. The lack of retail
banking and the comparative safety of
the service versus cash has made it
appealing and has acted as a driver for
mobile phone uptake, which could
enable digital engagement more fully.

Source: IGD Research, The World Bank IGD 2016

 3. STEPS IN DIGITAL DEVELOPMENT
Retailers and manufacturers cannot expect countries to jump wholesale to full eCommerce operations, with a slow
development likely as shoppers move through a digital development curve. Understanding where shoppers and retailers are
on the development scale will help manufacturers meet both parties needs more effectively.

First step in the development. Simple mass market SMS

Out of store engagement campaigns or chat apps can enable brands to begin a
conversation with shoppers that can be maximised later.

Evolving the conversation, saving money. Moving leaflets to a

Digitising trade marketing digital format can help retailers save on printing costs, but
could lead to higher redemption, which must be considered.

Growing the conversation. Digitising loyalty programmes

Digitising the loyalty card makes it easier for shoppers to use and allows retailers the
opportunity to have an on-going dialogue with them.

Only when ready will shoppers be happy to buy digitally.

eCommerce Having built faith in the digital environment with shoppers,
retailers or brands will be able to sell directly to them.

The first step in the final stage A long term aim for most
Encouraging multichannel countries digital development, the various steps described
will help retailers encourage shoppers to be more loyal.
Source: IGD Research IGD 2016
 4. FINDING THE RIGHT PEOPLE
Despite many countries large populations, manufacturers and retailers have often struggled to find
the right people, especially as the models evolve and the questions asked of staff develop too. This is
putting pressure on companies to pay their best staff more, come up with softer solutions to retain
loyalty and provide continuous development opportunities.
Training is becoming a vital component of staff development and retention in sub-Saharan Africa as
holders of some roles lack the relevant skills for companies as they change the way they operate.
To close the skill gap, companies can provide, either on their own or together as an industry, technical-
training that is pertinent to the roles it has, providing vocational training that meets the needs they
have. Only in this way will companies be able to retain staff and continue to win.

Source: IGD Research IGD 2016

 4. KEEPING THE RIGHT PEOPLE
While getting good staff is difficult, many retailers
and suppliers are noting that the most successful
request pay rises or leave, invariably to a
competitor. The expansion of platforms like
LinkedIn is giving staff the opportunity to market
themselves more easily than every.
This requires special skills in terms of talent
management, which asks questions of some
middle managers as well.
South Africa-based Pick n Pay has focused on
building a strong local staff base, investing in
training and taking staff to head office to help
improve understanding of company culture and to
build an association with the total company.
Also moving away from just monetary benefits,
companies have allowed staff to build a public
platform themselves to spotlight what they as
individuals are doing. Although a potential risk, as
building an employer profile is akin to marketing
their importance, the potential benefits often
outweigh the possible difficulties.
Source: IGD Research IGD 2016
 4. CREATING THE RIGHT STRUCTURES

A key area where companies can help support development is through improving their internal
structures. Given the comparative lack of legacy infrastructure, creating an entrepreneurial team that
can take be flexible is key. Freeing teams up to work cross functionally can help engender a better
team, while also enabling them to develop solutions that take into account all parts of a business.
This open structure will also help companies identify skill gaps across multiple teams and allow
them to fill those, rather than fill roles, which could be duplicated elsewhere.

Source: IGD Research IGD 2016

 4. GROCERY INDUSTRY AS A POSITIVE CHANGE
A key driver of sustained economic development is the creation of further jobs, especially high
productivity jobs that create a regional or globally competitive employment base. With its myriad of
roles and the potential to employ a large number of people, the grocery industry across both retailers
and suppliers has the opportunity to act as a force for good.
The point has been noted by South Africa-based Woolworths, which highlighted how the wholesale
and retail sector in South Africa is regarded as a growth sector of the economy and a major employer.
It is the fourth largest contributor to GDP with a contribution of around 13.3% and employing
approximately 19% of the total active workforce of the country so there are many opportunities for
skilled workers.

