EMB
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.
distribution network. The move, we believed, would allow us
to make products available to a much broader consumer base
across those African countries which had been underinvested
in—21 in total by our calculations. The logic was simple:
where there was underinvestment, there was potential, and
we aimed to squeeze every drop of it, doubling our business
every three years.
But things changed. Just four years on from our investment
announcement, we stopped the music and scaled down, an‑
nouncing layoffs and reducing product lines across our Africa
operations.
Misgivings and Miscalculations
For a fast-moving consumer goods (FMCG) powerhouse of
our stature, the situation was hard to swallow, but I can’t
help but think that the strong company culture that has been
integral to our global rise has, in this case, been part of our
downfall. Perhaps venturing into sub-Saharan Africa had
meant deviating too far from our corporate ethos. Maybe
our understanding of central and western Africa was just too
shallow. Then there’s the question of timing. Projections had
pointed to promising growth across the continent, but they
were exactly that: projections. Had we timed our entry better,
maybe we would have had a better grasp of the reality of the
situation on the ground.
Whatever the root of the problem, today, our official line speaks
of a grave miscalculation: “We expected this be the next Asia”
and “The middle-class is much smaller than we expected,”
are lines repeated over and over by our communications team.
In our defense, we are not the only ones to be caught off
guard. Debate now rages on the topic of Africa’s middle class,
with Credit Suisse placing the group at a dismal 3.3% of the
population. A survey from Standard Bank, meanwhile, puts
the middle class at a sobering 15 million across eleven central
African countries.
Perhaps I am naïve, but while the statistics make for
unpleasant reading, I adamantly believe that opportunity
lies in Africa’s future growth potential—potential that others
appear to be seizing.
Our experience contrasts with that of several local competitors
that are still expanding, and the string of shopping malls that are
opening across the continent points to healthy economic growth
and consumer demand. But while big name brands such as
Walmart and Carrefour are sure to serve as anchor tenants in the
new commercial centers springing up against African skylines,
the enduring success of local brands underlines the difficulties
for foreign entrants. To our detriment, Africa is dominated by
family businesses that are thriving on local know-how and the
sale of cheap products tailored to individual countries.
A big part of the problem lies with foreign companies
themselves, which continue to view value creation narrowly,
focusing on short-term financial performance, while missing
the most important customer needs and broader influences
that determine long-term success.
Time to Reflect
On reflection, we should have leveraged our rural presence and
developed new business models and distribution structures
that reduced system costs and made our products more
affordable. Yes, we built factories to produce goods locally,
but we overlooked strategies such as using less packaging,
or adapting the unit size to local needs to keep the cost to the
consumer low. Instead, we chose to focus on the size of the
middle—class, and now we are paying the price.
In hindsight you might say our expansion was too rash.
But maybe it is our exit that is too quick. Just before the
retrenchment announcement, our sales chief for Africa said
we were halfway to where we wanted to be. Isn’t that worth
saving? Making matters worse, just as we were declaring our
Africa withdrawal last year, the CEO of a competitor of ours
stated that he expected the continent to be “an incredible
part” of their growth in the next three decades.
As other local and global competitors seize the moment, I fear
that we are failing to heed our own words. Less than a decade
ago, our annual financial report stated complacency as the
biggest danger we faced. We may not be there yet, but if we
retreat instead of striding valiantly forward, we could soon be
staring a future of submissive resignation right in the eyes.
Maybe we just lost our appetite. The question is, can Africa’s
potential tempt our taste buds once again and reignite the
hunger that, just five years back, drove us to pin billion dollar
hopes on a continent we now stand to lose? Is our retrenchment
a mistake made in haste or is it time to concede defeat?
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