Ethiopia attractive for retailers, says report

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A new report by A.T. Kearney entitled African Retail Development Index says Ethiopia’s large population and growing economy makes the country attractive for retailers.
According to the report, despite the lack of a reliable supply chain and logistics companies, government control over some items (such as sugar and palm oil), and poor road infrastructure aggravating supply chain challenges, retailers are still eyeing Ethiopia.
Price-sensitive Ethiopian consumers usually shop for groceries at small local kiosks, where they buy small quantities, usually USD 15 or lower several times per week. While Ethiopian diets typically consist of commodities such as wheat, cereals and teff, consumption patterns are  changing as more urban and middle-class consumers seek packaged foods such as pasta, the report states.
Product availability and, thus, price stability remain major challenges as a few local producers and exclusive branded distributors dominate the market.
“Modern distribution is gaining momentum in Addis Ababa, the capital and largest city, and also a frontier market for many retailers. Alle, Ethiopia’s first modern cash-and-carry, is currently building what it hopes will be best-in-class operations and is planning to open three stores in Addis Ababa by the end of 2014,” the report reads.
At the same time, the report continues, local players on the retail scene are introducing into Ethiopia new innovative store concepts brought in from outside. The city now has more than 40 supermarkets, 100 minimarkets, and 18,000 kiosks (most family-owned). In addition, global consumer goods makers have started investing in Ethiopia such as Heineken’s with its USD160 million brewer investments and regional private equity firms such as Schulze GI are actively investing and seeking investments in local companies.
The report also underlines that Ethiopia is landlocked, and most products reach the country via neighboring Djibouti. Customs procedures can cause three-month backups before goods reach Addis Ababa. “Gray” imports, meaning legal yet unofficial or unapproved distribution channels, coming through Somalia have a detrimental impact on Ethiopia’s competitive retail environment.
The report says that what make the whole East African region attractive is that its fast-evolving retail dynamics; rapid population growth, increasing urbanization, macroeconomic stability and growth potential, and increasing foreign and regional investment in retail.
A limited but growing number of global Consumer Packaged Goods companies have a presence in the region or are currently operating there, including Unilever, Nestlé, Diageo, and Coca-Cola. These brands generally design products specific for consumers in the region