09 Jun 2020 / Article

The retail industry gears up for a major reshuffle

New consumption habits have been observed during the Covid-19 pandemic. The modern retail sector, although demonstrably more popular, must also adapt. No doubt with new, more local supply channels to meet increasing demand.


The Covid-19 pandemic is causing a “major reshuffle” in the African retail sector and in the fast-moving consumer goods market, in the words of Julien Garcier, Managing Director of Sagaci Research. An observer of African markets, he has produced data on the social consequences of the pandemic in Kenya and Nigeria. In the case of Kenya, for example, Julien Garcier believes “there has been a strong impact on livelihoods”, as shown in the fact that, in May, “a third of the population skipped a meal due to Covid-19”. 


“The truth is our consumers need to eat, to wash, to take care of themselves. And in this regard, our industry is in a good place.” 

Jaime Aguilera, Executive Vice-President, Unilever Africa 


Modern retail and e-commerce have seduced consumers


Julien Garcier also identifies several trends from his studies carried out in recent months. Supermarkets are increasingly prevalent in consumption patterns in Kenya and Nigeria. “There is an acceleration of modern retailing”, said Julien Garcier. The first factor is the one-stop shop. “During the crisis, and especially at the beginning, people were looking for only one shop to meet their needs. Also, consumers were looking for the right safety measures. In supermarkets, it’s easy to guarantee safety measures. Modern retail took the lion’s share of food services. People had to eat. They could not go to restaurants or canteens. They were picking up food from the supermarket.”


The Covid-19 pandemic has also allowed a surge in online shopping platforms. 

This is one of the most notable developments highlighted by the Chairman of Massmart South Africa, Kuseni Dlamini: “We have seen a double digit increase thanks to the digital services we have been offering during the crisis.”  


New consumption habits 


The range of products consumed also took an about-turn. Julien Garcier explains: “In both countries, there is a strong shift in consumer spending from indulgence categories to essentials. During the crisis, hygiene products and home care were essentials. Not only did consumers reduce their consumption of alcoholic beverages, but they also consumed fewer sodas and juices to save a bit of money. During this period in Kenya, we have experienced more demand for essential products, particularly if they can be stocked, like long life milk.” 


For Unilever Africa CEO Jaime Aguilera, Covid-19 is to be seen as a step-change: “We will have to adjust. Definitely, consumers will have less money.”


“We need to think about how to industrialise Africa to produce goods for the continent and the world. Local sourcing is cheaper because it simplifies the value chain, the logistics costs and, most importantly, creates jobs.” 

Kuseni Dlamini, Massmart Chairman


A question of supply chains 


For distributors, the Covid-19 crisis has brought into question the difficulties encountered, particularly in the supply of certain products. “While this crisis has exposed the vulnerability of our supply chains”, comments Kuseni Dlamini, Chair of Massmart, “we have been able to learn and move very fast. What is helping us is the efficiency we have in our supply chains”.


To respond quickly to consumers’ basic needs, the future is most certainly heading towards local production. For Jaime Aguilera, whose Unilever group has already taken this path, there is less and less of a shadow of a doubt. “We have localised many things, for example the production of sanitisers. It’s a very important thing for us. We can react quickly and now  the sanitisers we are selling in Africa are made in Africa. In the past, it was not like that. It’s a moment where we have had to be flexible and move fast. Even if it’s not perfect, it’s extremely important.”


General Manager FMCG Industries and Distribution at CFAO, Marc Bandelier shares Jaime Aguilera’s point of view. “It’s very important for us to reinvent the way we work during the crisis so that we come out stronger. We have turned a problem into an opportunity to accelerate local sourcing.”


“I think the key is: is this local production going to be permanent, or just for the Covid period?”

Niama El Bassunie, Founder and CEO at Waystocap


A new reality 


Julien Garcier, Managing Director of Sagaci Research, does not see the transformations underway in the consumer goods sector as mere parentheses. “Many consumers will retreat to essential categories as they struggle to satisfy basic needs, forcing them to put indulgence on hold. Also, recent growth in modern sector penetration is here to stay. A good market position before Covid-19 is not necessarily a good position to be in today!”  


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