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Contents

The Market Environment – key takings .................................................................................................. 2 The People – key takings ......................................................................................................................... 6 Population profile & Pen Portrait – Key takings ..................................................................................... 9 Purchasing behaviours & trends - Key takings ..................................................................................... 11 Retail environment – key takings.......................................................................................................... 13 Money, Banking & insurance – Key takings .......................................................................................... 16 Opportunities - key takings ................................................................................................................... 22 CONCLUSIONS ....................................................................................................................................... 24

Decoding the Kenyan Consumer Executive Summary Workshop organised on 27th March 2017 Key Speakers: Eric Reingewertz, Bilkiss Jownally and Virginie Villeneuve

We can help you to go further in your project : How? Before the launching of the project:

Analyse the opportunity for your product and service and Improve your offer

1. Market potential survey – qualitative and quantitative 2. Competitive Analysis 3. Concept and Product Test Survey: to estimate the acceptability of your service,

product, brand and price 4. Develop a Brand and Marketing Strategy (retail and communication) 5. Identify local partners for retail and communication

After the launching of the project:

Evaluate the impact of your marketing and retail strategy and Re-align:

a. Monitor your market penetration / share b. Monitor your advertising impact and brand presence c. Evaluate the consumer / customer feedbacks d. Audit the retail and communication organisation

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The Market Environment – key takings

1. Kenya is one of the most promising countries in Africa : a GDP growth above 6%, a GDP per capita of 1400 USD (Ethiopia = 600, Tanzania = 880, Madagascar = 400, Uganda= 800, Cote d’ Ivoire = 1400 and Mauritius = 9200), a young population of more than 52 million (41% <14 years old)

2. 42% of the GDP is still derived from natural resources 3. We note a significant growth in some key sectors over the period 2011-2015:

Agriculture; Construction; Finance & insurance; Real Estate 4. The urbanisation in Kenya is quite strong: the population of Nairobi and Kiambu

(close to Nairobi) represents more than 4 million people. 5. 83% of registered employment (excluding agricultural and pastoral activities) are

connected with the traditional sector (essentially trade). 6. Food and Beverages are the main expenses category for Kenyan households (36%)

followed by housing expenses (18%, incl. electricity, rent) , transport (9%) and clothing and footwear (7%)

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The People – key takings “In Kenya we are not taught to answer questions which have not been asked”

• There is a true & different Kenyan character • Since 2013 (riots post-election) Tribalism – renamed

“community” => sensible issue • Out of the 43 tribes existing in Kenya, daily

interaction is limited to approx. 8/10 tribes. • People in Nairobi have now developed their own

character • Overall, Kenyans are open to foreigners, seen as “opportunities” • The national motto of Kenyans is “what is it in for me” • Welcoming by nature, the Kenyans cannot support aggressive language (never

shout!), but understand / respect authority • Corruption is everywhere, despite continuous calls for action from all part of the

society and foreign partners, nothing seems to change and nothing will probably change soon. Most of the money (corrupted money) is reinvested in the country.

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Population profile & Pen Portrait – Key takings First of all, this is important when retailing to Africa not to confuse Wealth and

Development. Most of the Kenyans do not have money in bank but own cows or lands. For this reason, figures (such as Socio-Economic group) should be analysed with caution.

4 key customer segments have been identified: 1. the Rural (they depend on their production to eat and pay the school fees –

their quality of life depend on rain season), 2. the BOP – Below of Poverty line (casual workers living in Nairobi slums,

fighting every day to ensure that kids eat something before going to school), 3. the Middle-Class Urban (living in Nairobi, in flats, shopping twice a month at

Nakumatt or Tuskies, have invested in land or trying to buy land in their village) and

4. the Top Level (top executives or business owners, have a large house, children studying abroad, have large plot of land in the country side).

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Purchasing behaviours & trends - Key takings In Kenya, shopping is an activity on its own and is highly planned, if not ritualized.

For most people, it is planned with limited impulse purchase, done with a list

Most often done by the wife, with the kids over the week end. Smaller shopping can be done by the maid or children. Kenyans use informal sources of supply for milk, meat, veggies, etc.

Kenyans are loyal to their main brands (based on trust and respect relationship), however affordability is key.

