International brands and shopping outlets launch in Côte d'Ivoire

 

Political stability and continued economic growth are fuelling the development of Côte d’Ivoire’s retail sector. This is attracting new consumer goods manufacturers to the country, and driving the development of new shopping outlets with a diverse offer to cater to changing consumer habits. The number of retail points is growing through brick-and-mortar expansion and the rise of e-commerce platforms, as more Ivorians, especially in the major cities, gain access to the internet. Competition is also picking up in modern retailing as international players look to expand their networks of both large-scale supermarkets and hypermarkets, as well as the small, proximity stores catering to middle-class Ivorians.

Nonetheless, retail expansion in Côte d’Ivoire faces a number of challenges. Although the rising number of shopping malls attests to changing demand patterns from a growing middle class, correctly forecasting buyer demand within urban areas, as well as adapting products to lower-income Ivorians – 46% of the population is at or below the poverty line – remain key issues for retail operators. The retail sector’s long-term expansion is largely dependent on the transformation of national headline growth into higher incomes for the population at large. “There has been a lot of infrastructure construction, such as roads, bridges and other transport networks,” Oussame Azwat, assistant general manager at local retailer Compagnie de Distribution de Côte d’Ivoire (CDCI), told OBG. “However, these have yet to have an impact on economic development and buying power in a more palpable way,” he added.

In Figures

Nonetheless, the sector’s contribution to the economy has grown. Wholesale and retail operations, combined with vehicle repair services, hotels and restaurants, accounted for 10.4% of GDP in 2016, according to the African Development Bank’s “African Economic Outlook 2017” report. While this is a slight decrease compared with 2011, when the sector accounted for 11% of GDP, the fall in the sector’s relative weight is more an indication of the expansion that other sectors have experienced in the past few years than a slowdown in retail activity, which has witnessed robust growth.

Informal Segment

Although it is becoming an increasingly important part of the sector, modern retail accounts for a relatively small share of Côte d’Ivoire’s total retail sales. “According to a recent study we conducted, the formal retail sector accounts for 15% of the market,” Amadou Sanankoua, CEO of strategy consulting firm OnPoint Africa Group, told OBG. “It is growing, but not quite at the level of more developed regional markets such as Morocco, where it is closer to 25%.” However, data from global research firm Nielsen shows that 35% of consumers in Abidjan now shop in supermarkets for weekly and monthly food restocking.

Sales & Structure

AT Kearney’s 2017 Global Retail Development Index shows that the country’s retail sales reached $14bn in 2017, up from $13bn in 2016. Côte d’Ivoire’s ranking thus rose from 21st position in 2016 to 17th place in 2017. This is likely linked to the development of retail operations in recent years, in terms of retail area expansion and the arrival of international retail brands.

The index highlights the fact that retailers expanding in Côte d’Ivoire face difficulties but also benefit from several advantages. For example, political risk remains a factor that affects international groups’ appetite to invest in the country, while security concerns pose another challenge. AT Kearney also mentions the low level of market saturation due to the fact that many geographical areas and retail offers remain unexplored. According to the report, Côte d’Ivoire’s two main retailers, CDCI and Société Ivoirienne de Promotion de Supermarchés (Prosuma) account for a combined $600m in retail sales annually, while the remainder of the market is fragmented, being made up of numerous small local players. Therefore, the environment leaves considerable room for new entrants.

Economic Growth

Retail expansion in Côte d’ Ivoire is largely due to the rebounding economic growth since the end of the political strife and armed conflict, with stability, investment in reducing poverty and interest from foreign investors contributing to a more favourable retail environment.

Between 2013 and 2017 GDP growth averaged 8.5% per year, according to data from the IMF. This expansion reflects the impact that both political stability and business-friendly regulations have had on the country’s economy and its ability to attract foreign investment. Much of this investment has gone into industrial production aimed at the retail and consumer goods markets.

Despite the continued economic expansion in recent years, poverty is still a factor for retailers to consider when predicting demand patterns. The poverty rate fell from 48.9% in 2008 to 46.3% in 2015, according to figures from the African Development Bank, while purchasing power has increased. After an 8% fall in 2011, household final consumption expenditure has trended positively since, with the growth rate reaching 17% in 2015, according to the “Invest in Côte d’Ivoire” report, published by global professional services firm Deloitte in March 2017.

At the same time, the urban population has increased from 46.8% of the total in 2005 to nearly 55% in 2016, leading to an expansion of modern retail operations in the larger cities, with a strong focus on Abidjan, the country’s economic capital.

Retail operators are still looking to find the right strategy for new opportunities in Côte d’Ivoire’s central areas and smaller urban centres. Although the establishment of minimum crop prices for several key agricultural export goods has allowed farming communities to secure a more robust level of income, the retail sector has lagged behind in terms of its capacity to match its offer to rising incomes outside the biggest cities.