2011 2012 2013 2014

35.0
Unemployment rate (%)

30.0
25.0
20.0
15.0
10.0
5.0
0.0

IGD 2016
Source: IGD Research, World Bank. Please note: Unemployment = share of labour force without work but available for and seeking employment.
 5. SUPPLY CHAIN OPTIMISATION

Increasing competition, rising complexity of business model and growing shopper demands will
put greater focus on supply chains for most retailers and consumer goods companies in the
region. As with other topics, solutions are likely to be ever more focused on meeting specific
retailer, supplier and/or business model needs.
One country where supply chains have received time and investment is South Africa, where
Shoprite has led the way, with Pick n Pay and SPAR recently catching up. The three retailers
have focused on centralising supply as much as possible, but with this sometimes leading to out
of stocks, especially on a single SKU basis. However, the need to keep costs low or remove the
number of parties being integrated into a supply chain will demand a certain level of
centralisation.
Having a control on the costs that companies handle is key, given the challenging and expensive
issues that are driven by poor transport infrastructure only about one third of Africans live
within two kilometres of a paved road that is passable year-round and limited capacity, which
will only come under more strain as trade and economic growth picks up in future.

Source: IGD Research IGD 2016

 5. DRIVING CHANGE IN SUPPLY CHAINS
Following research carried out by IGDs Supply Chain Analysis team, common themes for supply chain
success globally were identified from interviews with experts in the field. These themes coalesced
around five focus factors to help supply chains evolve in the best way possible whatever maturity they
are currently at and whatever conditions they face locally.

1. Standards
Whether physical or logical, standards
are essential components to enabling
collaboration, end-to-end efficiencies
and reducing risk. Standards provide a
framework for joint solutions to work.

2. Incentives
There also needs to be motivation for
change. That comes firstly through
incentivisation which is the external
driver for change, pushing or pulling
businesses towards the right solution.

3. Guidance 4. Harmonisation 5. Transformation

Secondly motivation comes from
increasing awareness through education
and guidance. This helps businesses
understand the benefits and the end-to-
end impact of decisions, providing them
with the internal driver for change.
Despite this, a catalyst is often needed
to overcome inertia and trust or cultural
barriers. Harmonisation is essential in
bringing parties together and
coordinating efforts so everyone pulls in
the same direction.
The ultimate aim is transformation.
Incremental gains are no longer enough
to outstrip rising costs and complexity.
You need a step change in performance
and the solution needs to work in
whatever future unfolds.

Source: IGD Research. IGD Supply Chain Analysis: Supply chain evolution around the world' IGD 2016
 5. A ROLE FOR EVERYONE
There is a role for everyone in facilitating each of these five factors, as all stand to benefit from change
and the resulting improvements in supply chains. But certain players should take more of a lead with
driving forward specific focus factors as they have more leverage, capability or remit in those areas.
Everyone should be setting the vision for the future and what transformation should look like. This needs
to be designed in a way that will work responsively whatever transpires.

For actually proposing Governments have a big role

standards, industry bodies to play with incentivisation
should take the lead, looking in some cases this may
across markets and require legislation to change
businesses to identify behaviour but there are
solutions which will work in other ways to encourage
a scalable, responsive and businesses to change.
resilient way in different,
often contrasting conditions,
challenges and ways of
working.

Service providers (3PLs and

Guidance needs to come
pallet poolers) have the
from within the industry.
customer base and the data
Retailers and suppliers need
on flows to Identify
to invest in raising their own
opportunities, and the
awareness and working
independence to harmonize
together to build
these in a way which
relationships and their
supports their own
understanding of the end-to-
businesses and those of
end chain.
their customers.
Source: IGD Research. IGD Supply Chain Analysis: Supply chain evolution around the world' IGD 2016
 WHAT DOES THIS MEAN FOR SUPPLIERS?
A fluctuating range of issues will affect development. The range of
Flexibility will be required,
1 constantly
challenges likely to affect different countries and the varied pace and
trajectory of evolution will require companies and their management
teams to be flexible and aware of how changes can occur quickly.

Long term development will help long term planning. Thinking about
Mobile-first approach will
2 help them to win
how shoppers engage digitally, and definitely not solely through
smartphones, will help underpin shopper understanding and provide
longer term opportunities for suppliers to embed their engagement.

Supply chains to dictate the winners of the future. Without some of

Thinking about the
3 supply chain will be key
the legacy issues of an existing supply chain, companies have the
freedom to build a supply chain infrastructure that will work for
specific markets and for how they will develop in longer term.

Staff retention will require strong consideration. Given the long term
Training and incentivising
4 staff will help retention
nature of a lot of the key points, losing staff in the short term will
hinder development and embedding best practice. Supporting middle
managers to target and develop the best people will be key.

