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Townships Brand Building

Aperio FMCG ConsultingHow to successfully build brands in townships

By Michael Wood, Aperio Director

Reaching the illusive township shopper is high on the agenda of most FMCG companies that want to tap into the buying power of South Africans in some 43 major metro townships.

According to Michael Wood, Director of Aperio FMCG Consulting, a business consulting company focused on accelerating growth of FMCG brands in South Africa and Sub-Saharan Africa, “FMCG companies need to properly understand shoppers and the retail environment in townships in order to successfully build their brands.”

Reliance on “formal retail and formal wholesale to reach the emerging market,” will not ensure success says Wood.

The majority of the shoppers in these townships are from lower income households and nearly 90% of consumers in townships have a household income of under R5000 a month.

“These shoppers are highly reliant on public transport and the proximity of retail is key, so building a route to market to proximity informal retail is essential, for example the average distance of a these households to informal retail in Tembisa is 248 m,” says Wood.

The answer lies in mapping, tiering and targeting the retail environment which, according to Wood, provides FMCG companies with an effective coverage area and a better return on investment.

It is crucial to map the primary outlets in townships based on household clustering, thereby prioritising the best outlets based on estimated shopper spends, these primary outlets offer the best returns from local shoppers and in addition can be bulk breakers to service the smaller surrounding retail outlets.

Succesful brands in the emerging market have made route to market a key component of their brand strategy, companies like Coca Cola, SAB, Brandhouse, Unilever and P&G.

“One of the key success factors is to understand and work with wholesale, and not around it,” he says, “make wholesalers part of your route to market solution.”

“The informal township retailer landscape is changing. It is interesting to note that in some townships up to 80% of spaza shops are foreign owned. These stores are better run, better stocked, well merchandised, have credit systems for shoppers and are open6am – 9pm, 7 days a week.

“These spaza shops have setup informal buying groups; they buy for lower prices and pass on those cheaper prices to their shoppers, offering better value as well as convenience.”

Wood believes there is an opportunity to convert these retailers to franchise stores or for brand owners to partner with these outlets, build relationships, drive activity and shopper programs.

Woods provides these tips to FMCG brands who want to establish a succesful route to market:

Direct coverage – covering the tiered and mapped primary outlets directly, whilst partnering with local wholesale as the source of supply.

Cost to Serve – lowest costs by offering a basket of goods with a 3rd party sales agency that drives lowest possible cost to call.

Build scale – critical mass is crucial.

Discipline - operating in an informal environment requires a formal disciplined approach from your township marketing company.

Local is absolutely critical – this means using local wholesalers that know their retailer and local sales peoplethat know their neighbourhood.

Availability and visibility – in the township market shoppers will switch if the product is not available.

Adapt execution - a common strategy is required but execution is different from one township to the other.

“Reaching the emerging market shopper is a huge opportunity the foundation lies in developing and executing the right route to market strategy,” says Wood.

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