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GLOBAL 2016: Young, dynamic populations drive the next frontier for global brands

Eager consumers line up for new store openings

 by Richard Mullins
Director
Acceleration
Richard@acceleration.biz
 

 
The Middle East and Africa, with their young and dynamic populations, are the next growth frontier for multinational brands. Despite the pressures that many global economies are under as result of the falling prices of oil and other commodities, the region still contains many of the world’s fastest-growing economies.
 
Emerging markets may be out of favor with the world’s investment community, but not so for the many local and leading global brands, that are investing significantly into the region. They include traditional FMCG companies like Proctor and Gamble and Unilever, as well as retailers like H&M and Starbucks, through to digital disruptors like Facebook, Uber and Netflix, and even vehicle companies like Ford.
 
The rise of the MEA region’s middle class and rapid urbanization are the factors that are creating fertile ground for growth. According to research by KPMG, more than half of Africa’s population will live in cities by 2030. The massive shift in urbanization has seen investments by local governments and global partners in improving urban road, telecom, and electricity infrastructure.
 
This migration is resulting in a growing middle-class across the region and with it comes disposable income and aspiration for lifestyles aligned to first world and local exclusive and aspirational brand choices. Often these multinational brands (especially cars, clothes, leisure and smartphones) are becoming status symbols in their own right.
 
Queuing for success
For the first world, scenes of people queuing when Burger King, Starbucks or H&M launches may seem bizarre. However, the emerging middle class in Sub-Saharan Africa has a craving for being able to own and consume brands that were previously unattainable and associated with the success of the developed world of Europe, North America and Asia. Emotionally and intellectually, these consumers want to partake in the global economy, hence brands take on significance beyond their basic delivery. They are symbolic of the advancement of the region. Multinational brands bring competition and global standards to local markets, where choice and access has been historically limited.
 
Many new developments leapfrog developed nations at least partly because legacy systems and infrastructures do not exist. The sophistication of the region’s banking and telecoms infrastructure are playing a significant role in helping multinational brands invest and reach Arabian and African consumers. According the GSM Association (GSMA), Sub-Saharan Africa alone will add more than 400 million new smartphone connections by 2020, bringing with it cheaper mobile broadband and accessible computing devices connecting consumers to the digital world.
 
The access to global information, new product choices and innovation, like the local Netflix competitor Showmax, means consumers are re-evaluating brands and companies and these same brands have an opportunity to redefine their status and relevance with a new global audience. The emerging consumers are aspirational and looking to redefine themselves through their brand and product choices.
 
Opening the door to disruption
Mobile money and mobile banking are rapidly integrating Africans into a more formal banking system. The GSMA reckons that sub Saharan Africa accounts for more than half of the world’s live mobile money services. In many countries, mobile money accounts vastly outnumber bank accounts.
 
Throughout Africa, we’re seeing the effort to engage customers drive massive innovation. Payment mechanisms and integration with social apps are bourgeoning. Banks are partnering with the likes of WeChat, a global mobile chat service owned by the Chinese Internet portal Tencent, to provide users ease and convenience, where with a tap of their smart phone they can make payments to friends, retailers, and other providers.
Another areas that digital has enabled is transport. In Ghana there is a local Uber competitor using customer’s access to local banking applications and mobile wallet services to enable services. The increase in disposable income is also increasing travel and leisure options within the region, and the growth in travel is seeing opportunities for low cost airlines and new revenue streams linked to the a growing local tourism sector across the region.
 
New Growth 
Of course, challenges remain and brands cannot approach African and Middle Eastern markets in the same ways as they address consumers in Europe or the US. They also need to remember that there are many nuances that will drive brand choice, religion, language, culture and history being key factors across the continent.
 
The increase in urbanization has seen rapid growth in the construction segment with a key focus on shopping mall development. Currently, the vast majority of trade goes through markets, hawkers or spaza shops, informal convenience stores. The advent of malls and associated brand experiences, combined with online access and growth, will stimulate further consumer demand for global brand and shopping experiences.
 
Global brands are realizing the value and potential in Africa and the Middle East. Those that started to move five or 10 years ago are already reaping the rewards from a growing middle market. Yet the growth is off a low base and there’s still plenty to come. The rise is just beginning.