Standard Bank has launched an in-depth study, looking at unpacking trends across part of the growing consumer sector in East Africa. The report, which provides an analysis on the soft drinks industry is also looking to enhance debate around the opportunities for future investment in the soft beverages industry.
The Soft Drinks in East Africa report provides a comprehensive overview of the macro-economic and regulatory environment affecting the industry in the East African region. It outlines the value chain of soft drinks, trends influencing the market and the competitive landscape as well as opportunities and risks as identified by Standard Bank’s consumer team.
Africa’s large and youthful population, upward urban growth trajectory, socially-connected mobile users, untapped physical resources and the deepening of the financial sector have been identified as key trends propelling the African economy into the future.
“Multinationals and companies operating in saturated markets, which are seeking new revenue sources, are considering expansion into Africa as a real option and increasingly the non-commodity focused sectors, such as that of FMCG (fast moving consumer goods) are set to play an integral role in driving this growth,” says Brendan Grundlingh, Executive,Consumer Sector for Standard Bank.
According to recent research by Fitch Solutions, the global soft drinks industry is worth USD 295bn and is expected to grow to USD 377bn by 2023. Africa only accounts for 3% of this total value, despite representing 16% of the global population, which is expected to rise to 25% by 2050.
Across sub-Saharan Africa, multi-national, regional and local soft drink companies are looking to enhance their exposure to this potential growth, and countries like Kenya are already seeing some of the fastest growth, recording 11% CAGR USD growth between 2008 and 2018.
The East African market only makes up 10% of soft drink sales across Africa; however, the contribution of categories such as bottled water, carbonates, concentrates, and juice is very similar to developed soft drink markets such as South Africa and the United States of America. This presents a significant opportunity to increase consumption per capita through a total beverage strategy.
Growing competition across the soft-drinks industry is presented in the form of innovation in flavours, new low sugar and sugar-free formulations, and pioneering pack sizes, which combined with route to market excellence is where the challenge to market domination in Africa lies.
“We have undertaken to highlight and unpack some of the trends in this burgeoning sector, specifically looking at East African markets – Kenya, Tanzania and Uganda,” says Mr Grundlingh. “One trend for example, is that of the decline in market share by traditional players in favour of niche and more innovative drinks players. This is particularly evident with players who have looked at change in a risk averse manner, preferring to continue with traditional methods,” he adds.
There is no doubt that the global themes that have shaped consumer trends in the rest of the world are also present in Africa today. Certainly, trends that are identified in Africa, remain in line with global trends in this industry. What is different in Africa, however, is that these themes are evolving in a very different demographic, cultural, spatial and infrastructural environment.
“We are living through an age of disruption in the global consumer sector the likes of which we have never witnessed before,” says Mr Grundlingh. “Global consumer multinationals are having to self-disrupt to remain relevant as their traditional thinking and scale production is not always in line with what consumers want and need.”
According to Mr Grundlingh, relevance is something companies now need to rediscover, as their products, brands and packaging look to enhance consumer intimacy.
“At Standard Bank we work with our clients to understand the opportunities, risks and realities of investing in Africa. Our clients are corporates, but they also include all stakeholders in the process of analysis. The aim of this report is to stimulate a debate and further analysis around the allocation of capital and required returns as they are weighed up against growth,” says Mr Grundlingh.
As a bank present in over 20 African economies, Standard Bank recognises and supports the huge consumer opportunity that is currently unfolding across Africa. “Certain sectors continue to present good return opportunities for all stakeholders, but they do require measured and mindful investment,” says Mr Grundlingh.
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