Africa: Tapping into the Untapped
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  • 1. Africa: Tapping into the Untapped Growing Consumer Demand Driving Mega Growth OpportunitiesSurfactants HPC, Dubai20-21 March 201220-
  • 2. Agenda1. Frost & Sullivan - Introduction2. Mega Trends - How do we define it and why does it really matter?3. Mega Trends in Africa and its Impact on Various Sectors4. 4W - What, When, Where and Why of the Mega Trends on Key Sectors – Home and Personal care – Future outlook – Demand and supply projections5. Conclusions - Is Africa the Next Frontier ? `2
  • 3. The Frost & Sullivan StoryPioneered Emerging Market Partnership Relationship& Technology Research with Clients Visionary Innovation• Global Footprint Begins • Growth Partnership Services • Mega Trends Research• Country Economic Research • GIL Global Events • CEO 360 Visionary Perspective• Market & Technical Research • GIL University • GIL Think Tanks• Best Practice Career Training • Growth Team Membership™ • GIL Global Community• MindXChange Events • Growth Consulting • Communities of Practice3
  • 4. Our Industry Coverage Automotive & Transportation Aerospace & Defense Measurement & Consumer Information & Instrumentation Technologies Communication Technologies Automotive Energy & Power Environment & Building HealthcareTransportation & Logistics Systems Technologies Minerals & Mining Chemicals, Materials Electronics & Industrial Automation & Food Security & Process Control4
  • 5. Our Services GIL Global Community Growth Partnership GIL University Services Growth Consulting Events5
  • 6. Our Global Footprint 40+ OfficesScanning the Globe for Opportunities and Innovation6
  • 7. 2. Mega Trends - How do we define it and why does it really matter?7
  • 8. Mega Trends - DefinitionDefinition of a Mega Trend What is a Mega Trend? Impact of Mega Trends on Key• Mega trends are global, sustained, and macro economic Organizational Functions forces of development that impact business, economy, society, cultures, and personal lives, thereby defining our future world and its increasing pace of change. Marketing Why Do Mega Trends Matter?• Mega trends have diverse meanings and impacts for different industries, companies, and individuals. Analysis of these mega trends and their implications forms R&D an important component of a company’s future Innovation Budget strategy, development, and innovation process, and impacts Scouting Spending product and technology planning.• The following document sets the stage for visionary thinking by identifying the most important African mega trends, potential scenarios of specific trends in 2020, and their implications in transforming society, markets, and cultures. These mega trends can be used as a basis for strategic decision-making by understanding their impact on Product organizational functions such as marketing, Research and Technology Planning and Planning Development (R&D), budget spending, product planning and Development development, human resource management, technology planning, and innovation scouting. Source: Frost & Sullivan analysis. 8
  • 9. Global Mega Trends Driving Growth URBANIZATION ENERGY SMART FACTORY E-MOBILITYSOCIAL GLOBAL MEGA INFRASTRUCTURE TRENDS - 2020 BUSINESS ECONOMY HEALTH & WELLNESS TECHNOLOGY 9
  • 10. African Mega Trends Regional Renewable Energy Integration Urbanisation Innovating to Zero The Responsible Revolution Connecting the Unconnected New Business Models Future Infrastructure Source: Frost & Sullivan analysis.10
  • 11. Mega Trends relevant to Chemicals, Materials and Food Difference between what & why of customer wants , responding to opportunities & threats Sustainable Increasing Health & Safety Urbanisation Development Visionary Innovation & MarketPublic / Private Sector Vanguard Infrastructure Investment to Development Drive Industry Development Rebuilding War Torn Countries 11
  • 12. 3. Mega Trends in Africa and its Impact on Various Sectors12
  • 13. Mega Trends and the application sector matrix Sectors Renewable Energy Water Treatment and Sanitation Infrastructure Construction Mega Trends Consumer Oil and Gas Agriculture Products Materials MiningIncreasing UrbanisationPublic/Private Sector Investment to DriveIndustry DevelopmentSustainable DevelopmentInfrastructure DevelopmentHealth and SafetyRebuilding War-torn Countries 13
