McCain learns tough lesson of culture in S. Africa
It's a market where their products are unknown, few own freezers and the power supply is unreliable,
STEPHANIE NOLEN
Thursday, October 21, 2004
SOWETO, SOUTH AFRICA -- How's this for a marketing nightmare? You're a well established Canadian business looking for a toehold in Africa, the last of the world's untapped markets. You are prepared to invest in new plants and infrastructure and you have the nod from the competition bureau and the co-operation of trade unions.
But you sell frozen vegetables. And vast numbers of citizens in your target market don't eat frozen vegetables, don't trust them, can't afford packaged food and, oh yes, don't have freezers or a steady supply of electricity to run them.
Try fixing that with a couple of billboards and a TV ad.
Four years ago, McCain Foods Ltd. of Florenceville, N.B., moved into South Africa, intent on establishing a presence on the continent.
At first, things went well. The company quickly cornered the frozen-vegetable market and got its French fries into all the fast-food joints.
But McCain soon had to face a nasty demographic reality: There are only so many frozen peas that white South Africans will eat.
Marketing director Heather Partner put it this way: "White people have nannies, or [maids], and they don't need to just come home and grab something out of the freezer. And black people don't eat frozen foods."
There is a cultural distrust, born of unfamiliarity with prepared foods, among black South Africans. But there is also an economic factor.
Thirty per cent of South Africans, virtually all of them black, live in communities without access to electricity.
Unemployment is tallied officially at 32 per cent but is probably closer to 50 per cent, and a full half of the population lives under the poverty line, earning less than $2.50 a day.
But there is also an emerging black middle class and a low-income group with a bit of cash to spend. This is the "emerging market," after which businesses hunger.
They are the people that McCain needs to persuade of the pleasures of frozen foods.
To do it, Ms. Partner and her group hatched an array of stealthy marketing schemes.
On a Saturday morning in the township of Soweto, for example, Joe Masindi and his team arrived early to pitch their bright blue tent emblazoned with the black-and-yellow McCain logo outside the home of Solomon Khumalo.
Mr. Khumalo, 67, had died, and McCain provided the tent (vital for shade in the hot, spring sun), plastic aprons, paper napkins and cups for the funeral lunch planned for 1,500 mourners.
The company also matched the family's purchase of frozen spinach one-to-one, for a total donation of about 2,000 rand, or $400.
Mr. Khumalo's daughters were grateful. Funerals are major occasions in the townships (typical turnout is at least 700), and the cost of putting on the traditional lunches can bankrupt families.
Even more pleased with McCain were the women from the ladies' society, a community social group whose members take turns doing the mammoth job of peeling, chopping and cooking for a funeral feast.
"We didn't have to come all night. We came only early this morning, and there was nothing to peel," volunteer Gloria Khanyile said. They had only to boil water for the packages of McCain frozen vegetables.
Mr. Masindi looked on, delighted. "Now, when these ladies go to the store, they are going to recognize the McCain brand, and they are going to know it saves time, and they are going to remember, 'Oh, McCain helped the family,' " said Mr. Masindi, a Soweto businessman who convinced McCain last year that he could get them into funerals and, from there, into the elusive black market.
Gwen Gumede, Mr. Khumalo's daughter, said she wasn't troubled to see the McCain brand plastered all over her father's funeral.
"It's a blessing, really," she said. "At the end of the day, our funerals are about status, and when people come back to the house and see [that there is a tent], you can think, okay, it wasn't a flop."
McCain is also targeting black consumers with a single-serving, frozen-vegetable package aimed at people without freezers, and has planted a TV soap opera about the romantic tribulations of a McCain recipe tester on the national broadcaster.
Owen Porteus, McCain's managing director in South Africa, said it's not a conventional marketing model, but it's working. McCain did 450 million rand worth of business in its first year here, he said, and is now at one billion rand annually.
"If anybody had said to me, 'You'll be in the funeral business,' I'd have said, 'You're crazy,' " said Mr. Porteus, an Australian with more than 20 years of experience with McCain in that country. "But you run into this thing called culture, and it's not so simple."
When McCain came into South Africa in 2001, it bought out an ailing commercial food company, Irvin and Johnson Pty., which had a small frozen-foods division.
The next year it took over Heinz South Africa, invested $400,000 to upgrade the facilities and retrenched 400 staff from a work force of 1,400.
By 2004, the company had more than 70 per cent of the market share of frozen vegetables, and more than 90 per cent for potato products, according to Mr. Porteus.
And here, as elsewhere in the world, the company is the top supplier of restaurant French fries. McCain products are exported to a half-dozen surrounding countries, from Botswana to Mozambique.
The move to South Africa is part of McCain's strategy to go global: The company is building a $43.3-million plant in China, expanding operations in Russia and Latin America and making plans for India.
Mr. Porteus suggested that the African experience may offer lessons about the challenges of marketing in the developing world.
To spread the word that the opaque McCain packet contains high-quality vegetables -- not the nasty "off-cuts" recovered during food processing, as is a widely held perception here -- McCain trained a team of women in the townships to arrange tea parties, where they bring women together to show that the vegetables are not byproducts. They demonstrate how one might cook with frozen rather than fresh foods.
And the company has developed a tiny, 250-gram package of frozen vegetables targeted at black consumers.
Ms. Partner said research shows that people have an average of 10 rand to spend on dinner, so this small packet is priced at less than four rand. It can be used up in one meal, eliminating the need for a freezer.
"It's hugely inspirational; chips [fries] and frozen veg," in the blacks' markets, she said.
"If you can afford to use these products, you've made it."
The marketing move of which Ms. Partner is most proud is Food For Love. McCain paid SABC 3, part of the national broadcaster, $100,000 to place the soap opera, which tells of the romantic travails of Ben, who makes a living developing recipes for none other than McCain Foods.
"It's very subtle," Mr. Porteus enthused.
SABC apparently agreed, as it shot a second season, and the show has spun off a cookbook of recipes involving McCain products.
In the surrounding countries, with incomes much lower than South Africa's, most McCain foods are sold to expatriates, Ms. Partner said, but the company is optimistic about its future on the continent.
"If you look at sub-Saharan Africa, there are 650 million people, and as political stability takes hold, there will be an economic change. It may be 10 years, but we'll have a good base we can build on."
A place to do business
South Africa was a welcoming and easily negotiated business environment for the Canadian company, although the strength of the currency has made things difficult, said Owen Porteus, McCain's managing director in South Africa. (The rand was almost 10 to the Canadian dollar two years ago, and now is at five to the dollar.)
Any business here has to think about HIV/AIDS (South Africa is the world's most-infected country). Mr. Porteus said McCain is educating its work force, planning to encourage testing and would make anti-retroviral drugs available to any employee who disclosed HIV infection, though there is a huge stigma against going public.
The South African government puts an emphasis on "black economic empowerment," bringing historically disadvantaged groups into an economy where wealth remains almost entirely in white hands. McCain is looking to develop black small-business farmers as commercial suppliers, although Mr. Porteus described organizing such an initiative as "very complicated."
McCain, meanwhile, sees enormous agricultural potential to the north, in Zimbabwe, he said, but the growing political instability under the repressive regime of Zimbabwean President Robert Mugabe makes it impossible for the company to expand there.
The biggest problem for McCain in South Africa, he said, is the climate. The wild extremes of temperature have a nasty impact on potato fields, and it is not uncommon for the crops grown by McCain's suppliers to be wiped out overnight. |
