Editorial Team

Editorial Team

When global doughnut and coffee chain Krispy Kreme opened its first South African store late last year, eager customers queued overnight to be among the first to sample the brand’s wares. Since then, Krispy Kreme has opened four outlets in Gauteng – the latest being Clearwater Mall in Roodepoort at the beginning of August – and has plans to continue opening stores across the country over the next five years. The brand’s story began in 1930s America, when Vernon Rudolph bought a secret recipe for yeast-raised doughnuts from a French chef in the city of New Orleans. He then rented a building in the town of Winston-Salem in North Carolina and started a wholesale business selling the doughnuts to grocery stores. However, the delicious scent of cooking doughnuts drifted into the street and was too difficult to ignore, causing passers-by to stop and ask if they could buy hot fresh doughnuts. Vernon saw this as an opportunity to create a retail business and cut a hole in the wall of the building to sell directly to customers. The brand has continued to grow and the number of outlets worldwide now exceeds 800. It has become an American icon, with Krispy Kreme featured in the National Museum of American History at the world renowned Smithsonian Institute in Washington DC. On 1 September, the IMM Institute of Marketing Management will be hosting a discussion on the Krispy Kreme brand in South Africa, with Marketing Director Nick Eleftheriadis as the keynote speaker. The venue is Katy’s Palace in Kramerville, Sandton. For more information about this exciting event, contact Catherine Long at This email address is being protected from spambots. You need JavaScript enabled to view it. or visit the IMM Institute website (see ‘Upcoming Events’) or Facebook page.
As South African consumers feel the effect of rising prices, there is a move to smaller shopping baskets and more frequent store visits because people want to minimise their cash outlay per supermarket visit. This is compounded by the trend in the retail environment towards smaller format stores which have lower rentals and offer more convenient locations and longer opening hours. According to Shereen Tuff, a Senior Research Analyst with international research company Euromonitor, retailers and manufacturers of FMCG products are also implementing a range of strategies to cap the rising price of goods. In a recent blog, she notes that ‘de-gramming’ (making smaller or lighter) items such as chocolates and soap bars is becoming more common. So is ‘bulk packaging’ in categories like shampoo and laundry detergents. “Whilst in the past manufacturers have offered discounts such as ‘buy and get an extra 20% free’, it is now crucial for [brands] to continue to drive volume sales,” she says. “Thus, consumers only obtain a discount if they buy in bulk. For example, ‘buy three slabs of chocolate for R24.99’ or ‘two 125g bags of potato chips for R19.90’. Tuff observes that this is particularly true for non-essential items like confectionery and savoury snacks. “In terms of home care, leading players may offer promotions for products such as washing detergent – whereby if [you] purchase a liquid detergent, [you] get the same brand of washing powder free.” However, it is only the middle- to upper-LSM groups who can afford to stockpile products when they are on promotion. Lower-income consumers are struggling with the soaring food prices and have had to change their purchasing habits to exclude what other [shoppers] may consider essential, she warns.
Despite South African consumer sentiment being similar to that in the 2008/09 recession, things are actually not as bad as they were then. A study released by Nielsen research says inflation levels are better, and so is consumer demand in certain categories. “New retail sales data presents a far more positive picture of consumer spending realities,” notes the company in a media statement. “In fact, it’s clear that consumption figures were far worse in 2008/9, with overall pack sales declining by 7% and spend increasing by 5%. This is in contrast to the current situation, where annual spend is up by 9% and overall pack sales are up by 4%,” says spokesperson Craig Henry. Inflation was running at more than 12% during 2008/9, whereas it’s currently sitting at 6,2% and is also far more evenly distributed across the income groups. Henry explains: “Manufacturers and retailers have been diligent in trying to ensure that they still bring affordable products to consumers through pricing and promotion strategies, as well as [by offering] affordable packs sizes. This includes strategies such zero-rating increases on staples – for example, ‘same price as last year’ promotions – to ensure that consumers can still afford staples like bread.” He adds that, as a result, promotion-hunting by shoppers has intensified and consumers are more willing to switch brands because of promotions within their store of preference. But while people are more cautious, they are still willing to open their wallets and some categories have recorded above-average sales increases. These include beverages (sales up 14,2%) and confectionery (up 10,9%). According to Henry, consumers will always trade down to the cheapest product despite their negative sentiment. “The reality is that you don’t have to have a cheaper product in bad times or a premium product in good times – rather a product that meets the ever-changing needs of consumers.”
