Anyone familiar with the literature and handwringing around the size of the African middle class that’s an ongoing sidebar to the emergence of the continent’s economies, will appreciate the FT’s analysis of recent research results.
The global middle class is both smaller and poorer than previously thought, according to a new study, with hundreds of millions who have recently emerged from poverty in developing countries still vulnerable to falling back into it.
These findings seem to underline something we’ve been saying for quite some time now, that the metrics used to originally define the demographic “middle class” may not be applicable outside of their home region.
Africa’s connected and demanding consumers have never been so visible as they are today, and their buyer behaviour and consumption habits are undeniable. They, and their ilk in India, China or South America, just may not fit the criteria of “middle class” as entrenched in the OECD nations. This goes beyond mere purchasing power or access to consumer credit – it has often been said that “middle class” is as much a state of mind as of wallet size.
These results when contrasted with the weaker signals in social evolution and shopper behaviour imply that we need to step back and distinguish what purpose of our analysis is meant to serve before counting heads in one class or the other.
The FT article references Nestle’s rethink in sub Saharan Africa after discovering there weren’t as many “middle class” as they were led to believe. It leaves out the fact that Nestle’s fails came from trying to sell Nespresso sachets and premium pet food in consumer markets very different from wherever their new boss was prior to his posting in “Africa”. Its far easier to blame the customers for not wanting to buy your product than to conduct a consumer insights survey from the ground up assessing this untapped frontier market. Your decades of consumer research will not help in the entirely different operating environment of the African continent.
Yet, the same article overlooks the success of various emerging market private equity firms – Abraaj is one of the most visible – investing in FMCG brands and household furnishings; or, the rise of dairy as a key consumer segment. Denmark’s Arla cooperative has named Nigeria as one of its key strategic markets in the coming 5 years.
When it comes down to the African consumer market opportunity I advise people to listen to what the leaders of such companies who are already reaping the benefits of increasing sales and trade may have to say than the metrics and measurements from an environment that is dramatically different from this one. As BCG’s recent research states:
What MNCs are facing in Africa is similar to what they’ve faced in parts of Asia and Latin America: an increasingly capable set of local competitors. In a 2013 BCG survey of executives in developed markets, 73% said they considered local companies in emerging markets to be a threat. In contrast, 50% said this about emerging-market-based MNCs, and 40% said this about MNCs in their home markets. The entity looking to eat your lunch in Africa is one that your board of directors—and maybe you yourself—didn’t know existed until recently.
I’m actually glad that this research has discovered that the “middle class” is slowing down everywhere, even in the greatest consumer market on Earth. Perhaps, then, it’ll force marketers to rethink their assumptions on identifying and valuing opportunity spaces and question the meaning of the term “middle class” before chasing it like a unicorn in the woods.
There’s definitely a whole new opportunity and market that is emerging, and it must be studied from scratch from the ground up. Reflexive old labels and segments don’t apply.
Update: There’s an interesting Guardian article on this, with this insight:
Middle class, in the US, means what working class means in Britain. Except that, while nobody – even in Corbyn’s Labour party – goes around saying they represent “working-class values”, all politicians in America claim to represent the values of this middle class.
Might this explain the challenge of attempting to define and describe middle class across cultures?