Empowering company-wide answers will help. While there is a need

Fewer silos will help
5 create better solutions
for specialisation in some areas, the opportunity for a new view on the
industrys development will be best met with cross functional teams
that can create end-to-end solutions that work for a specific market.

Source: IGD Research IGD 2016

 HOW ARE WE GOING TO GET THERE FROM HERE?
Economic growth will spur greater cooperation e.g. the proposed free
The region will integrate
1 more
trade area between South African Development Community, Common
Market for Eastern and Southern Africa and East African Community
could drive imports by an average of 60% by 2020.

Income growth and an Although there continues to be a debate about the true size of the

2 emerging consumer
market
middle class, whether it is growing and what this means in terms of
spending power, spending power is growing across many countries and
will help drive volume and value growth in the longer term.

Sustained urbanisation over the medium term will have a major

3 Fast-paced urbanisation
impact on the region, its economies and development. Urbanisation
will create issues for governments, the benefits of the process will
hopefully outweigh the downside, driving economic growth.

According to the World Bank, Africas median age was 19.7 years in
Young and growing
4 populations
2012, and it is expected to increase to 25.4 years in
2050, making Africa the continent with the youngest population. This
demographic structure will provide long term growth opportunities.

A corollary of rising internet penetration rates, mobile phone

Increasingly connected
5 consumer base
ownership and regional travel is that Africans are increasingly
connected to global trends. This is encouraging consumers to become
more aspirational, brand-conscious and loyal to those brands they like.

Source: IGD Research IGD 2016

 AFRICAS TOP 10 GROCERY MARKETS IN 2021
At a regional level, grocery retail markets in sub-Saharan Africa are set to outpace average global growth by a large degree
to 2021. Although focus will remain on the largest opportunities, a range of medium Mozambique, Tanzania, Zambia and
Ghana and long term Sudan and DRC prospects remain.

2016 2021 CAGR 2016/21

300 14%

12%
250
Grocery market size (US$ bn)

Average CAGR for sub-Saharan Africa = 10.2%

10%
200

CAGR (%)
8%
150
6%
Global CAGR average = 5.9%
100
4%

50
2%

0 0%
Nigeria South Sudan Kenya Ethiopia Angola DRC Tanzania Ghana Zambia
Africa

Source: IGD Research, IGD Datacentre IGD 2016

 AFRICAS PER CAPITA GROCERY SPENDING
The global average for per capita spend in the grocery retail market is cUS$1,800 in 2016, with the average for sub-Saharan
African markets at cUS$630. The disparity between the figures underlines the present challenges for retailers and suppliers,
but shows the long term opportunity that the region provides as its economies expand and shoppers become richer.

2016 2021 2016-2021

2,100 9%
Grocery retail market/capita (US$)

1,400 6%

CAGR (%)
700 3%

0 0%
Namibia Botswana Nigeria Gabon Angola Sudan Zambia South Kenya Cameroon
Africa

Source: IGD Research, IGD Datacentre IGD 2016

 SPOTLIGHT ON URBANISATION
2010 2020 2030
The World Bank estimates the
share of Africans living in urban Huambo 160%
areas will rise to 50% by 2030. To Luanda 131%
Douala 102%
2030 the pace of urbanisation will Yaound 120%
lead to the doubling of certain Abidjan 87%
cities and see the emergence of Addis Ababa 100%
three additional mega cities. Accra 58%
Kumasi 110%
The trend could accentuate Mombasa 110%
Nairobi 121%
present issues, but a positive Aba 103%
outcome for the trend should be Abuja 171%
economic growth, transformation Benin City 106%
and poverty reduction. Ibadan 95%
Kano 92%
Lagos 125%
From a grocery retailing
Port Harcourt 151%
standpoint, urbanisation will Cape Town 29%
change demand patterns, Durban 22%
encourage and drive changes to Johannesburg 45%
Pretoria 62%
consumer tastes, whilst also Dar es Salaam 178%
putting stress on supply chains, Lusaka 154%
raising competitive pressures and Harare 39%
make properties stores and 0 5,000 10,000 15,000 20,000 25,000
warehousing less affordable.
* % = growth between 2010 and 2030 Total population (000s)