Other factors related to urban transformation are having unintended consequences on commercial activities and retail development at the customer level. “Retail in general is feeling the impact of ongoing urban development that has been taking place, especially in Abidjan,” Azwat told OBG. For example, government projects to remove informal housing from certain areas of the city in order to make way for various construction projects is changing the dynamics of some neighbourhoods, partly because it is removing informal retail operators. “This informal commerce is a cash earner for a lot of people in the city, so this buying power has been affected. Furthermore, some of the people living in informal housing were forced to move, in some cases into more expensive homes, and that has meant that their disposable income was further reduced. These trends are visible in the sector,” Azwat added.

Foreign Investment

Despite the challenges, a range of foreign retail heavyweights and consumer goods manufacturers have entered Côte d’Ivoire in recent years. In March 2016 Unilever opened a CFA6bn (€9m) mayonnaise production unit in Abidjan with an annual production capacity of 10,000 tonnes. The factory allows the company to distribute its locally produced mayonnaise, instead of importing it, which can be costly and time-consuming.

Global fast-moving consumer goods (FMCG) firm Nestlé also strengthened its presence in the Ivorian market through the establishment of a CFA6bn (€9m) logistics area in the Yopougon industrial area, near Abidjan. Opened in May 2016, the new distribution centre is spread over 29,000 sq metres.

Meanwhile, Dutch beer producer Heineken partnered with local retailer CFAO to set up a joint venture (JV), Brassivoire, and established a new production unit in the Anyama industrial zone, 24 km north of Abidjan. The brewery, which opened in May 2017, cost CFA100bn (€150m) and has an annual production capacity of 160m litres.

To an extent, international players are hindered by access challenges. “Despite the free movement of people and goods within UEMOA, frontiers are heavily guarded and controlled,” Abdallah Zoher, CEO of Black Hawk Security, told OBG. Nevertheless, foreign retailers’ entry into Côte d’Ivoire has been eased by the government’s efforts to streamline business regulations and Customs procedures.

Launched in July 2013, the national single window for foreign trade has consolidated information relating to trade into one transactional portal. “The development of the single window for external trade and the efforts to reduce the sale of counterfeit products have had a positive impact on the sector,” Jean Maurice Ibrahim, CEO of Distribution de Matériel Electrique Industriel et Bâtiments, a B2B electrical materials distribution company, told OBG. “However, illegal importation in the country is still an issue.”

Shopping Malls

The overall economic development of the nation is driving demand for new shopping centres and modern retail areas. In late 2015 the 20,000-sq-metre PlaYce shopping mall was opened in Abidjan’s Marcory district. The shopping centre was built under a partnership agreement between CFAO and French retailer and supermarket chain Carrefour, and includes the French brand’s first supermarket in Côte d’Ivoire, covering a total area of around 3200 sq metres.

The same concept was replicated when a second shopping mall, PlaYce Palmeraie, also with a Carrefour supermarket as its anchor store, opened in the Cocody-Riviera area of Abidjan in June 2017. The shopping centre covers a total area of 29,000 sq metres and includes a 2400-sq-metre Carrefour Market, a food court and green spaces.

In March 2017 Richard Bielle, president of CFAO, told international media that other retail spaces involving Carrefour were planned for the near future, one of which is set to be inaugurated in the Yopougon suburb of Abidjan in March 2018.

In 2016 Orca Déco opened its third shopping centre in Abidjan. The 5000-sq-metre mall is located in the upscale neighbourhood of Riviera. The group had opened its two other malls, both with 10,000 sq metres of shopping area, in the city in 2008.

Supermarket Drive

Many of the new malls are using supermarkets and grocery stores as anchors to increase traffic and attract customers. A mix of international brands and local incumbent groups are competing in the market and transforming the country’s grocery-shopping offering.

Carrefour’s entry to the country in 2015 has put pressure on domestic retailers such as Prosuma, which is bolstering its Casino Mandarin network that focuses on proximity stores selling mid- to high-market grocery goods. The first of these stores opened in the Biétry neighbourhood of Abidjan in September 2016. The group is planning to invest CFA7bn (€10.5m) in opening a total of 10 stores by 2018, according to international media reports.

Another local player in Côte d’Ivoire’s modern retail market, Mata Holdings, is also expanding its offer. In 2014 the firm established a franchise partnership agreement with Spanish distribution group Dia to develop its supermarket network under the Citydia brand. The group is the sole distributor of Dia products in Côte d’Ivoire, with stores ranging 200-400 sq metres in size. Since opening its first supermarket in late 2014, the chain’s network of stores has grown to 16 shops, with plans to increase this number to as many as 50 stores by 2020.

