By Cara Bouwer
What are the trends tickling the taste buds of the rich and famous? The annual Southern Africa Luxury Association (SALA) summit shone the spotlight on global tastes, high-end consumption and the growth of Africa's ultra-premium market.
Held at the Inanda Club in Johannesburg in March 2015, the Africa Luxury & Wealth Summit brought together prestige brands active in the African market such as Anglo Gold Ashanti, Pam Golding Properties, African gourmet tea company Yswara, wine and spirits producer Pernod Ricard, car icon Aston Martin and art advisory Walker Scott.
Teleconferencing from Italy, Antonio Achille, from management consulting firm Boston Consulting Group (BCG), and Armando Branchini, from Italian luxury trade association Altagamma, painted a clear picture of Africa’s place in the global luxury industry.
Currently “the African continent’s absolute contribution (to the global luxury market) is not at the same level as other regions”, they said.
According to Bain & Company data, the African luxury goods market accounted for just under 1% of the global luxury sector's worth in 2013, which was about €217 billion (US$235.7 billion). According to BCG, the global market is expected to increase from 390 million consumers currently to 465 million by 2021. This would see the total market increase to €260 billion (about US$282 billion). In 2014, it is estimated that the global luxury market was worth €223 billion (US$242 billion).
So the pie is growing.
The question is: Will Africa have the appetite for a larger slice?
One factor which may see a shift in Africa’s favour is the increased impact of digital channels on the sector. “The pure (physical) store is no longer the first channel for sales,” noted Achille and Branchini. Data suggests that, in 2014, digital was having an impact on more than 50% of luxury sales, with global consumers increasingly researching purchases online or buying online.
Sustainability is another important global trend with “the importance ascribed by consumers having almost doubled from 2013 to 13% in 2014. Some regions, like the European Union (at 18%) and key emerging market economies like Brazil (at 15%) are pushing ahead with sustainable consumer preferences at an even stronger rate, noted Achille and Branchini.
Also worth noting is the move away from the traditionally dominant luxury hubs of old with the likes of Dubai, Singapore and Los Angeles gaining momentum. That said, Paris, Milan, London, New York and Hong Kong remain the current key fashion and luxury centres. While South Africa’s rising middle-class is known to appreciate the finer things in life, it was interesting to note that the country has not yet been included in the BCG’s True-Luxury Global Consumer Insight study, which was released in January 2015. “We have not yet included South Africa in this study - we look forward to including this continent in the study,” said Achille.
This was mirrored by comments made by Niall Gately, Trade Marketing Director of Pernod Ricard South Africa, which is seeing a rise in its ultra-premium brands across Africa as part of a global wine and spirits industry. “There is a pocket of considerable wealth on this continent and a growing middle class who are living life to the fullest,” said Gately. “We are committed to getting the most out of this market.”
The group has been putting its money where its mouth is by investing in research into, in particular, the South African and Nigerian markets, and building its PR strategy accordingly. Key to the brand’s approach is forging a close relationship with its consumers. “The best way is to meet consumers and be able to talk to them,” noted Gately. “We believe in consumer advocacy and word of mouth.”
Speaking from a wine market angle, Michael Fridjhon of Reciprocal Wines highlighted another vital aspect of building and sustaining luxury brands: differentiating yourself from the crowd through the entire product and service offering.
“If you want to play in the luxury sphere you need to create experiences,”
Michael Fridjhon of Reciprocal
Yswara, for example, promotes its brand within Africa by organising exclusive high-end teas. But, as the company’s founder Swaady Martin-Leke, notes: in the African market this also requires an attention to detail around the variety of consumers and the varying democraphics across regions.
For example, while a Nigerian high-net-worth individual will probably travel at least twice a month to London, just for the weekend, this is not the case for a high-net-worth individual in South Africa, Martin-Leke told the Frontier Advisory African Consumer Outlook conference in Johannesburg in late-2014. “Our experience has been that it’s very straightforward to sell our product in West Africa where there is a pretty sophisticated understanding versus, say, South Africa, where a lot of education is still needed.”
Perhaps this is the lesson that BCG should be focusing on when turning their future research attentions to the continent. While the current BCG’s survey certainly speaks to the value high-end consumers place on differentiators like craftsmanship and quality, exclusivity, customisation, the overall shopping experience and value for money, in Africa there is also the added challenge of navigating 54 unique nations. And, for that, says Martin-Leke, there is no substitute for on-the-ground insights.