Source: IGD Research, UN Population Division: World Urbanisation Prospects: The 2014 Revision IGD 2016
 SPOTLIGHT ON CONNECTED SHOPPERS
The number of digital literate
shoppers is growing as access
to content becomes easier
and people demand it more.
However, while numbers are
growing quickly, it does not Africa 349 m 129 m 986 m 102 m
mean that it is uniform and
companies need to be aware Growth in 2015 14% 25% 9% 20%
of how to best to target their KEY:
shoppers, whilst assuming
Active internet users Active social media users
that one campaign or
method that proves Mobile connections Active mobile social users
successful in one country will
work across the region.
Internet penetration 53%
This is especially the case
given the low incidence of Mobiles share of web traffic 82%
online sales, with most
purchases closed in-store, Internet penetration 49%
which makes digital a key
part of engagement, but not Mobiles share of web traffic 75%
necessarily having to
conclude a sale.

Source: IGD Research, We Are Social IGD 2016

 RACE FOR SPACE TO REMAIN DRIVER OF GROWTH
Long term growth in many countries will be driven by the
addition of new space by retailers across a variety of formats
to take advantage of retailings modernisation.
Expansion across the region will be driven by a range of 19%
intertwining growth strategies:
Store growth 2016 2021
Retailers aiming for national coverage:
Within countries grocery retailers are looking to build scale
to close out opportunities for rivals to expand.
Southern African retailers expanding north:
Pick n Pay, Massmart, Shoprite and SPAR are all looking to
21%
grow across sub-Saharan Africa to offset slower growth at Space growth 2016 2021
home, while Botswana-based Choppies is also expanding.
France and Middle East-based companies heading south:
Casino, Carrefour (through CFAO), Systme U and Auchan,
through franchising, are focused on growing in francophone
West and Central Africa, while UAE-based Majid Al Futtaim
has expanded into Kenya.
2.3 mn
East African retailers growing regionally: Sq. m to be added 2016 2021
Kenya-based Nakumatt is leading the expansion into
neighbouring East African countries.
Source: IGD Research, IGD Datacentre. Tracked modern retailers only. IGD 2016
 SUPERMARKETS UNDER PRESSURE
2016 channel 2021 channel
Trend Comments
share share

In less developed countries, hypermarket

numbers will grow as retailers offer services and
Hypers 17.3% 17.4% a one-stop shop. This will offset slower growth in
developed markets, where it will face challenges.

As a proportion of total sales, supermarkets will

lose share as stores lose out to other channels.
Supers 76.3% 75.8% Despite this, the format will remain core for
many retailers as they evolve what it offers.

Retailers will drive growth through convenience

store openings in many markets, with
Convenience 5.9% 6.2% franchising and modernisation helping them to
add scale quickly in certain countries.

Discount could potentially expand quicker to

2021 as retailers become more flexible with
Discount 0.4% 0.5% their formats. Low private label penetration will
limit opportunities for widespread acceptance.

Wider availability of internet access and

Online smartphones, digital payment methods and
Grocery > 0.1% c 0.1% better supply chains will support the growth of
online sales in a limited number of countries.

Source: IGD Research, IGD Datacentre. Tracked modern retailers only. IGD 2016
 HYPERMARKETS: DOING THE BASICS WELL
Hypermarkets will remain a key format as retailers look to build scale and provide the widest range of products and
services. Opportunities to use space for third party brands, especially in apparel, could help some repurpose space in less
developed markets, while in countries where ecommerce is growing it could be switched to create warehousing.

Widest range Sustained value Store-in-store departments

Non-grocery ranges Private label expertise

E-commerce

Source: IGD Research IGD 2016

 SUPERMARKETS GROWING FOOD FOCUS
To compete with hypermarkets one stop solution and smaller stores convenience, supermarkets will have maximise their
food focus, while operators will have to become more flexible to enable varied ranges to help them target local shoppers.

Maximising counters Fresh focus Creating differences

Great value Targeting niches Food-to-go

Source: IGD Research IGD 2016

 CONVENIENCE: EVOLVING FOR DIFFERENT MISSIONS
What a convenience store will offer will vary increasingly by country and location. While meeting distressed purchases will
remain retailers core aim, the format will be evolved to meet a wider range of missions or to offer more premium meal
solutions in more developed markets or as a way to target comparatively rich shoppers looking for convenient solutions.

