Alexander B. Cummings, Executive Vice President and Chief Administrative Officer,
The Coca-Cola Company
The Coca-Cola Company
Stanford University's Institute for Economic Policy Research and African Leadership Academy
Palo Alto, California
May 13, 2011
Thank you to SIEPR and the African Leadership Academy for the chance to be part of this important event. It's a chance to explore the amazing potential of a place that is so much a part of my life... so important to our Company... and is so prominent in the world's future.
There is an African proverb: "When the music changes, so does the dance."
The key question for the world is: are we truly listening?
The signs of real and lasting change in Africa are all around us. But they can be obscured by the past... and by a tendency for a benevolent world to focus on the problems... to exclusion of the possibilities.
I've been a part of Africa all my life ... and it's a part of me. Even for me, signs of progress can come in unexpected glimpses.
A few years ago, I flew on Kenyan Airways from London to Nairobi. I had taken the flight many times in the past. But in the past, when we landed, I always felt the captain should not only say "Thank you... but also "good luck".
Good luck on how you would cobble together the rest of your journey... as that was always an open question.
This time, I found myself listening to the flight attendant reading off a list of direct connections...Lagos... Kinshasa... Accra... Maputo... Kigali... Johannesburg... Cairo. As she read the list, it occurred to me: I was listening to a continent connecting and coming together.
And as I was leaving the airport, I realized something else. I turned on my Blackberry to send a message. I hadn't stopped to see if it was actually working. I just assumed it would.
And it did. Those bars that indicated signal strength... also indicated market strength.
Again... a continent connecting and coming together. They were two small signs of very significant progress. They are small additions to a body of evidence that is starting to make a case to the world ... this is the time to become part of Africa's story. Africa is indeed an emerging global player.
I say this with some perspective.
Coca-Cola saw that story taking shape early on. We've been a part of Africa since 1928. We live there, employ there, sell there, buy there, invest there. We are the largest consumer goods company in Africa ... and one of the largest private employers.
Over the last ten years, we've invested $6 billion in Africa. And over the next ten... we'll invest another $12 billion. We don't invest that kind of money based on hopeful assumptions. We see the opportunity to repeat our success in places like Brazil... where aggressive investment has created one of our strongest markets in the world.
We're not alone.
Our largest global customer Walmart placed its bets by buying half of South Africa's Massmart for $2.5 billion. UK's Vodaphone and India's Bharti Airtel are battling for share. Nestle has built more than two dozen factories on the continent... including a new one in the Congo.
The list is growing. It's growing because of the inescapable conclusions from some very impressive numbers:
- In 2008, Africa had a collective GDP of $1.6 trillion - equal to Brazil and Russia.
- By 2020 - aggregate GDP is expected to be $2.6 trillion. The rate of return on foreign investment is higher than any other developing region.
- The Economist and IMF report that from 2000 to 2010, six of the world's ten fastest-growing economies were in sub-Saharan Africa.
- And between now and 2015, it will be seven out of ten.
McKinsey sums up the potential in a report that calls the continent's economic leaders "African Lions," that present the same kind of opportunity as "Asian Tigers." (South Africa , Algeria, Botswana, Egypt, Mauritius, Libya, Morocco and Tunisia.)
Rise of the African Consumer
The world sees these facts. It believes these facts. But it may not fully understand these facts. There is an assumption that they are driven primarily by the extractive industries that mine, drill and harvest... and then take those resources somewhere else to create value.
No doubt... Africa's rich resources are an important part of its story. But the resource-centered view of the future ignores another resource... long term, the most important resource: the African consumer.
We're witnessing the rise of the next great consumer class. Rising incomes allow millions to aspire to things long out of reach.
Their aspirations are made possible by: access, connection and collaboration.
Let's start with access ...
African consumers want the same things that consumers want the world over:
- They want to move beyond sustaining life... to enjoying it.
- Better nutrition, appliances, a car, a computer, travel, a better home. A cold bottle of Coca-Cola.
- Their growing ability to access those wants is clear in a few figures:
- Consumer discretionary income will rise 50 percent over next ten years.
- Already... one in every 10 African is a "solvent consumer"... able to purchase a variety of consumer goods.
- Already... Africa has a 313-million-strong middle class... about 34 percent of the population... on a par with China and India.
A critical part of access is... connection .