Most of the growth in modern retail has been centred in and around main cities such as Abidjan, San Pedro or Bouaké, leaving room for development in some of the country’s underserved regions. “The interior of Côte d’Ivoire remains completely unexploited in terms of retail offering,” Aboubakar Sidiki Fofana, CEO of Mata Holdings, told OBG. “The strength of the agricultural sector means that within rural areas there is a strong middle and even upper class with considerable amounts of disposable income. Yet, these people have nowhere to go to purchase goods,” he added.

Specialised Retailers

Due to its central location in the region, Côte d’Ivoire is increasingly important in international retail firms’ West Africa expansion plans. In late 2015 and early 2016 French books and electronics retailer Fnac opened two stores in Abidjan. Although the company was already operating in Morocco, the move into Côte d’Ivoire marked its first entry in sub-Saharan Africa. The two new stores, 300 sq metres and 800 sq metres in size, were opened in partnership with Prosuma.

Another French retailer, home-improvement and DIY brand Mr Bricolage, partnered with Ivorian Yeshi Group in 2014 to open a chain of hardware and construction materials stores in West and Central Africa. The JV will focus on opening stores in Côte d’Ivoire, Senegal, the Democratic Republic of Congo and Gabon. In Côte d’Ivoire, the company has opened three stores under the existing Bernabe brand: two in Abidjan and one in San Pedro. The chain has also expanded to the central city of Bouaké and is establishing an 800-sq-metre store in the Yopougon industrial zone near Abidjan.

Another European retailer, Belgium-based kitchen franchise Ixina, has been expanding its business in the country, with the number of stores expected to climb from seven to nine in the near term.

Fast Food

The gradual rise in disposable income has also attracted new restaurant chains and international franchises. Burger King entered the market in December 2015 through the opening of a 90-sq-metre restaurant in the PlaYce shopping mall in Abidjan’s Marcory district. A second, 249-sq-metre unit was inaugurated in March 2016 at the Félix Houphouët-Boigny International Airport in Abidjan. The two restaurants were opened by Servair Abidjan, the Ivorian subsidiary of Servair, an Air France subsidiary firm operating in the catering business.

Another major restaurant group that has been expanding its footprint in the country is Tweat, which has announced plans to create a pan-African fastfood chain. The brand is owned by Société Africaine de Restauration, the result of a JV between Ivorian agro-industrial company Société Ivoirienne de Productions Animales and French group Total. The first Tweat store was opened in December 2014 in Cocody, in one of Total’s petrol stations, and as of late 2017 the group had a total of four stores in Abidjan. Meanwhile, French pâtisserie and café chain Paul opened its first shop in sub-Saharan Africa in Abidjan in 2013, and since then the chain has opened two more stores at locations in the city.

Retail Space

With retail operators focusing on establishing new modern retail areas to attract customers, the gross leasable area (GLA) in Côte d’Ivoire has been expanding, according to the “Shop Africa 2016” report published by real estate consultancy Knight Frank. The majority of new developments are taking place in Abidjan, where much of the country’s buying power is concentrated. Abidjan had 61,000 sq metres of GLA in 2016, with a further 77,000 sq metres planned or under construction. However, modern retail space in Côte d’Ivoire’s economic capital remains relatively small compared with other cities in Western Africa. According to the report, available GLA in Lagos, Nigeria’s largest city, totalled 121,000 sq metres in 2016, while it reached 103,000 sq metres in Ghana’s capital Accra and 45,000 sq metres in Senegal’s capital Dakar. In 2017 completed GLA in Abidjan increased to approximately 100,000 sq metres, although it still remained below regional powerhouse Lagos, with around 150,000 sq metres, but higher than Dakar, at less than 50,000 sq metres.

Rent & Yield

Prime rents for modern retail spaces in Abidjan reached $46.50 per sq metre per month in 2017, according to Knight Frank, higher than rents charged for office space, residential and industrial. However, the yearly return on investment for retail-focused real estate development projects remains below that of other real estate segments. According to Knight Frank, the prime retail yield was 8.75%, below the yield on industrial space (at 12%), and office developments (on 9%), but higher than residential real estate, which stood at 8% in 2017.

Although there has been a steep increase in the number of real estate development projects taking place in the sector in recent years, retail expansion over the coming years will likely concentrate on upgrading older facilities and new developments in areas away from the largest cities.

