Enhancing Traditional Trade: The Rise of Premium Offerings in Africa

Traditional Trade, also known as Informal Trade, accounts for a very large portion of Africa’s retail sales. 

Euromonitor International say that, outside of South Africa, it is estimated that informal channels account for between 40% and 90% of total sales.

The size of South Africa’s informal economy, says World Economics, is estimated to be 28.8% which represents approximately $338 billion at GDP PPP levels.

Euromonitor International add that businesses seeking to expand their distribution networks, and access the region’s growing consumer market, will have a considerable amount of market potential by selling in the informal market.

Africa’s Growing Middle Class

According to the African Development bank, middle-class Africans have tripled to 313 million (approximately 34% of the continent’s population) over the last 30 years.

This, they say, is due to the Africa’s strong economic development.  Many of the fastest growing economies in the world are found on this continent. The World Bank say that Ethiopia, DRC, Côte d’Ivoire, Benin and Senegal all have annual economic growth rates in excess of 6%.

As the middle class has grown, so too has the demand for premium products, particularly in the alcoholic beverage industry.

What are Premium Alcoholic Beverages?

The term premium alcoholic beverages usually refers to those products that are unique because they are “sip able”, or made from quality or rare ingredients, or are aged, or they have a unique flavour.  It does not necessarily mean that they are more expensive, although they usually are.

The definition of premium products may also vary from region to region.  This may be due to local marketing campaigns, how recently the product has become available in the market, and the level of market sophistication.

Frontline Research Group (FRG), who are specialists in retail census and retail audits in Africa’s informal retail sector, say, that some premium products are widely distributed through traditional trade outlets.

Has Traditional Trade Decreased as the Middle Class Has Grown?

Common sense says that the amount of business conducted in traditional outlets would be decreasing at a rate inversely proportional to the growth of the middle class.  However, this is far from the truth.  Formal retail outlets have increased, but the ratio of informal to formal trade hasn’t changed much over the last quarter of a century.

Steve Johnson, Managing Director of the Frontline Research Group, says, “Traditional Trade caters to consumers of all income levels and is popular with people from all economic backgrounds.  This is due to the convenience of traditional trade outlets and because there is often a personal relationship with the stallholder. These outlet owners live in the communities they service.”

Trade Channels Premium Brands into Traditional Trade

The Frontline Research Group has been involved in the traditional trade since the ‘90s. Not only have they geolocated a vast number of these outlets but they also have a thorough understanding of how this market functions. 

“Our census and audit data cover both on premise and off premise outlets,” adds Steve.

The data is provided in such a way that it is possible to drill down by location, trade channel classifications, store segmentations, as well as estimated market share.

Steve says, “One of our most insightful tools are our interactive maps, where the above data is added to other map layers, such as population data, or even your own client data, to visualize opportunities.”

Not only do Frontline Research Group provide data, but their experienced analysts also provide insights and direction.

“We offer businesses the opportunity to join our research panels so that they may improve market share by identifying the right price, channels and locations for their products,” adds Steve.

Over the past few decades they have assisted many companies in penetrating this market sector.

If you would like assistance penetrating the traditional trade market contact Steve Johnson, Managing Director at Frontline Research Group, on Tel:  +27 (0) 86 999 0407 or Email: steve@frontlineafrica.com