  • 14. Africa – The Summary of Opportunities across sectors Manufacturing: Energy: $800 $204 billion billion Manufacturing, food packaging Electricity infrastructure, and fortification. renewable energy, rehabilitation of existing Infrastructure Development: structures >US$400 billion Agriculture: Transport infrastructure and rehabilitation, housing, ICT, building US$50 billion and other materials, construction Includes fertilizers, crop and PPE protection, animal health, feed and additive products, and plant biotechnology. Oil & Gas: US$3.6 trillion Infrastructure, extraction chemicals, and rehabilitation Water: US$700 billion Includes sanitation, water infrastructure and chemicals, renewable water, and water and wastewater treatment.14
  • 15. Key Mega Trends to Drive Home and Personal Care Sectors Most Relevant Increasing UrbanisationAfrican Mega Trends • By 2020, 43 per cent of the people living in to Surfactants Africa will live in urban areas. This presents a1. Increasing urbanisation growth opportunity for FMCG manufacturers2. Infrastructure development - and their suppliers in the home and personal3. Rebuilding war-torn countries - care market, as increased usage is forecasted.4. Public/private sector investment to drive industry - Sustainable Development development • This refers to using sustainable and environmentally-friendly raw materials and5. Sustainable development processes in the production of home care and6. Health and safety personal care products. Resources are limited. 2050 Fast Facts about Africa: Health and Safety 2010 • To protect employees, consumers, and the 1990 environment during the manufacturing and consuming of home care and personal care Urban population in Africa products. (millions): 205 400 1,230 Source: Frost & Sullivan analysis. 15
  • 16. Cities & Mega Regions - Not Countries Will Drive Wealth Creation In theComing Years Fast Forward City Facts: Did You Know?..... • Over 60% of Worlds Population to Live in Cities by 2020 • Cities like Seoul account for 50% of the country’s GDP; Budapest (Hungary) and Brussels (Belgium) each for roughly 45%. • Gauteng will contribute 40% of South Africa’s GDP and 12% of Africa What are the Micro Implications ? • High Economic Power With 85% of Scientific and Technology Innovation from These Cities • Hub and Spoke Business Model will evolve with Logistics, Healthcare, FMCG/Retail and many other industries • New Mobility Solutions like bike and car sharing, EV adoption, Tolling • The extension of transit lines to the suburbs will move businesses out of the central downtown to the suburbs • Social Polarization: High Gap Between Rich and Poor • A highly diverse socio-economic-cultural mix • Techno savvy and connected citizens with high speed broadband, 4G technologies and free Wi-fi to enable connectivity 24X7.
  • 17. African Cities will Increase by 25% by 2025 at an Average Growth Rateof 3.4%; 60% of Africa’s Population will be Urbanised by 2050 Population Growth Rate in Select Algiers Urban Populations, Africa, 2025 Cities, Africa, 2010–2025 3.6 million Alexandria Casablanca 5.6 million 4.1 million Addis Ababa Dakar 4.7 million 4.3 million Abidjan 6.3million Ibadan Nairobi Accra 3.2 million 6.2 million 3.5 million Douala 3.1 million Luanda remains the Luanda Dar es Salaam 8 million 6.2 million most expensive city for expatriates across Africa and globally Johannesburg/ Pretoria/ Ekurhuleni Cape Town 8 million 3.8 million Durban Migration City with population > 5 million, 2025 Urban Population, 2025 3.2 million Source: Africa Progress Report, 2010, Frost &Sullivan 17
  • 18. The Middle Bulge: Middle Class Will Account for 52% of Global Population in 2020. Over 65% of the Middle Class Population are from Africa, China and India in 2020 Percent of Global Percent of Global Middle Class Across Break-Up of Middle Class by Race, South Africa, 2020 Middle Class Across Regions in 2010 Regions in 2020 Africa 7000 Africa India Upper middle class ME 6000 Population in Thousands Middle class Rest of India Asia 5000 Lower middle class LA 4000 ME 3000 Rest of Asia CEE 2000 LA 1000 CEE China 0 White diamonds Black Diamonds Coloured Indian Diamonds China Diamonds The Black Middle Class Called the Black Diamonds will Increase to 5,970,000 in 2020 in South Africa AloneNote: The Middle Class in the graph are defined as people with Incomes between$6,000 and $30,000. However, this definition differs marginally from country. 18
  • 19. 4. 4W - What, When, Where and Why of the Mega Trends on Key Sectors19
