Foreign Companies Stumble In Search Of Africa’s Elusive Middle Class
According to the Financial Times, Nestle plans to cut 15 percent of its workforce in 21 African countries, including Kenya, the Democratic Republic of Congo and Angola, for what it says is an overestimated middle class on the continent.
“We thought this would be the next Asia, but we have realised the middle class here in the region is extremely small and it is not really growing,” Cornel Krummenacher, chief executive for Nestle’s equatorial Africa region, told the Financial Times.
Africa has one of the fastest growing middle class that is said to have tripled over the last 14 years, and is estimated by the African Development Bank to be over 300 million people, as the continent witnessed high growth rate of over 5 percent for over a decade
The food and drinks company is not the first foreign company to run into headwind in its search of the continent’s emerging middle class.
Barely one and half years after South Africa’s Woolworth expanded into Nigeria it called it quits and pulled out its three stores from the west African country, in November 2013, in what experts said was failure by the retailer to crack the Nigeria’s consumer market that is characterised by heavy spenders.
Many of these foreign companies are lured by the seemingly fastest-growing middle class that is expected to grow from 22 percent in 2013 to 29 by 2020.
Looking at this it always seems like a good reason for fast moving consumer goods companies to move into the continent.
But unlike other emerging regions like Asia and South America, getting Africa’s emerging middle class to buy into foreign products is a totally different game plan. It seems Africans have ‘peculiar habits’ and tapping into these behavious is the key to breaking into this consumer market.
While some like Nestle are stumbling and retreating, others like US retail giant Walmart are getting bolder about investing on the continent’s consumers.
Walmart’s South Africa subsidiary last month expanded into Kenya, after years of trying — and failing — to crack a market it says is key to capturing the East African region.
“The middle class in Kenya is really growing. It’s more appealing, it’s more sophisticated and it’s ready for formal retail,” Mark Turner, marketing director at Massmart, told the Financial Times.