CASE
STUDY
OUT
of Africa?
A
s the growth of Africa’s middle-class falls short
of expectations and foreign firms lose out to local
competition, the African fate of a leading multinational hangs
in the balance.
“Let’s celebrate! Finally, our $1.4 billion-dollar investment
to expand production capacity in Africa shows we’re getting
serious about the last frontier.” They were the words of the
regional president of one of the world’s largest food and drink
multinationals back in 2011. More precisely, they were my
words. And in my opinion, the decision couldn’t have come
soon enough.
Many called the huge investment a bold move, but from
where I was sitting—a bright and airy office at our European
lakeside HQ—it seemed perfectly rational. Across our many
F&B brands, African sales were recording strong double-
The Growth Story
Back in 2011, all indications pointed to a positive outlook. The
question was not ‘should we take the step?’ but ‘how could
we afford not to?’ At the time, though our Africa revenue
was increasing apace, just one third of our multi-billion
dollar sales were actually being generated from developing
countries—countries that housed a staggering 90% of the
world’s population.
The continent was—and indeed still is—home to more than
1.1 billion people, and that figure was forecast to rise to onequarter of the world’s population by 2050. As such, it was a
no-brainer that Africa should feature prominently as a center
for our corporate growth. True, income levels were very low,
but they were rising, with more and more people entering into
what we call the “emerging consumers” category. For the
first time, this group of African consumers could afford to buy
basic packaged food and beverage products—our products,
we hoped.
In the context of this swelling consumer bracket, our
investment plan was inspired by the much-talked about
economic revival of Africa and its rising middle-class. A
survey from the African Development Bank put the continent’s
middle-income group (those earning between $4 and $20 a
day) at 330 million people in 2011, with the figure expected to
climb to 1.1 billion by 2060—that’s 42% of the population.
60 Emerging Markets Business Summer 2016 • Issue No. 1
digit growth and had already reached $3.5 billion, replicating
the trend across emerging markets and outpacing growth in
developed nations. In the latter category, our revenue was
growing at a mere two percent or less. With the irrefutable
numbers in front of us, it was time to fulfill the potential we
had been overlooking for too long.
But that was then. Fast-forward five years and our Africa
turnover has fallen woefully short of our initial growth forecast,
with operations yielding disappointment after disappointment.
As a result, our company chief has decided to step away from
the investment, turning our back on the very fundamentals
which led us to Africa in the first place.
Several years ago, I didn’t understand what was taking us so
long to make the leap into Africa, and now, despite the tough
situation, I can’t comprehend the retrenchment.
The tone from the International Monetary Fund (IMF) was
equally optimistic. Reports from the organization indicated
that rising household expenditure in sub-Saharan Africa
specifically, may help the region’s economy grow almost three
times faster than that of Europe.
Investment Is Commitment
So, it was against a backdrop of attractive forecasts that our
company felt bullish about its African endeavors. Historically
we’ve invested for the long-term, generating employment
opportunities and developing facilities in many of the countries in
which we operate—a sign of dedication to the nations in question
and to our own corporate growth. For us, Africa was no different.
In sub-Saharan Africa, we managed to build three new factories
and create 750 new jobs. At the opening of one of those sites
in Nigeria a few years back, our CEO declared that the facility
would bring the company closer to our consumers, allowing us
to better adapt our products to their needs and preferences.
This latest investment, he said, was “proof of our commitment
to Africa.” With the inaugural ribbon cut, the new 12-hectare
factory promised to double our production of culinary goods
to meet growing demand, not just in Nigeria, but in other key
countries across central and west Africa.
Of course, we had been present across the continent for years,
but the $1.4 billion pledge paved the way for us to expand our