The challenge posed by counterfeit goods sold on the continent is a huge one, making it something that brands cannot tackle half-heartedly. According to Issue 3 2016 of ‘Strategic Marketing Africa’, the journal of the African Marketing Confederation (AMC), experts agree that while counterfeiting is a global scourge, it is at its worst in Africa. “The list of counterfeit goods is almost endless,” Steven Yates, a Partner at law firm Adams & Adams, tells the magazine. “Items you would expect to find – such as mobile phones, DVDs, food, beverages and clothing – are there. But we have also come across the likes of counterfeit razor blades, super-glues, batteries, golf balls, diapers (nappies) and hair extensions.” Ailsa Wingfield, Executive Director for Marketing and Communication in Africa at research company Nielsen, concurs. “In a country such as Nigeria you will find genuine brands of literally any product side-by-side with their imitations. Many counterfeit products are very hard to tell apart from the real thing and, in certain instances, can only be identified by a laboratory test conducted by the brand owner.” Counterfeit goods are also a concern in North Africa, says Mohamed Eldib a Senior Associate at one of Egypt’s oldest law firms, Eldib & Co. Fast-moving consumer goods (FMCGs) are the key target of counterfeiters in Egypt, but also on the list are clothing, electronic goods, mobile phones, TVs and refrigerators. At times, counterfeiting can be dangerous. Eldib provides an Egyptian example in which counterfeiters collected empty Nestlé water bottles from refuse dumps in Cairo, refilled them with water not fit for human consumption and sealed them again with replicas of Nestlé caps. Arguably the most insidious form of counterfeiting involves pharmaceuticals, which are available in abundance in fake form. According to an estimate by the World Health Organisation (WHO) fakes account for up to 50% of pharmaceutical sales in sub-Saharan Africa, compared to only around 10% worldwide. But some progress is being made in protecting legitimate brands. Paul Ramaru, an attorney at law firm Spoor & Fisher, says Kenya is among those making big strides, spearheaded by the Anti-Counterfeit Agency established under the 2008 Anti-Counterfeit Act. According to a study by the International Chamber of Commerce and Anti-Counterfeit Agency, counterfeit goods worth US$835-million were sold in Kenya in 2013. Edlib believes South Africa is by far the most advanced in combatting counterfeiting in Africa, followed by Egypt and Morocco. Other topics covered in the latest issue of the magazine include the growing potential of consumer markets in Africa’s secondary towns and cities, Uber’s disruption strategy on the continent, and the importance of advertising ethics in emerging markets. ‘Strategic Marketing Africa’ is published four times a year and distributed through AMC member organisations in Ghana, Kenya, Morocco, Nigeria, South Africa, Zambia, Zimbabwe and Indian Ocean Islands. It is also available in selected airline lounges and is mailed to a selected list of marketing industry professionals.