Even if the shopping mall segment in Abidjan has developed rapidly, and according to Knight Frank, is ahead of other markets in Francophone Africa, much still needs to be done. “The quality of infrastructure in Abidjan – from the roads, ports and bridges, to power and water infrastructure – ranks among the best in West Africa, particularly when compared to other large cities, like Accra, Dakar or Lagos,” Cheick Sanankoua, managing director at HC Capital Properties, told OBG. “However, real estate development and the quality of existing stock lags behind those cities. Historically, regarding commercial real estate in Abidjan, there were no active institutional quality developers and, as a result, operators had to become makeshift developers themselves. This is starting to change, with players like ourselves developing commercial real estate spaces to global standards.”

Online Opportunities

Evolving regulations for e-commerce have bolstered the country’s fast-growing online shopping market. In 2013 the National Assembly adopted new laws to govern electronic transactions and e-commerce activities, which provided a framework for the emergence of e-commerce operations. Another legislative step forward was taken when rules for online protection of personal data were established the same year.

A number of online stores have popped up since. French sports goods retailer Decathlon inaugurated its first online store in sub-Saharan Africa in Côte d’Ivoire by partnering with pan-African Jumia, one of the region’s biggest e-commerce platforms and the leading online retailer in the country.

The growing popularity of e-commerce, increasingly adapted to the expanding middle-class and new consumption habits, is also pushing traditional retailers online. In 2016 Prosuma inaugurated Yaatoo, its online platform, which sells a range of products including groceries, mobile phones, white goods and baby food. Items can be delivered to homes or collected at one of the group’s stores. In addition to Abidjan, Yaatoo delivers to cities including San Pedro, Bouaké, Daloa or Yamoussoukro.

Another online retailer that began operations in 2016 is CFAO’s Africashop. The platform carries beauty products, white goods, mobile phones, furniture and clothing. It sells international brands, which in many cases cannot be found anywhere else in Côte d’Ivoire. The development of e-commerce is proving a good way for brands to reach Ivorian consumers, while at the same time reducing retailers’ exposure to some of the risks and costs of operating physical retail networks in the country.

The e-commerce environment has been advancing steadily in recent years. In 2016 some 27% of the country’s population of approximately 24m was using the internet, compared to 12% in 2013 and 1.5% in 2006, according to the World Bank. In the third quarter of 2017 mobile internet accounted for the vast majority of connections, reaching 16.9m, while the country had a total of 118,628 fixed-internet subscribers, according to the telecoms regulator, Telecommunications/ICT Regulation Authority of Côte d’Ivoire. The accelerating smartphone adoption, especially among young, urban populations, is multiplying opportunities to boost online sales.

Although low banking penetration – estimated at 34% of the population aged 15 or over in 2014, according to the latest available data from the World Bank – and caution regarding cyberfraud is limiting the uptake of e-commerce by consumers, retailers also offer the possibility of cash payments for goods on delivery. Meanwhile, the increasing popularity of mobile money presents another avenue for secure payments online. “Payments via mobile have seen an upward trend in recent years and provide interesting opportunities for delivery companies,” Désiré Porquet, CEO of logistics firm Colivoire Express, told OBG. “Nevertheless, the main challenge facing the e-commerce industry is the fact that Ivorians remain sceptical of paying before seeing the products.”

Infrastructure Development

Inefficient logistics networks are one of the sector’s main challenges. In addition to leading to high transportation costs for domestic and international firms operating across the country, fragmented logistics networks compromise product quality, especially in the case of perishable goods. Connecting the agricultural sector’s produce with the consumer remains difficult. The African Development Bank estimated in its “African Economic Outlook 2017” report that as much as 40% of Ivorian plantain production and 30% of yam output is lost because of inadequate storage and warehousing capacity.

However, over the medium term retail operations are likely to benefit from projects included in the 2016-20 National Development Plan (Plan National de Développement, PND), which is set to allocate up to CFA3trn (€4.5bn) to development projects, setting a course for the country to become an emerging economy by 2020. Under the plan, the government aims to attract private investment in projects like a new CFA25bn (€37.5m) logistics platform near Abidjan as well as the rehabilitation of almost 4000 km of bitumen roads linking cities across the country – an investment worth more than CFA1.2trn (€1.8bn), according to Deloitte’s 2017 report.

Outlook

Côte d’Ivoire’s retail sector is currently experiencing unprecedented growth. Modern retail networks are in the midst of expanding, more international brands are entering the Ivorian market and a number of new large-scale shopping malls are opening their doors. This expansion has so far focused on Abidjan; however, as the market matures, and retail operations in major cities reach a saturation point, retail groups will likely allocate more resources to less explored areas of the country.

Partnerships that bring together international know-how and brands with local knowledge and distribution networks have proven successful. This type of deal is expected to grow as domestic retail players continue to modernise the sector by adapting their retail offering to local market demand.

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The Report: Côte d'Ivoire 2018

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