Executives who look at traditional media images of African poverty and conflict, and then turn away, are missing an unrivaled growth opportunity in what is tipped to become the world’s leading consumer market. “I think there is a lot of demand which is not served,” says Pierre-André Térisse, food giant Danone’s Executive Vice President for Africa.

For companies considering entry into Africa, opportunities are endless. A happy cocktail of demography, improving living standards and urbanization is set to serve up a growing pool of customers eager to access new products and experiences. Smart businesses are adding an African dimension to their portfolios.

“The biggest threat is not being here,” says Bryan Leith, Chief Operating Officer of KPMG’s Global Africa Practice. “The Chinese and, to almost the same extent, the Indians, are really capitalizing on the African opportunity. The rest of the world tend to be more risk-averse and are holding back, and if they continue to do so, they will find that all the low-hanging fruit has been picked,” says Leith.

Africa’s population is set to grow faster than any other place on earth, from around 1.2 billion people today to double that by 2050. At the same time, urbanization is expected to concentrate consumers with changing tastes and growing income in more readily accessed areas. By 2030, 50% of Africans are expected to live in urban areas, up from 36% in 2010.

“Those people are increasingly urbanizing, having more disposable income and so you have this emerging middle class that is moving out of the subsistence stage into the age of consumerism,” Leith says.

In 2010, the African Development Bank estimated that 34% of the continent was middle class, defined by those who earned between US$2 and US$20 a day. This group is expected to grow to 1.1 billion by 2060.

This includes people who are on the cusp of poverty as well as those who can afford to purchase durable products. A consumer with an income of US$1,000 a year can already afford to buy an array of consumer products. Once earning more, he or she tends to add non-food purchases, such as beer, soft drinks and prepaid mobile phones.

“With access to television, people can experience whole different cultures… their expectations are changing from basic survival and basic food needs, to be more aspirational. They want more consumer goods, white goods and all the fast-moving consumer products,” says Leith. These developments in Africa are set against the backdrop of a key new factor: technology.

“Technology is enabling things to develop at a faster pace,” says Leith. “Advancement of individuals is exponential compared to what we have seen in the rest of the world.”

Many Africans now have access to a mobile phone. This liberates them from a key infrastructure shortfall. Leith points to many who have “never had a landline, yet they now have access to a smartphone, so they have just leap-frogged the technology.”

Companies are also using technological innovations to broaden their African offering. For instance, retail is moving into the banking space, allowing customers to deposit and withdraw cash using tills at stores in different locations, even different countries.

Beyond the opportunities delivered by those trends, companies can benefit from tax incentives as resource- and agriculture-rich economies seek to diversify. And for global brands coming into an African market, particularly when there is an established business, exploiting operational efficiencies can be a good earner.

What companies need to know

“Successful companies I have come across in Africa so far, are not necessarily those that have incredible products. They are run by people who have a level of execution which is very, very good,” Térisse says. Experts have key recommendations for consumer and retail businesses’ first foray into Africa: embrace diversity, leverage local knowledge, be ready to anticipate problems and access the benefits of regional groupings.

“Much of the outside world often wrongly regards Africa as one country, rather than a continent with 54 very different countries,” says Leith. For instance, North Africa, on the Mediterranean coast, is more aligned with the Middle East and Europe. In sub- Saharan Africa alone, there are 26 French-speaking countries.

“A newcomer should not try to treat the whole of Africa as if it is one market,” says Dr Marietjie Theron-Wepener, Head of Marketing and Stakeholder Relations at the University of Stellenbosch Business School in South Africa.

Realistically, no company coming into Africa will want to enter the continent wholesale. Entrants would likely be choosing from the countries that offer the biggest potential growth in consumer demand, including South Africa, Mauritius, Nigeria, Morocco, Botswana, Tunisia, Gabon, Ghana, Namibia and Egypt. “It’s better to cut your teeth in one of the more established markets and then expand,” Leith says.

Partnering with a local company in a joint venture, taking over an existing business or using local advisors can all help to steer you through the customs and business practices.

“The best way to carry out research is to have a partner on the ground in the country where you want to set up shop,” Leith says. A key benefit of this is avoiding corruption: “It means you won’t get into the corruption net everyone fears in Africa, because things like that are avoidable.”

Know your market

Companies will also need to build strong relationships with local stakeholders, so they are fully aware of the local context and can avoid potential problems. Danone, for instance, was surprised when a ban on plastic packaging was introduced in Ivory Coast. The company adapted quickly and was out of the market for only five months, but that experience underscores the risk.

Since African countries can be just like any other potentially volatile business environment, companies also need to constantly monitor risks and be ready to anticipate problems, according to Térisse. For instance, a company might make a product using an imported ingredient. If the currency then appreciates, the choice is either to lose margin, or protect margin by increasing price and losing sales volumes.

Africa is now on the verge of establishing a group of nations like the European Union.. But prior to this there have been three key groups, the Southern African Development Community or SADC, the Economic Community of West African States or ECOWAS and the East African Community or EAC, and these are the building blocks for a single pan-continental market.

