A number of businesses continue to seek growth opportunities beyond the boundaries of the country. As many countries in Africa seek business to open up in their countries (in foreign direct investments), there are also Africa-born businesses that seek to expand their presence within and also beyond the continent. To do this, businesses need to understand the dynamics and factors that influence entry as well as development in the new markets. While there are many macro and micro factors to consider, key factors in marketing aspects would include such areas as the consumption habits, demographics, and psychographics among others.
I would like to focus on the issue of demographics and why it is important for businesses to first understand how this affects entry and market development. Demographic comes from two words – dēmos; a greek word for people and Graphic; to give a clear and effective picture. Hence, we can define demographic as a way of providing a clear picture (usually quantifiable) of a given population and its subsets.
A few weeks back, one of the dailies in Kenya carried a feature of how one of the pork processing firms is expanding to new markets within Africa and also Middle East, especially Dubai. However, readers were quick to question how the firm has grown in Dubai, which is an Islamic state. Around the same period, there was a tweet with an accompanying picture of popular brand of pork sausages in Dubai. Some followers thought this was a joke and there is no way one can find pork products in Dubai. The surprise emanates from the belief that it would be offensive to have such products in the region.
However, like in many cases, the above could be an example of a case of understanding the role of demographics in developing the market. Dubai’s population is made up of over 150 nationalities. The local nationals constitute less than 15% of the total population. 85% are expats, majority from the subcontinent, other Arab countries, from the Far East, and then Western countries as well as Africa. If we deduct the population of local nationals and expat Muslim population, we still have about 50% of the residents that can consume pork. More so, part of this target group is made up of expats from the East (Mostly the Philippines as well as China), which have a high per capita consumption of pork. The above example illustrates the point that despite the widely held belief about Dubai as an Islamic state, the demographic profile of the target consumers indeed leads to demand. Therefore, it is no wonder you can find pork in select supermarkets and select restaurants. Further, as a key transit hub, there are many visitors who are also target consumers.
Hence, businesses in Kenya and other African countries that seek to expand to the Middle Eastern region should first understand the demographic profiles. The Middle East is relatively vast and we can further sub-divide the region into two areas:
- The Gulf Cooperation Council, GCC, made up of six states (UAE, Qatar, Bahrain Saudi Arabia, Kuwait and Oman)
- The Levant (Lebanon, Syria, Jordan, Palestine states).
They are all different in composition. Taking the UAE and Qatar together, these are nations with relatively higher disposable incomes in the world but with a different market composition from the rest. As previously highlighted, the local nationals (even in Qatar) comprise less than 15% of the total population. This also reflected in a number of indicators. For instance, according to the 2010 census in Qatar, there were 2,077 local nationals with masters or PhDs compared to 16,069 expats with the same qualifications, from a combined population of about 1.7million.
In Bahrain, Saudi Arabia and Kuwait, there are varied proportions of expats and citizens. Oman is mostly comprised of local nationals (due to a policy cap on expats), but has strong historical ties with the East Africa coast (so Swahili is not uncommon in Muscat). The Levant region is made up almost entirely of local nationals from the respective countries.
Hence, for the GCC, expats also form bulk of the market. This has a number of implications:
- Given the nationals form less than 15% of the populations (In the UAE and Qatar), then the mindset of having a market made up of many local Arab dwindles. However, the local national have relatively higher disposable income, which imply they would mostly seek value propositions.
- The balance 85% is made up of expats.
- However, in terms of income, the expats segment is made up of diverse groups with differences in purchasing power. It is important to conduct a research to understand the target groups.
The above illustrates that entry and development in the market is by either having a relatively premium product or customising it to purchasing power (and habits). This applies also to other areas like restaurants. Apart from the international franchises, most residents also identify with restaurants from their respective ‘cultural’ cuisines.
The case of meat brings to light a lot of interest as the market, especially in the UAE, which is developed in depth and breadth. Meat from the local market, cuts from Australia and Brazil, animals from Pakistan, India to Sudan, Ethiopia among others (sometimes Somalia), are all seeking shelf space just like ones from Kenya. If you include the processed category, then you get products from countries such as the Netherlands, Germany, and Belgium …etc.
However, it is the first category of the unprocessed meat that is of interest. This includes beef, mutton / lamb and to some extent camel meat. It is the products that you will find in the supermarkets and local meat market (or Butchery – as we popularly call it). Once again, the demographic factor plays a role in the consumption. A local Arab household may have an average of 6 members as most live in closely-knit families. So they we will purchase a ‘whole part’. On the other hand are small families or single member households who go for specific cuts.
Overall, there is stiff competition across most categories, but with a clear understanding of the demographic profiles, marketers can develop and grow new markets in the region.
For details, contact:
pauline@episodesresearch.com
www.episodesresearch.com
That’s a smart way of thnkniig about it.