Zambia's Zambeef is one of the country's largest companies; its vertically integrated operations span production, processing and retail. Listed on London's Alternative Investment Market (AIM), Zambeef has a wide-ranging business that includes poultry, edible oils and yoghurt lines. Strong top-line growth in Zambia over the past few years has made the company more ambitious, and it is pushing forward with plans to pursue growth in West Africa, where Nigeria presents key opportunities for fast-moving consumer goods companies with pan-African aspirations.
The early arrival of Shoprite - South Africa's largest food retailer - into Zambia in 1995 was a blessing for Zambeef, as the supply agreement it established was crucial to its subsequent success. With an annual sales base that now exceeds US$250mn per annum - an almost tenfold increase on 10 years ago - Zambeef is one of Sub-Saharan's Africa's leading meat companies.
Africa's food and drink sector is primed for a dynamic period of growth, with many economies growing quickly from low bases. This will lead to higher food consumption, which in turn will lead to greater meat consumption. Indeed, companies such as Zambeef are increasingly interesting given that the middle-class consumer spending take-off in countries such as Nigeria, Ghana, Tanzania and Kenya is still in its early stages.
According to the World Bank, the total value of Africa's food and drink sector will grow to about US$1tn by 2030 from less than US$350mn currently. While a number of multinational companies have extensive exposure to Africa, Zambeef is one of a select few that is both exposed to Africa food and drink and is also London-listed.
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Zambeef's very 'hands-on' vertically integrated model has been key to its success. Operating in Sub-Saharan Africa often carries a lot of added operating expense given poor roads, frequent power outages and expensive real estate. Distributing products can therefore be much more difficult and ultimately a lot more expensive than in other emerging markets.
By pursuing West Africa, Zambeef is boldly attempting to gain the advantage of being a first-mover. The safe option would be to expand in Southern Africa, where the economies are more integrated and where the company knows the 'terrain' better, so to speak. Indeed, retail channels are generally a lot more organised in Zambia, Zimbabwe and Botswana than in Nigeria, for example. However, Nigeria's 150mn-plus population and vast potential means it is an opportunity that is too good to ignore for an established regional player. We also highlight that Shoprite is expected to pursue growth in Nigeria at some point. This is crucial, in our view, as Zambeef might be able to use a similar model of operating outlets within Nigerian Shoprite stores as it has done in Zambia.