West & Central Africa Food and Drink Report Q4 2012

We hold a positive view towards Cameroons food, drink and mass grocery retail industries over our forecast period, in line with our broadly positive view on the countrys consumer sector, which is already one of the regions most established. We expect consumer spending power to grow in line with the countrys strong medium-term growth outlook, with growth in economic activity driven by the ongoing expansion of the countrys oil industry and the subsequent inflow of investment into the market.

This will feed through into falling unemployment, growing consumer confidence and increased spending.

Key Forecasts

- Total food consumption growth in 2012: 7.9 % year-on-year (y-o-y); compound annual growth to 2016: 9.5%.
- Mass grocery retail sales growth in 2012:9.5%; compound annual growth to 2016: 15.7%.
- Beer sales growth in 2012: 4.3%; compound annual growth to 2016: 3.6%.

Key Trends

Population Growth: In line with the wider Sub-Saharan African region, a major factor in West and Central Africas appeal to investors is its favourable population dynamics. Nigeria, with its massive population, leads the pack in this regard. However, Cameroons population dynamics are also a major plus point for investors. The countrys 20.0mn-strong population (as of 2011) will grow to 24.1mn by 2020 and by an enormous 88% to 38.5mn in 2050. Most notable is the age profile of the population; in 2012, 51% of Cameroons population is forecast to be younger than 20, and this provides immense longterm growth opportunities for regional investors.

Formalisation of Retailing: Throughout the region, our forecasts for mass grocery retail sales growth outstrip our forecasts for food consumption growth, although it should be noted that both are broadly impressive. The outperformance of retail will be a result of the ongoing formalisation of the sector and the fact that it is, in most cases, coming from an exceptionally low base. The addition of just a few modern retail outlets, which cause shoppers to trade up and away from traditional independent stores and marketplaces, will have a massive impact on growth in the sector. In Cameroon, we estimate that only around 2% of grocery retail sales are accounted for by the organised sector, providing tremendous room for growth.

Risk/Reward Ratings

Cameroon is in 10th place out of the 13 regional markets that are ranked for Sub- Saharan Africa within BMIs Food & Drink Risk/Reward Ratings. The country scores above the regional average in terms of rewards – an illustration of the massive growth opportunities available in the region.

However, it scores below average in terms of risk, highlighting the challenge that investors face in fully realising this potential opportunity. Overall, Cameroon ranks just below the Sub-Saharan Africa average in our regional ratings.

Côte dIvoire

We have a very positive medium-term outlook for the Ivorian food, beverage and retail sectors. Our positive view hinges on our Country Risk teams expectations for economic growth in the country over our five-year forecast period, an impressive domestic demographic picture and the currently highly underdeveloped nature of the local market, which if nothing else leaves tremendous room for growth.

Key Forecasts

- Total food consumption growth in 2012: 9.9%. Compound annual growth to 2016: 10.3%.
- Mass grocery retail sales growth in 2012: 14.0%. Compound annual growth to 2016: 14.0%.
- Beer sales growth in 2012: 8.0%. Compound annual growth to 2016:6%.

Key Trends

Population Growth: In line with the wider Sub-Saharan African region, a major factor in West and Central Africas appeal to investors is its favourable population dynamics. Nigeria, with its massive population, leads the pack in this regard. However, Côte dIvoires population dynamics are also a major plus point for investors. The countrys already attractive 20.2mn-strong population base (as of 2011) will grow to 24.5mn by 2020 and by a massive 98% to a very healthy 40.7mn in 2050. Most notable is the age profile of the population – in 2012, 51% of Côte dIvoires population is forecast to be younger than 20, and this provides immense long-term growth opportunities for regional investors.

Formalisation of Retailing: Throughout the region, our forecasts for mass grocery retail sales growth outstrip our forecasts for food consumption growth, although it should be noted that both are broadly impressive. The outperformance of retail will be a result of the ongoing formalisation of the sector and the fact that it is, in most cases, coming from an exceptionally low base. The addition of just a few modern retail outlets, which cause shoppers to trade up and away from traditional independent stores and marketplaces, will have a massive impact on growth in the sector. In Côte dIvoire, we estimate that only around 3% to 4% of grocery retail sales are accounted for by the organised sector and this provides tremendous room for growth.

Risk/Reward Ratings

Côte dIvoire is tied for 11th place out of 13 regional markets that are ranked for Sub-Saharan Africa within BMIs Food & Drink Risk/Reward Ratings. The country scores above the regional average in terms of rewards – an illustration of the massive growth opportunities available in the region. However, it scores well below the regional average in terms of risk, highlighting the major challenge that investors face in fully realising this potential opportunity. Overall, Côte dIvoire ranks below the Sub-Saharan Africa average in our regional ratings.

Gabon

Relative to a number of other Central and West African economies, our outlook for growth in Gabons food, drink and retail sectors is fairly modest. That said, this is modest growth by regional standards, and our forecasts for food consumption and soft drink sales growth for 2012 is still pretty appealing and largely in tune with our positive views on the Sub-Saharan African consumer growth story.

However, there are some macroeconomic risks that must be considered. Oil production in Gabon is in decline, and despite ambitious government diversification plans, there is still an overreliance on this sector for growth and employment.

Key Forecasts

- Per capita food consumption growth in 2012: 3.8%. Compound annual growth to 2016: 2.9%.
- Mass grocery retail sales growth in 2012: 12.5%. Compound annual growth to 2016: 13.1%.
- Beer volume sales growth in 2012: 3.1%. Compound annual growth to 2016: 4.4%.

Key Trends

Population Growth: In line with the wider Sub-Saharan African region, a major factor in West and Central Africas appeal to investors is its favourable population dynamics. Nigeria, with its massive population, leads the pack in this regard. Gabon is at the opposite end of the scale. Similar to most of its regional peers, it will enjoy very strong population growth – the size of the countrys population forecast to increase by 75% out to 2050. Also in keeping with broader regional dynamics, Gabon has a very positive age profile, with 46% of the countrys population expected to be younger than 20 in 2012.

However, growth is coming from a very low base. Gabons population is forecast to reach 1.6mn in 2012, and this marks it out as significantly less attractive than many of its neighbours.

Formalisation of Retailing: Throughout the region, our forecasts for mass grocery retail sales growth outstrip our forecasts for food consumption growth, although it should be noted that both are broadly impressive. The outperformance of retail will be a result of the ongoing formalisation of the sector and the fact that it is, in most cases, coming from an exceptionally low base. The addition of just a few modern retail outlets, which cause shoppers to trade up and away from traditional independent stores and marketplaces, will have a massive impact on growth in the sector. In Gabon, we estimate that only around 3% to 4% of grocery retail sales are accounted for by the organised sector, and this provides strong prospects for growth in spite of the limited size of the potential audience.

Risk/Reward Ratings

Gabon falls in 13th place out of the 13 regional markets that are ranked for Sub- Saharan Africa within BMIs Food & Drink Risk/Reward Ratings. The countrys rewards score is low by regional standards – a product of relatively high existing spending levels and a small population. The country also falls below the regional average in terms of risk, albeit just. This combines to give Gabon the lowest score within the overall regional table.