(Ecofin Agency) - With over 90% of businesses in Africa’s food sector being micro, small, or medium enterprises (MSMEs), the report highlights the need to promote economies of scale and shared production tools. This approach could help lower operating costs and meet African consumers' buying preferences better.

About 70% of consumers in Sub-Saharan Africa prefer local food brands over international ones due to their better quality and affordable prices, according to a report released on October 9, 2024, by Boston Consulting Group and the Mastercard Foundation.

Titled “Transforming Africa’s Food Systems: How Food Brands Can Lead the Way,” the report is based on a survey conducted among 2,300 consumers across eight African countries—Kenya, Uganda, Ethiopia, Nigeria, Côte d'Ivoire, Ghana, South Africa, and Zambia. The respondents, who purchase packaged food products from modern retail stores, fall into different income groups: 30% are classified as low and lower-middle income, 60% as middle and upper-middle income, and 10% as high income.

Across all countries surveyed, consumers choosing local food products did so mainly for better prices (44%), authentic local taste (43%), family purchasing habits (34%), and product availability (30%).

Overall, respondents identified quality as the top factor influencing their decision to buy food products in retail stores (38%), followed by price (29%), product safety (13%), and brand reputation (10%). Only 2% of those surveyed indicated that factors like local job creation or environmental protection influence their food choices. Meanwhile, the report also highlighted that 54% of African consumers lack awareness of African food brands outside their own country.

The report emphasizes that understanding consumer preferences is essential for companies aiming to meet rising demand. Africa’s food industry is projected to triple in size by 2030, reaching $1 trillion annually. This growth is driven by rapid population increase, urbanization, rising incomes, and changing consumer habits around food shopping and meal preparation. The World Bank estimates that these factors will drive this expansion. In addition, the African Continental Free Trade Area (AfCFTA) agreement is expected to boost African agro-food trade by 41% above 2020 levels, according to projections from the United Nations Economic Commission for Africa.

To take advantage of these opportunities, African food companies must not only understand consumer behavior but also scale up to supply products in an economically viable way. Building brand recognition will be essential as the market grows increasingly competitive. However, over 90% of food businesses in Africa are micro, small, or medium enterprises (MSMEs) that face challenges such as limited access to affordable financing, low visibility with consumers, and high input costs, especially for packaging.

The report suggests that investments in consumer research can help companies develop targeted marketing strategies, choose the right sales channels, and refine brand messaging. Access to shared facilities for processing and packaging, for instance, can enable smaller food companies to produce high-quality products at lower, shared costs.

In this area, access to fractional human resources—outsourcing roles like marketing directors or brand strategy experts to external consultants or specialized firms—could help turn market insights into effective branding strategies for African food companies. There are already examples of specialized accelerators and government-initiated innovation hubs providing this tailored support, such as the Wakanda Food Accelerator in South Africa and the Kenya Industrial Research and Development Institute (KIRDI).

In this context, the availability of affordable financing is crucial. African banks could provide access to affordable capital to support MSMEs in the food sector. Concessional financing would also help. Analysis by Boston Consulting Group reveals that from 2018 to 2021, $19 billion went toward the development of upstream agricultural production in Africa, mostly through public aid and multilateral development organizations. In contrast, only $100 million was directly allocated to midstream and downstream activities within the agro-food value chain, such as processing, packaging, logistics, and retail. This imbalance suggests a need for a funding shift to maximize impact and distribute benefits more evenly across the value chain.

In addition, African governments are encouraged to create policies that support local food production and cross-border trade within AfCFTA. Policies that could help include infrastructure development, streamlining cross-border trade processes, and offering tax incentives to agribusinesses to enable them to expand.