Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Stock Markets Failing to Give Another AI Mega-trend Buying Opportunity - 6th Jun 20
Is the Stock Bulls' Cup Half-Full or Half-Empty? - 6th Jun 20
Is America Headed for a Post-Apocalyptic Currency Collapse? - 6th Jun 20
Potential Highs and Lows For Gold In 2020 - 5th Jun 20
Tying Gold Miners and USD Signals for What Comes Next - 5th Jun 20
Rigged Markets - Central Bank Hypnosis - 5th Jun 20
Gold’s role in the Greater Depression of 2020 - 5th Jun 20
UK Coronavirus Catastrophe Trend Analysis Video - 5th Jun 20
Why Land Rover Discovery Sport SAT NAV is Crap, Use Google Maps Instead - 5th Jun 20
Stock Market Election Year Cycles – What to Expect? - 4th Jun 20
Why Solar Stocks Are Rallying Against All Odds - 4th Jun 20
East Asia Will Be a Post-Pandemic Success - 4th Jun 20
Comparing Bitcoin to Other Market Sectors – Risk vs. Value - 4th Jun 20
Covid, Debt and Precious Metals - 3rd Jun 20
Gold-Silver Ratio And Correlation - 3rd Jun 20
The Corona Riots Begin, US Covid-19 Catastrophe Trend Analysis - 3rd Jun 20 -
Stock Market Short-term Top? - 3rd Jun 20
Deflation: Why the "Japanification" of the U.S. Looms Large - 3rd Jun 20
US Stock Market Sets Up Technical Patterns – Pay Attention - 3rd Jun 20
UK Corona Catastrophe Trend Analysis - 2nd Jun 20
US Real Estate Stats Show Big Wave Of Refinancing Is Coming - 2nd Jun 20
Let’s Make Sure This Crisis Doesn’t Go to Waste - 2nd Jun 20
Silver and Gold: Balancing More Than 100 Years Of Debt Abuse - 2nd Jun 20
The importance of effective website design in a business marketing strategy - 2nd Jun 20
AI Mega-trend Tech Stocks Buying Levels Q2 2020 - 1st Jun 20
M2 Velocity Collapses – Could A Bottom In Capital Velocity Be Setting Up? - 1st Jun 20
The Inflation–Deflation Conundrum - 1st Jun 20
AMD 3900XT, 3800XT, 3600XT Refresh Means Zen 3 4000 AMD CPU's Delayed for 5nm Until 2021? - 1st Jun 20
Why Multi-Asset Brokers Like TRADE.com are the Future of Trading - 1st Jun 20
Will Fed‘s Cap On Interest Rates Trigger Gold’s Rally? - 30th May
Is Stock Market Setting Up for a Blow-Off Top? - 29th May 20
Strong Signs In The Mobile Gaming Market - 29th May 20
Last Clap for NHS and Carers, Sheffield UK - 29th May 20

Market Oracle FREE Newsletter

Coronavirus-stocks-bear-market-2020-analysis

Africa Is The Final Frontier for Consumer Goods Companies

Companies / Africa Dec 12, 2010 - 03:36 PM GMT

By: Investment_U

Companies

Best Financial Markets Analysis ArticleTony D’Altorio writes: Investors are finally beginning to notice Africa…

•They like its richness in much-needed commodities.

•They appreciate its improving currency, political and economic stability.


•They also like how the International Monetary Fund projects sub-Saharan 2010 growth at 4.75%.

Then there’s Jim O’Neill of Goldman Sachs, who originally coined the term BRIC for Brazil, Russia, India and China. He believes that Africa may join that coveted grouping over the next few decades.

O’Neill believes the combined potential of the 11 largest economies there is enormous. He even predicts they may trump Brazil and Russia, though not China or India.

Certainly, the continent is on a roll already. In Nigeria, Africa’s most populous country, the middle class population keeps growing.

The whole area has the dual advantage of being under-penetrated and underserved. So the global consumer product companies are suddenly noticing Africa have a lot to gain.

Africa… The Final Frontier

Once thought impenetrable, Africa now looks good to many businesses.

This makes perfect sense according to David Murray of Ernst & Young. “You could characterize it as the final gold rush for the large consumer products companies of the world, because where are they going to go after Africa? There’s nowhere left.”

Take beer, for example. China consumes 30 liters per year per person while Nigeria only goes through 10. Recognizing the potential growth there, SABMiller ADR (PINK: SBMRY) is busy staking its claim. It already derives a third of its earnings before interest, tax, depreciation and amortization from Africa.

And Diageo ADR (NYSE: DEO) sells more Guinness in Nigeria than it does in Ireland.

Meanwhile, Wal-Mart’s proposed deal with South Africa’s Massmart Holdings ADR (PINK: MMRTY) ensures even more focus on Africa. Especially since Massmart has plans to expand across the continent.

More than likely, more manufacturers will want to follow the world’s biggest retailer. They see it as a way to help distribute their products and maybe their profits too.

They have good reason to think so, considering AT Kearney’s recent findings. Its survey showed eight out of nine West African subsidiaries of global consumer goods companies registered faster revenue growth than their parent company.

On average, it was twice the annual compound growth rate.

Infrastructure Problems = Logistical Nightmares

Crossing a new frontier is never easy though and Africa is no exception for consumer goods companies. Dirt roads, and inefficient rail systems and harbors make it a logistical nightmare.

Consumer goods companies rely heavily on distribution. Yet any that venture out into Africa will have to brave poor infrastructure for a while.

Due to a lack of local supplies, they’ll have to pay higher costs to build plants too. That’s why brewing beer in Africa costs twice as much as in India and four times as in China.

Electricity poses yet another problem since supply is erratic at best in many areas. Even in South Africa, the state power provider Eskom offers less than reliable coverage.

Eskom can’t even deal with those problems before 2013. Meanwhile, power problems across the continent have forced many companies to build their own generators.

Even with all that aside, Africa suffers under high taxes and huge informal markets. Going back to beer again, estimates indicate moonshine consumption at 4 times bigger in volume than legally purchased alcohol.

Global Consumer Product Companies Set Sights on Africa

So yes, Africa has its problems. But global consumer product companies like it all the same.

And certainly, the lack of competition is compelling.

Working in the western world means a lot of competing for a sliver of market share. Not so in Africa though, with the exception of a few companies from China or India.

That makes it very attractive to big multinationals like Wal-Mart and Nestle ADR (PINK: NSRGY). They compare it to China 20 years ago: a get in now or regret it forever deal.

More than likely, they’ve got it right.

Good investing,

Source: http://www.investmentu.com/2010/December/africa-final-frontier-for-consumer-goods-companies.html

Tony Daltorio

http://www.investmentu.com

Copyright © 1999 - 2008 by The Oxford Club, L.L.C All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Investment U, Attn: Member Services , 105 West Monument Street, Baltimore, MD 21201 Email: CustomerService@InvestmentU.com

Disclaimer: Investment U Disclaimer: Nothing published by Investment U should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Investment U should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Investment U Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules