The COVID-19 pandemic has had significant effects on top brands in emerging markets, wiping out 12 percent of brand value, or $5.5 billion from Africa’s largest brands between 2020 and 2021. FMCG brands, especially food and beverage manufacturers were some of the hardest hit, as their route-to-market has been severely hampered. Lockdowns, social distancing, and other restrictions have introduced a new complication in markets that already had low visibility across the value chain due to data limitations, fragmented front ends and last mile execution issues.
However, there is hope on the horizon, as emerging markets offer enormous growth opportunities that large FMCGs can maximize on. Household consumption across Africa is predicted to grow at 5 percent per year in real terms to reach $2.5 trillion in 2030.
As the crisis recedes, there will be a dramatic change in the shape of demand at the front line and how brands respond to that demand, as the pandemic has significantly disrupted traditional sales and marketing activities. While there are many unknowns ahead, one certainty is that route-to-market (RTM) approaches must fundamentally change.
Understanding traditional route-to-market challenges in emerging markets
Africa is more than just another emerging market opportunity. It is an incredibly complex continent comprising of over 50 markets – each socially, culturally, and economically unique. The logistics alone are daunting, not to mind the intricacies of multiple operating models, distribution networks and marketing strategies that must be applied to unique markets. This complexity can be overwhelming for many FMCG brands due to the numerous route-to-market challenges they face.
The consumption patterns in Africa differ greatly from other emerging markets, influenced as much by local culture and consumer preference, as it is by economics and market sophistication. For example, while Moroccans prefer to purchase tea and coffee in traditional markets, Kenyans and Nigerians buy most of theirs at supermarkets. Ethiopians on the other hand, buy almost all of theirs at kiosks. To set up the right RTM and successfully expand into new markets, brands must understand how their product is consumed by different consumer segments and in different markets.
Lack of actionable data is also a major challenge to driving growth in the emerging African market. Accessing, compiling, and analyzing market data is like solving a mystery as sales and marketing teams are left in the dark, with no visibility into where the demand for their products is, or who is buying them.
These challenges make the traditional route-to-market weak, as customers are unable to see and interact with the brands when and where they need it. To recover lost ground and expand to new markets, African brands must embrace digital technologies to transform their go-to-market strategies.
Digital route-to-market transformation is vital for driving growth
African brands today face a compelling opportunity to innovate their traditional route-to-market channels and models as they attempt to recover from pandemic-induced losses. The simultaneous rise of digital commerce, powerful digital players, and millennials as the dominant customer segment is disrupting the sector and changing the way FMCG brands need to go to market.
Despite this opportunity, many brands are unsure of how to proceed with digital RTM transformation, or are focused on the wrong initiatives, resulting in halting action and a failure to build significant value. A McKinsey study of the management practices related to digital strategy and capabilities that correlate most strongly with growth and profitability shows that many B2B companies, which include FMCGs, trial consumer companies in terms of overall digital maturity.
This is a massive opportunity missed, as the study shows that companies which move quickly and decisively to digitally transform their go-to-market strategies generate 3.5 percent more revenue and are 15 percent more profitable than their industry peers. They have also been able to capture 10 percent or more of incremental growth and have expanded margins by 5 points or more.
To achieve digital route to market transformation, African brands must reimagine their sales and marketing processes and answer some crucial questions:
- Are these activities really needed?
- Is there a way to digitalize them so they become more efficient and effective?
- Can existing solutions or partners help with the reimagination process?
FMCGs across Africa must also rethink their distribution model, as there are many inefficiencies in the way products are distributed, often related to order-taking and payments at the fragmented front-end.
The rise of B2B e-commerce players in emerging markets has shown how technology can make distribution more efficient for brands, distributors and retailers, hence companies must focus on developing tech-enabled sales and distribution models to accelerate robust growth and expansion in emerging markets.
Drive market expansion with RedCloud
To successfully drive digital RTM transformation, FMCG brands need a solution that solves the problem of the traditional route-to-market. They need a solution that provides:
- access to valuable market data in real-time.
- in-depth visibility into micro consumption patterns across multiple geolocations.
- customer segmentation and targeted marketing communications to drive engagement and increase order frequency.
RedCloud is the world’s first open commerce platform that unlocks the traditional distribution chain, empowering brands to digitally transform their route to market and drive growth. With RedCloud, sales and marketing teams can collect valuable data at POS and gain much-needed insights into the consumption patterns and geographical demand of their products. The inbuilt market intelligent tool also allows marketers to better manage their campaigns, and create targeted promotions aimed at specific customer segments, leading to greater ROI on marketing spend, more sales and increased revenue.
Schedule a demo today to see how RedCloud is partnering with FMCGs around Africa and empowering them to sell smarter, buy better, and pay simpler.