The Kenyan consumer and retail landscape is set for a multitude of shifts. While the country has favourable future prospects and a stable consumer confidence, the Kenyan shopper is becoming more complex with tighter pockets. Kenyans shop 21 times per month and 41% of their trip to the store is for topping up essentials. Total FMCG grew by 7% in MAT* March 2019 vs previous year, with the growth mainly driven by groceries and kiosks. However, trade is getting more complicated and is impacted by the evolution of new channels and supply chain changes.
These were just some of the insights that emerged at a recent Nielsen event in Nairobi, which looked at whether retailers and manufacturers are equipped to beat the odds they are facing in Kenya by anticipating and preparing for the future.
Speaking at the event, Nielsen East Africa MD Faith Wanderi said “Everyone is fighting for growth. Inflation continues to be a main concern for consumers, big traditional brands are facing challenges from smaller, more agile, regional and local players who are faster at adapting on the go. At the same time, new formats and channels are emerging, making our market even more competitive. In such an environment, finding opportunities with the right insights becomes key to help beat the odds.”
BEATING THE CONSUMER ODDS IN KENYA
The Kenyan consumer is confident but cautious. 57% Kenyans feel good or excellent about the state of their financials, but only 3 out of 10 Kenyans have spare cash after meeting their essential living expenses, and 33% only have enough money for the basics. Consumers are feeling the pressures of a squeezed wallet.
Given this backdrop, the Kenyan shopper has become highly price conscious. According to Nielsen’s Shopper Trends syndicated study conducted among supermarket shoppers in Kenya, 70% of shoppers are aware of prices and more than 95% notice price changes. 6 out of 10 shoppers are influenced by promotions in stores and 60% shoppers put in a lot of effort to buy groceries at the lowest price. Soft drinks, fresh fruits, and chocolates are some of the categories that the Kenyan shopper will cut down on if their prices increase.
Despite the money crunch, 79% Kenyan shoppers enjoy grocery shopping and 74% are willing to pay more for quality products.
When we look at what factors are important for a shopper in a store, convenience, having everything in one shop, well stocked, and good value for money are some of the features that stood out.
It is important to understand the consumer nuances in Kenya when offering products and services to them. Consumers are price conscious and are looking for value but are willing to pay more for quality products, if they see perceived value in it. It is not just a pricing game anymore. Factors like convenience, availability, ease of shopping are some of the parameters that consumers are using to make shopping decisions. Marketers need to understand the different aspects that shape consumer attitudes and that impact spend.
BEATING THE RETAIL ODDS IN KENYA
The retail environment is fragmented and tough. We have seen a 54% growth in the number of stores in Kenya in the last five years, increasing the complexity in the market. The traditional channels of distribution are evolving, increasing access for the consumer to the products and services of their choice.
While trade is becoming more complicated, it has led to opportunities for some. We see that traditional trade, which accounts for 66.3% of total trade in Kenya, grew by 10.7% in MAT March 2019 vs previous year. The growth is driven by small players and local manufacturers who are expanding their reach.
At the same time, the consumer basket is still focused on basic needs, with the top 20 categories accounting for 82% of spend. Category growth is driven by value brands, speaking to the price consciousness of the Kenyan shopper. It is interesting to note that over 70% of FMCG transactions occur at below KES 55.
Ecommerce is going strong with an appetite for online shopping in Kenya. 3 out of 10 Kenyan shoppers are willing to shop online in the near future. However, concerns around quality (55%), extra charges (44%), product examination and delivery time (both 38%) are the top barriers to purchasing groceries online for Kenyans.
When we look at new launches, we see that 7% SKUs (Stock Keeping Unit) contribute to 90% of new launch sales and 32% SKUs don’t last beyond a year. The right innovation can be a game changer in the market. Brand trust, quality assurance, convenience, experience, and how ethical and sustainable a brand is, are some of the reasons consumers would buy new products.
Given the fragmenting retail landscape, manufacturers and retailers need to find their pockets of growth, deliver products and services at the right price points to the consumer and focus on innovation to break through the clutter. There’s also a need to build precise and efficient distribution and trade strategies to navigate the complexity that exists in the market and beat the odds in Kenya.
*MAT – Moving Annual Total (MAT Mar’19 – April’18 to March’19, 12 month period)