When American and Europeans think about emerging economies, most naturally gravitate to China, ASEAN countries like Vietnam and Cambodia, India and a handful of countries outside the region like Brazil and Russia. But evidence is increasingly mounting that we need to broaden our horizons even more; specifically, that we need to incorporate Africa into our thinking about emerging economies. What to make of Africa has been something I have written about here, here, here and here. The challenges of successfully navigating Africa are many, and it was my good fortune to recently spend some time chatting with Marc Schreuder, the Principal at M2D Consulting, a company specialized in Pan-African QSR and Retail with offices based in both Lagos and South Africa.
Marc is an old hand at business in Africa in general, but Nigeria specifically. He was instrumental in helping introduce the KFC brand to Nigeria, and has worked in Lagos with Eat “N” Go Limited, the company responsible for bringing Dominos Pizza into Lagos. Prior to his work in Nigeria, Marc worked in Kenya running the operations for Nandos, Pizza Inn, Chicken Inn as well as 2 other QSR brands and On the Run, the convenience retail brand at the back court for Exxon Mobil. Beyond his work in Nigeria and Kenya, he has worked in Saudi Arabia, Uganda and South Africa, always with an eye towards operations, quality, and P&L management.
I was curious to get Marc’s read on how as both an expat living in Nigeria, but also someone with a long history in Nigeria and a life lived largely in Africa writ large, what he makes of the growth story the west is hearing about Nigeria specifically. Marc was emphatic: “what is going on here is very exciting. The country has changed tremendously since I first came here. When I am gone for just a month you see major changes when you come back: constant improvement through new roads, more visible policing with less corruption, and (some what) better power. There are lots of new buildings, a lot of high rises under construction.”
Anecdotally these are powerful observations, but many still have deep reservations about going into Nigeria, which led me to ask Marc whether it was still pre-mature for western companies to be thinking about a strategy for the country. Marc responded, “Absolutely not. If you look at the population in Nigeria, Lagos alone has around 14 million people, with an influx of 60,000 people a month coming into the city. There is hay to be made by anyone who can execute.” If that is the case I asked him, what are some of the reasons companies aren’t successful? Marc added, “The fault a lot of people make is they come in with their own preconceived notions about what will work … some almost seem to want to re-colonize Nigeria … you have to go into the country with an open mind, know what you’ve done in the past, but adapt to local expectations.”
This begs the obvious question of which he has seen do this poorly, and who has done this localization well. In Marc’s mind, the best example of this was a South Africa telecom company who went into Nigeria only to exit with a multi-million dollar loss. They brought in what Marc described as “the same way of running their business as they would have done in South Africa, the same marketing campaigns, but the marketing in Nigeria is very different.” I found the example Marc shared fascinating. South African radio marketing for telecom is pretty traditional when compared to western radio advertising; the difference in Nigeria is that because of the atrocious traffic, radio advertisements are much longer. Marc said that “in Nigeria, radio ads are between 3-4 minutes long, and the product is mentioned maybe twice in total.” What do they fill up the balance of this time with? They tell a story, one that the decision maker can relate to: a harried mother who has “screaming kids in the car, is being shouted at by her boss, doesn’t have any cash in her purse, but thank goodness ‘Bank X’ has an ATM around the corner so she can buy food for her family.”
If marketing is different, are the motives that ultimately drive a Nigerian consumer to spend more on a western brand that much different than what we see in other emerging economies? Based on what Marc shared, I would have to say no: “Nigerians are highly, highly aspirational. Up until 10-12 years ago there was no middle class. Even now, that is a small part of the country. They have satellite TV, so they see everything the west has to offer. When I first opened up KFC, I would see them take pictures outside the restaurant.” However, Marc was quick to add that this aspirational nature was not de-coupled from a sense of value. In his mind, “For Nigerians, the value of premium versus price is critical. If they perceive a premium, they will pay for it, but if he doesn’t he’ll buy a copy at the corner market.”
Because this aspirational feature is critical, Marc learned to pay particular attention to how his stores looked and the level of service he offered customers. In his restaurants, “your stores have to look sexy – clean, well lit and friendly. In Nigeria especially, customers are not used to friendliness; culturally, they tend to come across aggressive.” For Marc, he always wanted his store employees and the store itself to reinforce the aspirational dimension of his customers. As he put it, “They want to be seen with a big meal: ‘I am walking into a KFC or Dominos or a Mango clothing store because I can afford it.’ That is how they want to be seen and it is who they want to be.”
Marc admitted the many challenges of developing a strategy for getting into Nigeria are real, but as he sees it the evolution of the Nigerian middle class is about 10-15 years behind what he saw happen in Kenya. What he was very clear on, and a point I am emphatic about as well, is that thinking about an “African Strategy” is a mistake. This was one of the issues I had with the otherwise illuminating book Africa Rising. Specifically, trying to think about Africa as one large market is a terrible mistake. Marc commented, “what works in South Africa won’t work in East Africa, and what works in East Africa probably won’t work in West Africa.”
In addition, businesses like Yum! Brands will need to find competent local partners. As Marc pointed out, “Local shareholding is not a requirement by law but it is highly suggested that a local partner is involved.” Marc was founding chairman of the Anti Counterfeiting Coalition of Nigeria and was impressed by the number of law firms that focus on IP law and protection for foreign brands. British law principles are the basis of the Nigerian legal system unlike South Africa that uses Roman Dutch law principles.
When reflecting on the government, Marc shared, “Investment strategies by Government are not clear cut and goal posts can change. However the banking sector is particularly solid with the banks that have foreign shareholding as well such as Standard Chartered and Stanbic along with some others. The CBN policies make good sense and are rigorously enforced having a stable influence on the sector that is improving its reputation month on month.”
Towards the end of our conversation, I asked Marc to build on what he saw as the biggest challenges for a company seeking out a strategy in Nigeria. Marc pointed to the high cost of retail space as one problem, largely because you have to pay three years ahead in order to secure a spot. In addition, the supply of power remains a real bottleneck. At KFC he shared that “I had two stand-by generators … that obviously has a huge impact on costs and overhead.” In addition, water supply is problematic and transportation problems related to infrastructure (road, rail and port) are all in need of improvement.
Having said this all, these are problems that savvy companies who have been successful in other emerging economies will also recognize, and in most cases, have been able to rise above. Many of the factors that Marc and I discussed are out business’ control: the stability of the national government, the efficacy of the fuel subsidy reforms, violence in the country’s north are all good examples of what can’t be controlled. But what can be controlled are the operational and strategic factors like service levels, infrastructure and brand positioning. Ultimately staying focused on what you can control versus what you can’t is the key to success in a market like Nigeria.