  • 20. Unlocking the Opportunities presented by Mega Trends How can you adapt your strategies to tap Why is Africa into this massive the next big opportunity opportunity for Africa presents? Where are the home and key personal care opportunities suppliers? When can you that would What are the expect to see manifest in key mega the impact of Africa by 2020? trends that micro trends on would drive the business business for environment? home and personal care companies in Africa ? Source: Frost & Sullivan analysis.20
  • 21. The Impact of Micro Trends on the Home and Personal Care Surfactant Business in AfricaDriver / Restraint Micro Trends 1-2 years 3-5 years 6-10 years Growth of the consumer market is being spurred on by: • economic growthDriver • retail expansion • growth of the middle-income class • high population growth • demand for commodities Limited availability of alternativesDriver (significant active ingredients) Limited downstream manufacturingRestraint (reliance on importing finished products) Increased contract manufacturing due toRestraint increasing manufacturing costsRestraint Environmental and health concerns Multi-functional products and povertyRestraint (3-in-1 bar soaps for very price-sensitive consumers)Impact: High Medium Low Source: Frost & Sullivan analysis. 21
  • 22. Snapshot of South Africa Supply Side Demand Side• Two local manufacturers produce 97.5 per cent • In 2010, the South African home care and of the anionic surfactants used in South Africa. personal care markets were worth $114 million and $28.5 million, respectively.• Raw materials used in local manufacturing are imported. • Major driver for demand: growing consumer income.• Other surfactant types rely largely on imports. • As a result, some consumers are more willing to• The level of competition is moderate. pay higher prices for quality products.• Supplier differentiation: blending and formulation if they do not have manufacturing capacity.• Future market share of anionic surfactants will Total Home and Personal Care Surfactants Market, South Africa, 2011 decrease as non-ionic surfactants are being 4.8% 3.8% preferred due to their performance and 20.4% Anionic environmental benefits. Non-ionic 71.0% Cationic Amphoteric Source: Frost & Sullivan analysis. 22
  • 23. Future Outlook for Surfactants in South Africa Total Home and Personal Care Surfactants Market: Revenue Forecasts, South Africa, 2007-2015 180.0 4.5% Revenue Growth Rate (%) 4.0% Revenues ($ Million) 150.0 3.5% 120.0 3.0% 2.5% 90.0 2.0% 60.0 1.5% 1.0% 30.0 0.5% 0.0 0.0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 HPC Surfactant Revenue 135.7 141.2 142.5 144.8 148.9 153.7 158.9 164.3 170.0 Revenue Growth Rate (%) 4.1% 0.9% 1.6% 2.8% 3.2% 3.4% 3.4% 3.5%• In 2011, the South African home and personal care surfactant market generated revenues of $148.9 million with 2.8 per cent growth year on year.• The South African home and personal care surfactant market is expected to generate revenues worth $170 million in 2015. Source: Frost & Sullivan analysis. 23
  • 24. Snapshot of Kenya Supply Side Demand Side• Local manufacture: 41 per cent of anionic • An emerging trend: men and women are taking surfactants; the remaining 59 per cent is more pride in their appearance. Therefore hair imported. This is largely due to the inconsistent and skin care markets are showing growth rates quality of local SLES production. as high as 10 to 15 per cent.• Kenyan government has used a tax limit to • Home care products: Kenyans are switching from protect and encourage the local industry. laundry soap bars to toilet soap bars and synthetic detergent powders.• Contract manufacturing is common and on the rise. This enables economies of scale and • Detergent powders are restrained by the lack of competitiveness, as manufacturing prices soar. washing machines (the appliance is expensive and the price of electricity is high). Total Anionic Surfactant Volume • Limited consumer purchasing power, therefore Split, Kenya, 2011 FMCG manufacturers require cost-effective 28% anionic surfactants for economical products. Home Care 72% Personal Care Source: Frost & Sullivan analysis. 24
  • 25. Future Outlook for Anionic Surfactants in Kenya Total Home and Personal Care Anionic Surfactants Market: Revenue and Volume Forecasts, Kenya, 2007-2015 50.0 45.0 34 000 32 000 Revenue ($ Million) 40.0 Volume (Tonnes) 35.0 30 000 30.0 28 000 25.0 26 000 20.0 24 000 15.0 10.0 22 000 5.0 20 000 0.0 18 000 2007 2008 2009 2010 2011 2012 2013 2014 2015 Anionic Surfactant Revenue 22.8 27.8 29.9 31.2 34.3 36.8 39.6 42.4 45.7 Volume (Tonnes) 20 098 20 420 20 959 22 123 23 513 25 184 27 084 29 104 31 312• In 2011, the Kenyan home and personal care anionic surfactant market generated revenues of $34.3 million with volumes of 23,513 tonnes.• The Kenyan home and personal care anionic surfactant market is expected to generate revenues worth $45.7 million in 2015. Source: Frost & Sullivan analysis. 25