There are differences in shopping behaviours according to the Consumer Segment and Revenue. See slides below.

READ: TOP 10 Brands in Kenya

https://softkenya.com/kenya/top10-brands-in-kenya/

A List Of The 20 Biggest Brands In Kenya In 2017 Has Been Unveiled

http://omgvoice.com/news/list-biggest-brands-kenya-2017/

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Retail environment – key takings Only recently, modern distribution has reached over 50% volume share across most categories

Modern distribution is now developing very fast. We are using the presence of a supermarket in a town to define it as Urban center

Traditional distribution is progressively shrinking Kiosks and “Dukas” used to be handling a huge volume of daily consumption and

are now declining sharply: almost disappearing in urban residential centers Driven by development of large estates/gated communities, proximity stores are

progressively taking over in mid and upper classes locations Police checks, alcohol blows and attempt to control consumption of alcohol by

restrictive laws encourage this trend from consumption & shopping in the close neighbourhood

In the meantime, hard push from the government to collect taxes discourages informal retail

Modern distribution: Convenience stores − Petrol station & service bay are important location/retail for small shopping . These

places are important meeting points for friends and families: to eat & drink nearby ( bar & Nyama Choma place), with bouncing castle over the week end for children , and place to clean and wash the cars (a low middle class “ritual”).

We have identified two opposite trends in shopping habits (see details in the following slides)

1. Small SKUs -Increase affordability 2. Big quantities - Reducing prices/costs

READ

Nakumatt closes branch in city centre, blames poor sales http://nairobinews.nation.co.ke/news/nakumatt-closes-branch-city-centre-blames-poor-sales/ East Africa’s biggest retailer has sold a 25% stake to an international investor https://qz.com/890060/kenyas-nakumatt-just-hired-a-tesco-veteran-after-selling-25-stake/ Ouverture du 1er hypermarché carrefour au Kenya http://www.carrefour.com/fr/actualites/ouverture-du-1er-hypermarche-carrefour-au-kenya Kenya: first carrefour hypermarket store opens at the hub mall, karen http://allafrica.com/stories/201605180106.html

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Money, Banking & insurance – Key takings Overall there is a complete lack of trust toward banking industry :

Every now and then, some banks collapse, most of the time fraudulently (Imperial Bank & Chase Bank in 2016 only)

Rates of transaction are perceived as prohibitive Banks are too formal. Complicated, not helping enough & Arrogant International Banks are less accessible and have long and tedious process for

financing or account openings When it comes to investment: low return while other options can provide higher

return

Financing projects: Generally Kenyans don’t like borrow money formally (loans &

mortgages) and will avoid doing so as much as possible.

Deeply rooted mistrust toward the banking system and what is perceived as big institutions

High cost perceived: why paying twice the price of the asset? Feeling of uncertainty about the future Use as far as possible, other solutions such as the tontine system (Harambee)

Insurance (except car insurance) are not in well anchored in the local culture/habits. The concept of anticipating the risk is not widely spread: the attitude is to save money – not to cover risks. Furthermore there is no trust toward the institutions.

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Mobile phone market – Key takings Safaricom has been leading the market now for about 15 years

Mpesa is a key factor but the company has been diversifying its activity: TV box, Optic fiber, Applications, Finances, Etc. Overtime, Mpsea has become the backbone of the economy and daily life. “When Mpesa is down, it is like the entire life is on standstill…!

Some of the benefits of Mpsea :

Can reach anyone across the country, including in the very remote places “ Before we used to send money through the bus driver to the village” Trustworthy, convenient, widely accepted across the country No security issues, no scams

Competitors have been trying to file a case against Safaricom for dominant position – so far with no success. The government tried to force a separation between Safaricom and Mpesa –so far with no success.

However, new initiatives are now coming out which could potentially challenge Safaricom: Equitel, PesaLink, etc.

Mobile phone has become the key access to internet and its services. In people’s mind, Safaricom and Mpesa have both been contributing to this success. Both brands are actually recognised and appreciated. Both actually did make a difference in people’s life and this cannot be forgotten.

