Why serious entrepreneurs must target more than just the bottom of pyramid

Revellers at the Carnivore grounds during a Blankets and Wine concert in Nairobi recently. The event’s founder has been criticised over the cost of tickets. Photo/Charles Kamau 

By Wallace Kantai

In Summary

• Consumers in emerging markets are not easily categorisable.

A few weekends ago, there was an online furore about the cost of a ticket to the Blankets and Wine concert. The contention was that at Sh4,500, the picnic-and-dance event had become unaffordable.

This is not the first time the event’s founder, Muthoni Ndonga, has been on the receiving end of criticism about the cost of her functions.

Then mid last week, an intriguing article in the Financial Times caught my eye. The head of Nestlé’s Asian division Nandu Nandkishore was admitting a near-fatal error in the company’s approach to the Indian market.

The foods maker had targeted the mass market, selling to those ‘spending pocket change on sweets and noodles’, while neglecting the country’s growing numbers of affluent spenders.

This segment of the market, the article concluded, was more immune to inflation and temporary economic blips, and Nestlé was thus shifting strategy to go after them.

These two incidents go to the heart of a strategy discussion that broke out a few years ago when university professor C.K. Prahalad published the book The Fortune at the Bottom of the Pyramid.

His insights were not particularly profound for anyone who does business in Africa, Asia or Latin America — that poorer people will buy and consume goods in smaller sizes, and that there are many millions of them.

The true gem was that companies that start off serving this market, but keep wanting to grow out of it, might have it backward. They may (and perhaps should) stay with that market. The buzz created by the book unfortunately then served to mask another insight.

Global companies, and their local doppelgangers, then assumed that profits were only to be found in mass sales to pocket-shallow consumers. Entire corporate strategies and sales careers were re-oriented with this insight in mind.

What was forgotten was two traits about these markets that make them remarkably interesting and challenging, and which are epitomised by the Blankets and Wine and Nestlé insights.

The first is that consumers in emerging markets are not easily categorisable into income and spending profiles.

The second is that there is a part of the pyramid — and a significantly sizeable one — that tends to be forgotten even as fortunes are being sought at the bottom.

There was a curious photo making the rounds on the Internet a couple of weeks ago. It shows an array of impressively expensive champagne being sold in Nigeria, in a kiosk.

Bottles of Moet et Chandon are proudly displayed in a space where you’d expect to see packets of washing powder or milk. Quietly (or, loudly in characteristic Nigerian fashion), the West African nation has become Africa’s biggest consumer of high-end champagne. This is still in a country with low per capita income.

Compare this picture with one closer to home, where expensive German cars are parked at the dingiest smokiest nyama choma joints. The assumption that a particular income level determines consumption patterns is a demonstrably false one.