Rural consumers in South Africa who lack access to a formal bank branch may now be able to do their banking from a converted shipping container. Banking giant FNB this week launched what it calls ‘mobile banking units’ that offer a range of services including automated cash withdrawals and deposits, loan applications and traditional teller services. A container takes about three months to convert into a mobile bank branch and costs between R1,7-million and R2,5-million, depending on the level of specification. The first unit was initially earmarked for the community of Mutale in Limpopo, but it has been temporarily located at the Tembisa Mall near Johannesburg, which was extensively damaged by a tornado recently. FNB plans to roll out a total of four units by the end of 2016. “South Africa still has a large section of the population that has limited access to banking facilities and we want to turn this around. The first step for us was to think about an innovative way of delivering a full suite of banking facilities to rural communities in a convenient fashion,” bank spokesperson Lee-Ann van Zyl says. “Everything you can do at a branch, you can do at the mobile banking unit space. It’s not like we’re dropping off a container and expecting customers to help themselves.” The system is flexible and also allows multiple containers to be joined together to form a larger ‘branch’ if necessary. The containers are designed to be in a particular location for several years, but may be moved elsewhere if circumstances change.
Liquor brand Absolut Vodka, which produces a wide range of limited-edition bottles worldwide, has honoured South African musician and songwriter Khuli Chana with a Signature Edition Bottle aimed at local consumers. The distinctive bottle ties in with Absolut’s marketing campaign centred on the upcoming the 2016 MTV Africa Music Awards. The campaign will see Khuli Chana collaborate with other leading artists across the African continent to create a concept album called ‘One Source’, celebrating the connectedness of Africans. “Absolut is renowned for aligning itself with trailblazers in creative industries. Not only is Khuli Chana a multi-award winning artist but the Motswako (a hip hop genre popular in Southern Africa) originator. He is reflective of an artist who is self-believing, unique, creative and constantly innovative,” says Melanie Campbell, Portfolio Manager for Pernod Ricard South Africa. “We are proud to commemorate our longstanding … partnership with him through this personalised bottle.” A total of 3 000 cases of the Khuli Chana Signature Edition have been produced. The design showcases vivid colours of semi-transparent triangles that overlap in a distinct way when viewed from different angles. The brand says the design symbolises “the connection that all African’s have with one another”. Swedish-based Absolut is owned by French liquor group Pernod Ricard and sells in more than 120 countries. Producing limited-edition bottles has become a high-profile part of its brand strategy and these pay homage to countries like India and South Korea, cities such as Buenos Aires and Chicago, and artists such as Andy Warhol. The brand has also leveraged its reputation for innovative and artistic bottle designs by, for example, sponsoring an Absolut Art Award and creating a website called Absolut Art that will sell Swedish artworks online.
In an acknowledgement of the popularity of English Premier League soccer in Africa and throughout the world, local Kenyan online gaming firm SportPesa has signed a multi-million dollar sponsorship deal with the Hull City club for the next three seasons. As part of the arrangement, SportPesa becomes Hull’s shirt sponsor from the upcoming 2016-17 season, which begins in mid-August. The club will also visit Kenya to play in a friendly game against a select team. “SportPesa, which operates online and via text message, was launched in Kenya in February 2014 by local company Pevans East Africa. It now has tens of thousands of unique monthly users and its net revenues are estimated to average more than US$10-million a month, according to people with knowledge of the company,” the London-based ‘Financial Times’ newspaper reported. The Hull City Tigers club website quotes Ronald Karauri, Chief Executive Officer of SportPesa, as saying: “This is a big milestone for SportPesa as it marks the scaling of a Kenyan brand into the global market. The SportPesa platform will now be available in the United Kingdom and later in the year present in several African countries. One year from now we will have [a] presence in at least four continents.” He added: “Even as a global brand, staying consistent with our core values that centre around grassroots sport and community development will replicate the success SportPesa has enjoyed in Kenya.” The company already sponsors Kenya’s soccer league and the national rugby union, as well as the two most popular soccer clubs in the country. SportPesa is not the first African business to sponsor a top English team. South Africa’s Investec Asset Management had a deal with Tottenham Hotspur for several years. Bidvest, also from SA, sponsored Sunderland in 2013.
