African Businesses Win by Understanding Base of Pyramid Consumers

Africa’s business landscape has been rapidly changing, due to increased regional mobility, rapid urbanization and population growth, all of which has boosted demand for African-manufactured products and services. This, coupled with strong interconnectedness and a sense of pan-Africanism, has brought much optimism for businesses operating in the region.

Several key trends are driving large-scale private sector growth on the continent. These trends are not only shaping the strategies for existing companies but have also influenced the nature and appetite for joint venture projects across the continent. One of these key trends is the rise of ‘Bottom of the Pyramid’ consumers.

‘Bottom of the pyramid’ consumers

Despite rapid socio-political advancements in Africa, only around half of people there earn more than $4 a day. While in Africa this might be categorized as “middle class”, manufacturers locally and globally would still label them as low-income consumers, or the bottom of the pyramid (BOP) market.

The competitive advantage of African owned and run businesses is that, unlike their foreign counterparts, they understand the purchasing decisions of the world’s more than 5 billion low-income consumers, which gives them a competitive edge.

When CK Prahalad published The Fortune at the Bottom of the Pyramid, he was speaking directly to the many African entrepreneurs that understood the world’s poor and their untapped buying power. Companies on the continent are learning how to serve these consumers while making money in the process.

Single-use and/or low-cost products have been experiencing solid demand. Products like SC Johnson’s individual mosquito coils for $0.01 and returnable 200ml bottles of Coca-Cola continue to be profitable because these companies have invested heavily in the logistics needed to reach BOP consumers, and have carried out market research on the packaging and disposable income required for poorer consumers to be able to buy their products.

A full length version of this article first appeared on the WEF website.