Africa Investment-Courting African consumers gets a reinvention of cool
Oct 4 (Reuters) - Samsung Electronics is betting on a top-end refrigerator designed not to lose its cool in Africa as a way into the continent's consumer markets, where there is growing demand for prestige products which meet local needs. The refrigerator comes with a sticker saying it is "Built for Africa", meaning that while it is basically the same flagship product on sale elsewhere in the world it has been tailored to suit local conditions. The South Korean firm's strategy is simple, and increasingly followed by a number of multinational firms looking to sell in an expanding African market - lay off the cut-rate goods, launch major products in Africa at the same time as the rest of the world but give them local appeal to build brand allegiance among consumers who are set to move up the income ladder. "Africa is not a dumping ground for technology. You always have to keep in mind that you are creating your market for the future," said Thierry Boulanger, a director for Samsung at its African headquarters in Johannesburg. Samsung's "Built For Africa" refrigerators come with an extra layer of insulation guaranteed to keep food in the freezer frozen for a longer period of time without being powered. Rolling blackouts are not uncommon in major urban African centres as power-strapped utilities try to lighten the load during peak demand.
As a result the "dura-cool" refrigerator has boosted Samsung's standing in Africa's refrigerator market to a 23.5 percent share, with the company leading the sector for two straight years, Samsung says.
Also in the "Built for Africa" product line are certain flat-screen TVs and monitors and air conditioners with built-in protectors to avoid damage from the power surges that follow outages, and built-in solar panels for netbook computers.
SMALL BEER, BIG POTENTIAL
In the big scheme of things, Africa is still small beer for major multinational firms, representing only a tiny portion of global sales and profits.
A major drawback is rampant poverty and unemployment. Even though per capita GDP in the richest economy, South Africa, is about $7,500 a year, nearly 40 percent of the population lives on less than $3 a day.
But the demographics, with young populations in most countries seeing increased urbanisation, are stacked in Africa's favour in attracting sellers of consumer products, especially as markets stagnate or shrink in some developed markets already saturated with products.
According to management consultancy Accenture, consumer expenditure in sub-Saharan Africa is expected to grow from $600 billion in 2010 to nearly $1 trillion by 2020. The growth rate of economies in the region is also expected to be double that of the global economic growth rate during the same period.
Most African consumers still cannot afford to buy big-ticket items from the likes of Samsung and Sony. But there are still millions who now can and their numbers are set to grow.
And one factor making life easier for international firms is that 10 countries - Algeria, Angola, Egypt, Ghana, Kenya, Morocco, Nigeria, South Africa, Sudan and Tunisia - account for an estimated 80 percent of Africa's private consumption.
"Interest in Africa is explosive but there is still a lot of fear because of the risks," said an official in charge of Africa-related matters for the Korea Trade-Investment Promotion Agency (KOTRA) in Seoul.
Global consultancy McKinsey said African consumers are optimistic about their future, pay keen attention to labels and are in the early stages of developing brand loyalty.
"African consumers demand quality products and are brand conscious, belying the view that the continent is a backwater where companies can sell second-rate merchandise," it said, based on a survey of 13,000 consumers in 10 countries.
"The options of African consumers have been limited to cheap, poor-quality, unbranded products in many categories. Our research indicates that companies operating in this way are unlikely to succeed in the long term."
Instead Japanese car maker Toyota, which has a presence in all 54 African countries, has been promoting its vehicles as affordable but highly capable of handling the continent's rougher roads as well as looking good on its paved highways.
"People tend to think that if you sell things to Africa, you can sell them inferior things. That will be the biggest mistake you can make," Toyota Africa's chief executive Johan van Zyl told the Reuters Africa Investment Summit earlier this year.
By Christine Kim and Jon Herskovitz