Past errors haunt consumer giants' new Africa push

Reckitt Benckiser

23/03/2026 16:01

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

By Aimee Donnellan

DUBLIN, March 24 (Reuters Breakingviews) - For consumer goods giants plagued by weak revenue growth in established markets, Africa looks compelling. The continent's population is set to surge from 1.5 billion to 2.5 billion by 2050, according to the United Nations Economic Commission for Africa. The ongoing baby boom could open up a fast-growing market for high-margin products like infant formula, diapers, and vitamins. But consumer giants have been here before. They have repeatedly hyped the "Africa opportunity" and then failed to deliver. For this time to be different, chief executives will need to learn from past mistakes.

Consumer goods companies are in a difficult spot. Inflation has made premium products a tough sell in core developed markets, while private-label goods show no sign of losing their appeal: supermarkets' own brands accounted for nearly 40% of European grocery sales in 2024, perMcKinsey. Demographic headwinds are making things worse - ageing, health-conscious populations in Europe and North America are losing their appetites for premium beers, spirits and sweet treats. The United States and Europe now have the lowest fertility rates in the world, according to the Pew Research Center. These issues have contributed to management churn. Nestlé NESN.S, Unilever ULVR.L, Diageo DGE.L, and Heineken HEIN.AS have all parted companies with their incumbent CEOs in the past twelve months; the Dutch brewer is still searching for a permanent replacement.

The turmoil helps explain why consumer giants are once again betting that Africa can turbo-charge their growth, in the way China and India once opened up new markets. Heineken made Africa a central pillar of its EverGreen 2030 strategy and singled out Ethiopia as a fast-growing emerging market, having already opened breweries in Mozambique and South Africa. Pernod Ricard PERP.PA last year described Africa as a market with “great potential” for the French company's premium spirits and champagne. The $241 billion Nestlé announced it was expanding its research and development centre in the Ivory Coast, while Danone DANO.PA is pushing into Morocco, Algeria, and Nigeria.

Their optimism is grounded in some exciting prospects. For makers of consumer products, rapid population growth not only means a growing supply of new customers but also a young and energetic workforce to operate factories, staff research and development centres and market products. According to the African Development Bank, the continent’s median age of 19 will help fuel $47 billion of GDP growth through increased workforce participation. African cities, where salaries and disposable incomes are generally higher than average, are rapidly expanding. More than 60 African conurbations currently have populations over 1 million, on par with Europe. By 2050 the OECD expects that number to reach nearly 160.

Consumer goods giants have attempted this pivot before, though. In 2011, Unilever's then-CEO Paul Polman set a target to grow the share of sales from emerging markets, including Africa, from 55% to 75%. Yet in 2013 and 2014, Unilever missed its sales targets largely due to currency volatility. In 2018, Heineken boss Jean-François van Boxmeer declared African investment "absolutely key" to the company's international growth strategy. But by 2024, Africa and the Middle East brought in less than 14% of the beermaker's sales, far behind the U.S. and Europe.

There are many explanations for these lacklustre results. To start, disposable income in Africa did not take off in the way many expected. A 2017 McKinsey report projected that by 2025, nearly two-thirds of the continent's 303 million households would earn above $5,000 a year. Yet today in many parts of Africa the average GDP per capita is below $2,500, which suggests disposable income has not grown as expected. Meanwhile, employment has failed to keep pace with rapid population growth: in South Africa, around 30% of the workforce is currently jobless. Inflation further eroded disposable incomes. Currency volatility compounded the pain for multinationals which tend to pay for raw materials in dollars but earn revenue in local currencies. For example, Nestlé ran into difficulty in 2024 when Nigeria devalued the naira, triggering a drop in profit even as local revenue grew in nominal terms.

But big consumer companies also made avoidable errors by overextending. In 2008, Nestlé invested across 21 African countries and built factories in anticipation of a growing middle class. By 2015, sluggish sales forced the KitKat maker to cut 15% of its African workforce, close offices in Uganda and Rwanda, and shut warehouses. The head of Nestlé's Africa business said at the time: "We thought this would be the next Asia, but we have realised the middle class here is extremely small and it is not really growing." Diageo also had a rethink and sold a significant stake in Guinness Nigeria to Singapore-based rival Tolaram.

The companies returning to Africa today appear to have absorbed some of those lessons. Their new approach is to divide up Africa into economic regions and go deeper into specific markets, rather than trying to cover large areas. Pernod Ricard and Durex condom maker Reckitt Benckiser RKT.L are concentrating their efforts on relatively affluent cities rather than attempting continent-wide distribution. A source close to Reckitt says the company is looking to double or triple its revenue growth in the region. Diageo has retained licensing rights to Guinness Nigeria, allowing it to benefit from growth in the region and freeing up cash to pay down debt. Nestlé is targeting a smaller number of markets with specific products tailored to local needs and price points like Nescafé instant coffee, Maggi stock cubes and KitKats.

This more disciplined approach makes business sense but is also a financial necessity. Diageo and Nestlé both carry debt equivalent to around 3 times expected EBITDA, limiting their ability to make aggressive investments. Pernod Ricard's share price has been under significant pressure. None of these companies can afford to overextend themselves again.

Yet at the same time none can afford to stay away either. Africa's long-term demographic trajectory is unlike anywhere else in the world. If the growth story does eventually materialise - if income levels rise, infrastructure improves, and a genuine consumer class emerges - companies that avoid the continent risk missing out on one of the last major growth markets on earth.

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Consumer giants valuations are under pressure https://www.reuters.com/graphics/BRV-BRV/zjpqmwlwkpx/chart.png

Africa's population is set to grow this century while others decline or stagnate https://www.reuters.com/graphics/BRV-BRV/zdpxgnennvx/chart.png

(Editing by Peter Thal Larsen; Production by Streisand Neto)

((For previous columns by the author, Reuters customers can click on DONNELLAN/Aimee.Donnellan@thomsonreuters.com))