The convergence and the services attached are even more critical in Kenya as many of these services were just not available before: they come and are discovered for the first time through the mobile phone

READ: Safaricom tops the list of most influential brands in Kenya Read more:

https://www.tuko.co.ke/109978-top-10-most-influential-brands-in-kenya-number-one-seems-obvious.html

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Opportunities - key takings 1. Traditional distribution: mitumba : An estimated $1.1 million per month, 100,000 tones

of secondhand clothes a year, Selling price: from Ksh. 100 to Ksh. 1,000 2. Cosmetic and Beauty : An estimated Euro 10 billion market in 2017 across Africa . Driven

mainly women entrepreneurs. Double digit growth over the last 10 years. Boost by the Young population, increasing middle class with higher disposable income, increasingly urbanisation.

3. Other interesting sectors are : Agro-business Industrial farming Construction (infrastructure & housing) Real estate Car import Transport ICT (Technology, programing, software, etc.) Fashion Health/Pharmaceutical Education Power generation Finances investment

4. Global business is facing tough challenges while local players are gaining momentum

After the financial crisis, many multinationals have sometime brutally disinvested or have not invested enough when markets where growing in Africa, thus leaving a vacuum.

This happened while local competition is stepping up fast and is improving quality of services and products offered to local the market.

Large multinationals remain challenged with excessive centralization of decision: too often key decisions are made at head office and are not best fitted for Africa while local players can move and react much faster as they know the local markets

Multinational are fighting here an asymmetric warfare against local businesses and many are actually struggling to get return, just sustain or penetrate the market

Furthermore, many consumer categories have seen the number of players increasing (cosmetics, distribution, spirits & alcohol, etc. ), from both international and local companies, increasing significantly the level of competitiveness

READ : Nestlé cuts Africa workforce as middle class growth disappoints https://www.ft.com/content/de2aa98e-1360-11e5-ad26-00144feabdc0 http://www.nestle.com/media/news/nestle-positive-about-africa-future Nice & Lovely représente désormais 2/3 des ventes de L’Oreal en Afrique orientale

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http://www.agenceecofin.com/industrie/2105-20165-nice-lovely-represente-desormais-2/3-des-ventes-de-l-oreal-en-afrique-orientale

5. Local Entrepreneurs Increasingly take the Lead : There is an increasing inclination toward local brands/companies: Progressively

a shift in consumer mindset is happening in favor, at least for some categories, of local brands and local companies. Consumer word: “her fight is our fight”.

Local Entrepreneurs have eeasier access to financing through local banking system and access to cheaper manufacturing capabilities from China are making possible investments & ventures which would have been unthinkable a few years back

They have better ability to identify/recruit & retain best resources : In the meantime, large multinationals find it harder and harder to attract and retain best talents who have knowledge of the local market

And the New generation: “don’t care about the big corporates anymore…” : While previous generation was more concerned about a career in formal business or an international company, the young generation is eager to become entrepreneurs, is ready to drive innovation and to take risk to succeed

READ : The female Kenyan brewer taking on a global drinks giant - http://www.bbc.com/news/business-32495853 - Kilimall courts local brands to grow its market in Kenya - https://businesstoday.co.ke/kilimall-courts-local-brands-to-grow-its-market-in-kenya/

Kilimall launches global shopping service in Kenya https://www.standardmedia.co.ke/business/article/2000221755/kilimall-launches-global-shopping-service-in-kenyamarket-in-kenya/

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CONCLUSIONS

Few points to remember on KENYA market and consumers

Economic Environment:

- A pretty stable environment and pretty protected legal with strong ambitions: it is progressively happening! - A fast growing economy, progressively becoming more sophisticated, improving infrastructure - The economy is becoming progressively more formal

Customer and Market Environment

- Copy pasted solutions don’t work: African situation require African solutions + need to balance with global solutions - Heritage is not enough anymore: need to make a change in people life to get credit - New generation is ambitious but has no time, want to make money fast…. ! - Local entrepreneurs are now extremely aggressive; depending on sectors: distribution is critical - Almost 50% of the population still leaves below the poverty line: this requires adapted strategies….

More information and quotations:

Nathalie JOB – Analysis Group / Kantar TNS / nathalie@kantartns.io

Katouskia SAWMY – Kantar TNS / Katouskia@kantartnsio.io

T + 230 202 00 55