  • 26. Snapshot of Nigeria Supply Side Demand Side• Tariffs on imported manufactured goods have • Revenues in the Nigerian personal and home supported the growth of local manufacturing of care sector were valued at $1.09 billion in 2010. home and personal care products. • Relatively high economic growth along with the• However, cost of production is high due to high steady growth of the middle class have been key energy costs and importing raw materials for drivers for this market. manufacturing. • Of the over 150 million people living in Nigeria, a• A mark-up of at least 40.0% is implemented to large proportion use only bar soaps, mostly multi- avoid revenue loss due to high production costs. purpose, for home and personal care.• More than 63% of the home and personal care Home and Personal Care Market Revenue market is catered for by multi-nationals who use Split, Nigeria, 2010 Hair Care complex formulations as a means of 6.5% 5.7% Skin Care differentiation. 34.9% 19.9% Fabric Care• Local manufacturers produce products with very limited properties by using basic formulations. 33.1% Dish Care All PurposeSource: Frost & Sullivan analysis. Cleaners 26
  • 27. Future Outlook for Surfactants in Nigeria Total Home and Personal Care Surfactants Market: Revenue Forecasts, Nigeria, 2007-2015 60.0 10.0% Revenue Growth (%) 50.0 Revenue ($ Million) 8.0% 40.0 6.0% 30.0 4.0% 20.0 10.0 2.0% 0.0 0.0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 HPC Surfactant Revenue 30.8 32.2 32.8 34.0 36.7 40.2 43.7 47.6 51.4 Revenue Growth % 4.5% 1.9% 3.7% 7.9% 9.7% 8.7% 8.9% 7.9%• A significant amount of home and personal care final products are imported into Nigeria, thus despite a population of over 150 million, surfactant revenues are lower than, for instance, South Africa.• The Nigerian home and personal care surfactant market is expected to generate revenues worth $51.4 million in 2015. Source: Frost & Sullivan analysis. 27
  • 28. Supply chain overview – An example in Nigeria Total Home and Personal Care Market, Overview of the Value Chain (Nigeria), 2010 Supply Side (top 70%) Demand Side (top 70%) Local Manufacturers Imports 90% 70% for Home and Personal• Rhodia (Solvay) • Unilever• Cognis (BASF) • Procter and Gamble• Henkel • PZ Cussons• Clariant • Johnsons Wax Nigeria Ltd• Huntsman • Reckitt Beckniser 30% •• Aqualon (Ashland) Distributors . Cormart• Akzo Nobel • Doyin Soaps and Detergent • Nigerian German Chemicals • European Soaps and Detergents. Local • Comart Laboratories Manufacturers of 10% • Orkila Chemicals Chemical Raw • Cordwell Limited • Biochemical Derivatives Materials • Ulysses Chemicals• Doyin Soaps and Detergent • Advantage Laboratories (surfactants)• European Soaps and Detergents• Nasco Source: Frost & Sullivan 28
  • 29. 5. Conclusions - Is Africa the Next Frontier?29
  • 30. Mega Trends and the Home and Personal Care Markets Increased Urbanisation • Economic growth • Retail expansion • Growth of the middle-income Sustainable Development class • High population growth • Demand for commodities Health and Safety ` Growth in Local Growth in Production Imports Opportunity for Growth30
  • 31. The Value of Emerging Markets – Are you ready ? Emerging markets offer significant growth opportunity, as mature markets stagnate. Africa could be the most promising. Why Africa? `• Total population: 1.28 billion by 2020• Spending from the top 18 cities: Key Concepts: $1.3 trillion by 2020 • Find the unmet, distinctive needs• African middle class: 360 million by 2020 • Target the correct consumer segment• Africans living in urban areas: 43% by 2020• Sub-Saharan Africa is one of the fastest- • Understand your consumers, their preferences, and how to conduct business with them . growing regions globally. • First-mover advantage Sources: UN Department of Economic and Social Affairs; Frost & Sullivan analysis.
  • 32. Contact For Additional InformationMani JamesRegional Director – Frost & SullivanAfricaTel: +27 21 680 3208Email: mani.james@frost.com http://www.frost.comVishnu ShankarIndustry Manager – Frost & SullivanMiddle East & North AfricaTel: +971.4.4331882Email: vshankar@frost.com