Local consumers are showing an increased preference for rooibos tea over traditional tea (called black tea), according to the recent South African Tea Industry Landscape Report 2016. Ernest du Toit, spokesperson for the Rooibos Council, says although black tea still has a higher overall consumption than rooibos, it is experiencing a steady decline, whereas rooibos is showing growth both locally and globally. “The proportion of black tea consumers decreased between 2011 and 2015 – from 58,6% to 51,5%. However, the percentage of South African rooibos consumers increased from 29,4% in 2011 to 30,9% in 2015,” he says. Du Toit attributes this shift in consumption behaviour primarily to the health benefits of rooibos becoming better known. The product is especially high in antioxidants, which help to protect the body against ailments such as allergies, stomach cramps, colds and flu, as well as more serious illnesses like heart disease and diabetes. It can apparently also reduce the risk of contracting cancer. International demand for rooibos is also on the rise, strengthened by a recent agreement between the European Union and the 15 Southern African Development Community (SADC) states. Among other things, this gives increased access to European markets and improves trademark protection for rooibos as a product. In 2012, a French firm filed applications to register rooibos as a trademark in France. Subsequently, South Africa’s Department of Trade and Industry (DTI) countered with an objection and squared up for a legal battle, supported by the concerned local industry. SA currently exports rooibos tea to over 30 countries – including Germany, the Netherlands, Japan, UK and US. Germany by far still remains the biggest importer at 31%, with the Netherlands at 16% and Japan at 15%.
As the digital world changes the way consumers buy cars, the world’s auto brands are looking for new and innovative ways to engage with likely customers. Hyundai in Britain says that three in five potential buyers are turning to digital research, with many watching ‘car tour’ videos on YouTube as they seek to avoid the high-pressure selling environment in car dealerships. However, most content is highly technical and difficult to understand. Latching onto Albert Einstein’s famed observation that “If you can't explain it to a six-year-old, you don't understand it yourself”, the brand has produced a series of videos in which a salesperson gives children a tour of each vehicle and explains the key features in language they understand. “It’s clear across the automotive industry that the role of the Internet, and specifically social media, is beginning to replace some of those early visits to a local dealership to fact-find. We are seeing fewer customers coming into the dealerships than before, but those who are visiting us are much more aware and knowledgeable about our cars than ever before,” says Adam Nickson, Head of Brand Strategy and Communications at Hyundai Motor UK. “With the Kids Car Tours series, we will provide that critical product information to customers at key moments in their purchase journey. But rather than the functional feature based films we have seen many times before, we have taken a new approach – letting children understand the simple benefits for themselves and replaying them back to us.” Global research published last year by management consultancy Accenture showed that 75% of drivers polled would consider conducting the entire car-buying process online – including financing, price negotiation, back office paperwork and home delivery.
Despite a relative slowdown, Africa remains one of the fastest growing regions in the world. This is according to a study released this week by business consultancy EY (formerly Ernst & Young). The ‘Africa Attractiveness Programme 2016, Staying the Course’ study says there was a 7% rise in foreign direct investment (FDI) projects in the region over the past year. This made Africa one of the only two areas of the world achieving growth in FDI projects. Ajen Sita, Africa Chief Executive Officer at EY, says that economic growth across the region is likely to be slower in coming years than it has been over the past 10 to 15 years, although the main reasons for a relative slowdown are not unique to Africa. East Africa recorded the highest share of FDI across Africa last year, achieving 26,3% of total projects. While Southern Africa remained the largest investment region on the continent, its projects were significantly down from 2014 levels. West Africa saw a rebound in FDI projects, which increased by 16,2%. North Africa experienced 8,5% year-on-year growth in FDI projects, and the study says it is notable that the region’s projects are increasing at a faster rate than in sub-Saharan Africa. Michael Lalor, EY’s Africa Business Centre Leader, believe the continent’s ability to attract FDI is still relatively good. “In a context of heightened concerns about economic and political risk across the continent, FDI flows remain robust and in line with levels we have seen over the past five years,” he observes. Mining and metals, coal, oil and natural gas – which were previously the key sectors attracting major FDI flows – have now given way to consumer products and retail, financial services and technology, as well as media and telecommunications.