Meeting daily needs Providing value Blurring with foodservice

Value with private label

Adding services Flexing ranges by location

Source: IGD Research IGD 2016

 DISCOUNT: A GROWTH OPPORTUNITY
While shoppers love of brands will limit wide scale expansion of the European discount model, there is the potential for a
more Latin America-inspired format built on the Bodega Aurrera model that Walmart has successfully expand in Mexico.
The format would provide retailers will flexibility around range and share of private labels, whilst also enabling them to
potentially stock a wider range of non-grocery products to help it compete with hypermarkets and online rivals.

How could this format evolve?

Mirroring the traditional store

Emphasis on EDLP

Strong fresh offer

Curated, small range

Tailored to low income

shoppers

Source: IGD Research. Photograph from Shoprite Holdings. IGD 2016

 ONLINE: AN ENTREPRENEURS DREAM
While some solutions being launched are simple replications of those seen globally, the challenges around last mile delivery
and infrastructure, coupled with comparatively low personnel costs are leading to country-specific ideas to be developed.

Bricks and clicks Pure play online

retailers retailers

Food delivery
Marketplaces
specialists

Source: IGD Research, retailers IGD 2016

 TRADITIONAL RETAILING: SIZING THE PRIZE

Although modern trade will attract a lot of attention from

90%* manufacturers, traditional channels will remain dominant or key
Of sales occur through in a number of countries. Given the sheer scale and ubiquity of
traditional channels traditional stores and, sometimes, the cheaper prices they
provide, it will remain crucial to engage with them.

96% As traditional channels modernise, or communities such as

Somalis integrate their buying to make cheaper bulk purchases,
Share in Ghana
working with intermediaries, be it distributors or wholesalers
will be ever more essential.
70% The modernisation of cantinas in Angola or the growing number
Share in Kenya of partnerships between large scale retailers and independent
stores, such as by Pick n Pay in South Africa or Tuskys in Kenya,
will create new opportunities in the longer term, but for now,
working through third parties is required.
While innovative approaches do occur brands employ direct
sellers that market their products via bicycles or carts for mass
marketing they can create more issues, especially with an
additional layer of supply chains, than they initially look to solve.

Zambia.
Source: IGD Research. * PwC report into Angola, Cameroon, Ethiopia, Ghana, Cte dIvoire, Kenya, Nigeria, South Africa, Tanzania and IGD 2016
 BLURRING OF MODERN AND TRADITIONAL

Mobile marketing in Africa will only grow in

importance given mobile phones dominance in many
countries and the mechanic being an affordable way
to target a large number of people quickly. Suppliers
are building solutions to enable shoppers to redeem
mobile coupons or money off vouchers in traditional
channels, in addition to engaging with them.

Nigeria-based ecommerce platform

Kaymu opened the Kaymu Village, a space that
enabled small businesses and local
entrepreneurs to meet with buyers, helping
shoppers who cannot make e-payments to
complete purchase, linking independent sellers
directly with shoppers.

Kenya-based East African Breweries Limited (EABL) has used a very targeted marketing
strategy, built around the Tusker Project Fame, a reality show. To maximise viewing
figures, EABL sponsored bars to show the programme, whilst simultaneously having
them run promotions on EABL-branded drinks. Votes were received by SMS text
messaging as part of the programme, which enabled EADL to engage with them later.

Source: IGD Research IGD 2016

 WHAT DOES THIS MEAN FOR SUPPLIERS?
Market change needs to be seen in context. Present challenges and
Short term pressures will
1 require long term thinking
market changes will require companies to view them through the prism
of longer term opportunities. Learnings taken at the moment will help
medium term decisions and potentially be reused in the longer term.

Despite difficulties, the channel cannot be ignored. Given its size and
Traditional stores demand
2 on-going attention
long term viability, the traditional channel will require in-depth
investigation. The process of modernisation in certain countries will
likely inform development elsewhere, so be aware of these changes.

Local operators are incorporating global best practice. Although local

Take a global view on e-
3 Commerce development
solutions will ultimately succeed, given supply chain infrastructure, but
starting points are often being taken from global operators. Keeping
close to these developments will help manufacturers prepare.

Similar pressures will likely be seen. While hypermarkets will remain a

Store formats will evolve,
4 be prepared
key channel in some countries, the channels long term sustainability
appears limited. Assisting retailers prepare for these changes, within
specific categories, will help suppliers to stand out.

Formats transferability appears assured. Given the success of

And consider what
5 discount could like
different discount models globally, a version will emerge that will work
for retailers and shoppers. Manufacturers need to take a view on how
it could develop locally so that they are primed for its emergence.

Source: IGD Research IGD 2016

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