Posts Tagged ‘floating class’

Analysing shifts in consumer household purchasing patterns – Milk ATMs in Kenya

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Uchumi Supermarket, Ngong Rd, Nairobi Photo Credit: @bankelele

“We are selling one litre at Sh65, but a consumer can get as little as 77ml at a cost of Sh5. All one needs to do is key in the amount they require, and the product is dispensed,” Gitonga, who procures his machines from Italy, said.

Flexibility is the key to survival, indeed. This quote is from a Kenyan newspaper article titled “Dip in purchasing power drives demand for milk dispensers” which covers the increasing visibility of these milk vending machines in Nairobi and touches upon some of the demand drivers.

Mr Gitonga told Business Beat he shares the profits equally with supermarkets and retailers as he is protected from other expenses such as rent, water and electricity.

He said the demand for milk from the machines is being dictated by changing dynamics in the local market, including the need for quality milk, depressed purchasing power and a surging population.

The prices for processed milk have increased since the introduction of VAT last September, which has prompted consumers to turn to raw milk. Currently, a litre of raw milk in most estates costs between Sh50 and Sh55, while a litre of processed milk averages Sh85.

“We are giving consumers who frequent outlets in estates that sell raw milk that may not be inspected a safer choice.”

What strikes me is the fact that this shift back to one of the fundamental purchasing patterns observed among the lower income demographic is not only an obvious sign stretched household budgets due to rising price of food, but a classic example of the flexibility required by those managing on irregular income streams.

That is, this daily habit to purchase only what is needed and that too by cash amount (5 shillings) or quantity, is the same purchasing model for kerosene, another household staple.

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Could this shift in buyer behaviour also be considered a signal of the fluctuating fortunes of the “floating class” identified by the African Development Bank as those who are part of the emerging middle class but their cash flow might not be as steady as for someone on a regular paycheck?

If so, then we’re seeing here an example of an innovative solution to providing a daily need – milk – to urban households without a cow in the backyard – by ATM entrepreneurs as a whole new market creation opportunity.

Not for milk per se, but for products and services which can offer the flexibility that volatile income streams require, and are still upwardly mobile or progressive consumables that the emergent middle class household needs for their shopping basket, in this case, pasteurized milk.

And the increase in demand might actually also be an increase in the population of those who are now part of “middle class with floating”… this could be one of the dividing lines. I’d keep an eye on the fortunes of these milk machines in supermarkets if I were interested in the African middle class market.

 

The Brass Ring Syndrome: When prosperity is close enough to make a jump for it!

We’ve been talking about that borderline where one goes from “destitute” or “BoP” towards becoming “emerging global middle class” or the AfDB’s “Sub Saharan middle class” since the common band that overlaps both categories is the ever popular $2-$4 a day and it is proportionally the largest segment of the population in most newly emerging economies. I am going to try and describe these GEMs – global emerging middle classes.

What we don’t ask ourselves in all these conversations on emerging markets or emerging consumers is where exactly have they emerged from or what state are they in the process of leaving. It is usually the lower income category or country or LDC labeling or the BoP segment at the bottom of the social and economic pyramid. Its upward mobility for a nation state or region or demographic segment of the population.

Worldwide momentum of changes signal tipping point for shift into BoP minority

Now, this is happening on a global scale, that enough momentum has occurred with all our poking and prodding at the bottom, whether through sustainable development or BoP enterprising women in some form. One could say that there is no impact at all of all these puny pilots all beavering away in their little remote villages, country towns and livestock markets, maybe achieving the social impact of a flea on the back of the Indian rural poverty elephant or one might wonder if all of this activity, taken together, synergized into this faint rumbling of an imminent global change about to take place.

Finally, enough people in enough places have managed to lift themselves free of the gravity well sucking them down into completely insecure and uncertain relationship with the poverty line (aka the next meal or three for the entire family) that they can plan ahead for the next purchase or investment in their future economic status and social standing. One is not independent of the other, especially not in the closely knit, hyper local social networks in rural regions of the developing world.

This photograph is one such example that encapsulates this kind of liminal rural economic behaviour, particularly in the developing world. Here I choose Bobbi Schaetti’s definition of liminal space, taking meaning from the root word limnos, which is Greek for the threshold time – when what was is over but what will be is not yet. Schaetti considers it a time rich with creative fomentation and full of potential, fairly bursting with the energies of the new and improved aka innovation.

Is not pulling yourself up by your bootstraps, like thousands of Kenya’s smallholder farmers, the equivalent of innovation in quality of life and circumstance? Are you not seeking a whole new level of lifestyle thus adopting a sustainable change in the way you currently live?

This is just a hypothesis that I hope to validate in the next opportunity. Because if we are able to use the tools from the design planner’s toolkit in order to understand economic behaviour and activity in the very human and flexible rural economy which is primarily based on tangible evidence of wealth, value and Returns on Investment (RoI).

Answer at bottom of page: What is the photograph telling us?

This is a light fixture and lampshade that has been affixed to the ceiling of the homestead’s main living room in a solidly bourgeois farming neighbourhood in Mwingi, Eastern Kenya. The household is dependent primarily on agriculture, thus living on seasonal cycles of abundance and scarcity per the harvests. But they’re now ready to make that leap for the last mile to the electric grid – this connection from homestead to the nearest Kenya Power grid might cost as little as 30,000 shillings, the price of a prize cow, or as much as a 100,000 if you are just a wee bit short of the distance they will cover with their equipment.  We’ve met a local teacher who managed to install an additional pole for the electric wires within his homestead walls.

Here, the entire homestead has been wired for electricity and so, a visible symbol proclaims to the community and neighbourhood what the family is aiming for in the next opportune moment that such a lumpsum of cash is available free and clear.

Reaching such a point, imho, implies that all else is in readiness for this status jump up from low income or lower class if one considers schoolteachers, civil servants, bank managers etc are considered the rural elite. They first to install solar power in their homes in order to enjoy the latest mod cons and gadgets. This signal itself, however, might be country or region specific. What we can feel certain about however is that there will be such a set of culture and region specific signals or cues, appropriate to the local context, that will signal as visibly the ongoing intent of this household to emerge into the global middle classes as customers and consumers of goods and services that improve one’s quality of life.

That is, now consumption patterns should change to include those which contribute to lifestyle choices and indulgence or convenience just enough more, on a regular basis, than those who live hand to mouth for survival’s sake. Another way that one can look at this distinction is to ask if the person is able to treat oneself regularly (whether its monthly near payday or every weekend to meat for the family dinner) or if this treat is random, uncertain and rare.