These groups offer increased benefits to business, with nations recognizing that foreign direct investment in their regions can be positive for their economies. Efficiencies abound: a retailer, for instance, could put its distribution center in one nation and ship goods to others, rather than catering for each separately. “It wouldn’t be possible if there was not the ability to freely transfer goods from one country to another,” says Leith.

What consumers want

Approaching different countries with a one-size-fits-all plan will not work in Africa: many consumers look for locally relevant brands they can connect with. Danone, for instance, works to understand consumers in Africa by staying close to them.

“We are following this logic, which is not to take brands from the rest of the world into Africa. We are into the logic of trying to understand what the African consumer wants, using the team locally,” Térisse says.

While there are some African consumers demanding expensive brands, most of the population cannot afford premium goods, so new products need to be “affordable, available and attractive,” Térisse says.

Attractive products should offer a perception of quality, may be fun and answer to a local need. Making sure your product is readily available means considering routes to market in many different places, some of which may be hard to access. In these circumstances, easily portable products are important. Affordability relates to the importance of price point.

As well as a price per liter, price per unit is a key consideration in many African countries. Consumers and shopkeepers alike may have little storage capacity for products, so it’s important to offer small formats. Snacks, products for people on the go and for individual consumption work well.

Appealing to local pride is a good approach. “In many countries there is an appetite for products which are local, which represent the country, and play on the pride of the country,” says Térisse. In Senegal, Danone’s partner, La Laiterie du Berger, created Dolima, which in the local language, Wolof, means ‘give me more’. The yogurt range is branded with a Senegalese identity, including the colors of the national flag, and builds on the pride of a Senegalese product: milk from local herders.

Indeed, companies ignore local preferences at their peril. Leith points to one South African retailer which went into a Francophone nation with English language labels on products. Consumers preferred French labeling and the project floundered.

But despite a multiplicity of nations, cultures and markets, all Africans respond to personal, or one-on-one contact, says Theron-Wepener.

“Although the middle and upper class on the continent is extremely savvy regarding mobile (electronic) technology, this needs to be balanced with interpersonal (relationship building) approaches,” she says.

Big communications company MTN Group Limited has been successful in this area, Theron-Wepener says. The company “ensured contact with clients on the ground by having small stores under umbrellas everywhere, where they sell air time.”

MTN regards selling through street vendors and mobile agents in areas such as taxi ranks and malls, as very important, says Simo Mkhize, General Manager of Informal Channels for MTN SA. The company manages thousands of agents and in addition there are hundreds of thousands of street vendors selling MTN solutions and products. “The reach and ubiquity of these channels ensures that MTN products are easily accessible to our customers wherever they are, including in those places where formal retail networks do not have a presence,” Mkhize says.

How to tackle the challenges

To be sure, companies moving into an African market are going to face many varied challenges. They may need to navigate poor infrastructure, a lack of data and financial restrictions. And they will need to maintain strong operational controls.

“The road, rail, ports and airports in South Africa rival the best in the world, but that is not the case in other African countries,” says Leith. Companies need to consider the logistics of how to take their products into a country, assessing the quality of infrastructures such as roads, electricity and water. Teaming up with local logistics providers is smart, Leith says: “they know the ropes.”

As in some other emerging markets, most companies that erect a large manufacturing plant would make sure they have dedicated power generation facilities and water supply rather than having to rely on the local municipality. “Being prepared to be off the grid is essential,” Leith says.

New shopping centers are being built in major African cities with independently maintained infrastructure a key attraction, since that takes the responsibility away from the retailer. “It’s far better to be part of a large shopping center where your needs are automatically met, rather than going into a standalone unit,” Leith says.

Another challenge in some African countries can be access to quality data, says Leith, citing Malawi as one example. “Reliable statistics and information about consumer trends, consumer demands and living standards is sometimes quite hard to get,” he says. But that tends not to be the case in primary African markets such as Nigeria, South Africa and Kenya.

Growth initiatives in Africa can also be stymied by lack of money, says Térisse. “There is a limit to African expansion coming from the absence or restriction of money,” he says.

Restrictions on imports or a lack of hard currency can limit what is brought into a country. Another issue can be that there just isn’t enough money available in the trade and a company’s expansion can be slowed because other parties lack finance to proceed, Térisse says.

There are often simple reasons why products that consumers are keen to buy are not available. “Some items cannot be imported or manufactured, they are too expensive to produce or companies aren’t performing well enough to bring a product to the point of sale,” says Térisse.

Companies also need to be rigorous in the way they run their business. If not, the risk is that they will lose control of their business and lose money, says Térisse. A company acquired by Danone in Nigeria had tried to expand too quickly under its previous management. “They did not control tightly enough the deployment of agent after agent. If you are not strong enough you basically get into issues of no control and you can very quickly lose performance and lose money,” he says.

But regardless of the challenges, Africa presents the last big opportunity for companies to stake out new markets and develop generations of fresh consumers. “It really is the last frontier,” says Leith.