Me: Excusez-moi, avez-vous poulet yassa? (Excuse me, do you have poulet yasssa?)
Senegalese server: Toujours (Always).
An unusual response, but not entirely unexpected.
Senegal is unique when it comes to chicken and eggs. It has one of the higher rates of chicken meat production per capita in sub-Saharan Africa, totaling about 3.2 kg per capita in 2010.
Chicken is what is known as a Fast-Moving Consumer Good (FMCG) or Consumer Packaged Good (CPG). FMCG’s are the buzz across Africa now. Investors are seeking opportunities to take advantage of this rapidly growing market. This article will be the first in a series about the changing landscape of FMCG in Africa.
The reality of sub-Saharan Africa (SSA) is that meat consumption, particularly chicken consumption, is growing so fast that capacity is not meeting demand. Since 2000, chicken consumption has skyrocketed across the continent by more than 55 percent (more than 32 million tons) to around 92 million tons in 2012. When calculated on a per capita basis, this growth does not appear as spectacular but it still supports an argument for continued growth.
The growth in overall poultry consumption in Africa has been near 0.5 kg per person, which amounts to about a 6 kg average consumption per person. In 2009, per kg consumption of poultry for a South African was around 32 kg. As many readers of this article will point out, there are bigger poultry consuming cultures across Africa, but the true differentiating factor in these numbers is availability of poultry.
There are several other observations that support continued growth in poultry consumption: (1) according to the United Nations, the share of the working age population in Sub Saharan Africa (SSA) is set to rise from 55 percent to 65 percent by 2050, adding more than 680 million workers and subsequently wage consumers; (2) according to the McKinsey Global Institute, households in SSA earning more than USD 2,500 annually is set to rise to almost 70 percent from less than 50 percent in 2000; and (3) according to the IMF, African economies are growing on average at a rate of 5.5 percent as compared to a 4 percent global average which means more consumption if you buy consumption as a natural byproduct of economic growth. Effectively, you have the theme of a growing African population, particularly middle class, that is demanding more, specifically chicken in this case, and are not finding their need met.
Following the chicken consumption trend is egg consumption. Analysis on a per country basis shows that the concentration of egg production follows the trend of chicken production with the ten leading countries in overall volume production accounting for around 80% of Africa’s total production. Removing North Africa from these numbers paints a very despairing picture. Five of the top ten egg producing countries on the continent come from North Africa (i.e., Libya, Morocco, Tunisia, Egypt and Algeria). Also, it is hard to ignore how instability in North Africa could easily reduce the supply of chickens and eggs to the continent. However, demand will slow some in North Africa as tourism slows in countries, particularly Egypt. Still, you can expect supply to drop much faster than any potential decline in demand.
Regardless, throw away the statistics and see the personal narratives as you travel the continent and the picture is clear. On a bus from Johannesburg to Maputo, be prepared to ride with many Mozambicans carrying dozens of eggs as the price of eggs in Mozambique are quite high compared to South Africa. By the time I arrive in December, the price of chicken should be up, as normal, during the holiday season.
I asked a local Tanzanian restaurant in Dar Es Salaam how the supply of chicken is and got “Karibu Tanzania” (Welcome to Tanzania) and a long talk about chicken not being the best quality when it arrives to Dar Es Salaam and how there is often a shortage of “good” chicken. To explain Ethiopia, I can say that my diet is more beef than it has ever been. Stop in Malawi, Cameroon, and so on and you will get the picture. The search for a “legitimate” and top notch chicken farmer is not solely for one country but for the expansion of chicken and eggs across the continent.
Aureos recently sold its stake in Golden Lay, a Zambia-based company involved in the production, distribution, and sale of chicken table eggs. Golden Lay was also a supplier to the huge and growing population of the Democratic Republic of Congo. As trends on the consumer class continue to hold, these deals should become more common AND hard to find as one true reality of the chicken producing system in Africa holds in the near future—there simply is not that many chicken farmers, especially with strong distribution capabilities and networks, supplying the market that can absorb large private equity investments, or, in layman’s terms, get up to a large commercial scale in a short period. Then again, this would not be private equity if the story was straightforward, and the growth was just a flip of a switch. Just finding the right technical adviser and chicken farmer is only a start. Try meeting the chicken farmer after a 3-hour 4×4 truck ride on terrible roads (been there, done that). The ride, by itself, will teach you a lot about distribution and logistics in the face of poor roads and infrastructure.
Kurt Davis Jr. is an experienced private equity investor and early business/start-up consultant with experience in Sub-Saharan Africa and North Africa, Asia, Europe and United States. He is an avid traveler who has been to 60+ countries throughout the world in search of new investment opportunities, new people, and better understanding of the world. His international professional career includes positions with Schulze Global Investments, Kukula Capital, African Development Bank, Swicorp S.A., Bear Stearns, Citigroup Smith Barney, and Skadden, Arps, Meagher, Slate & Flom. His experience covers the agri-processing/food processing, construction, fast-consumer moving goods (FMCG), energy & infrastructure, manufacturing, natural resources and real estate sectors. Mr. Davis holds a Master in Business Administration (M.B.A.) degree from the University of Chicago Booth School of Business, Juris Doctor (J.D.) degree from the University of Virginia School of Law, and Bachelor of Arts (B.A.) degree from University of Virginia, having also taken classes and/or studied in Ghana, Nicaragua, France, and Brazil. He is a registered lawyer with the New York State Bar and the Massachusetts State Bar. He has also passed CFA Level I and II and speaks English, French, Portuguese and Spanish. He is currently living in Ethiopia and can be reached at email@example.com.