As I experienced coming into Nairobi: the continent is coming together, and linking to the rest of the world. That connection is creating the kind of common experience that allows us to create the communities and enter the conversations that are the heart of a new consumer age.
At the center of connection is the mobile phone.
You can site impressive growth figures... like doubling in cell phone use every year since 2002. But even more impressive is what those statistics mean... how the cell phone will transform economies... and lives... as device and access costs continue to drop.
A project called "Mobile Trends Africa 2020" brought together telecom professionals and entrepreneurs. They were asked how mobile will change Africa. Their predictions touched every aspect of the economy and society.
- Entrepreneurial businesses
- Health care solutions
- Government transparency
- Greater safety on the streets and in homes... particularly for women.
- Text to speech will allow easier communication across languages.
Some make a good argument that mobile devices are so important to the future... that Africa will develop a large, thriving local industry to provide them. One measure of the digital opportunity is companies like Google, Microsoft, IBM, Cisco, HP and others moving quickly, and investing, to establish a presence.
Finally... collaboration. This is the difference-maker.
Africa's transformation can be a point in time... or a promise of the future. There is historic momentum... but it is far from self-sustaining. The difference between being a world resource and a world market is still in play.
There is a daunting list of problems. And the solutions will not come quickly. Three of the most significant issues are corruption, bureaucracy and the lack of a sufficient number of competent leadership.
Africa still ranks at the bottom of World Bank's ease of doing business survey.
Poverty is pernicious and entrenched. Half the population of Africa still lives on $1.25 a day. Security remains a question. While transfers of power have been more peaceful than in the past, the threat of violence stalks the perimeters of political change.
To address these issues, the collaboration I'm talking about must evolve from the old philanthropic model to one of shared value. It's a recognition that the success of business and the success of communities are a single, inseparable issue.
Creating shared value demands a new and more collaborative connection among the points of progress... business, NGOs, governments and the local communities themselves.
We're seeing that kind of collaboration much more than we have in the past. But if you look at the opportunity to build a better, stronger, safer, more successful Africa as the summit of a mountain... we are just coming out of the foothills.
Let me share with you a quick story of the power of shared value.
Our business model historically relies on big trucks with big loads delivering to big outlets. In many countries with developing infrastructure, that simply doesn't work. Rural roads can be too muddy. Neighborhood streets can be too narrow.
So, we've set up more than 3,200 small distribution centers... that employ 14,000 people... and generate more than $600 million in revenues. We call them Micro-Distribution centers... or MDCs.
Instead of trucks, the entrepreneurs who own the MDCs use bicycles, motorcycles, and hand-carts. In some key markets... such as Kenya, Tanzania, Uganda, Ethiopia and Mozambique... we rely on MDCs for a significant amount of our distribution.
The shared value is obvious.
For Coca-Cola , these small operations are a way to get our products to consumers in areas we might never reach. For the MDC owners and their communities, they mean jobs and income and local stability.
One of our MDC owners is Rosemary Njeri.
She's an amazing woman. Starting with nothing, she has been running an MDC in Nairobi for 10 years. In those 10 years, she has gone from one to 16 employees... two have been able to build their own houses with their income. She's using her profits to invest in real estate.
In 2009, we announced that our goal is to have women like Rosemary own half of all new micro-distribution centers.
We've already surpassed it.
Rosemary figures prominently in another Coca-Cola effort we launched late last year called Five By Twenty. We will empower 5 million women entrepreneurs worldwide by 2020 - small distributers like Rosemary, but also recyclers in India and fruit farmers in the Philippines
Believe in the Continent, Believe in the Opportunity
The future never arrives fully-formed. It comes together in pieces... some according to plan; others random and unexpected. It's been a long and uneven process to get to where we are. And the next steps will certainly bring setbacks along with gains... triumphs along with mistakes.
One mistake we cannot make is allow a vibrant future to be obscured by old assumptions and stereotypes. This is a new Africa. Stronger, better, more hopeful than anything we have seen in the past.
As part of a company, and as a son of Africa, I have the great advantage of seeing progress and opportunity from inside. Certainly, we see the obstacles. But more importantly, we also see beyond them.
Those who will be part of the continent's future will show that kind of vision.
They will move now... move quickly... and move with the confidence that, although uneven at times, Africa is ... the world's next great economic story.
The music of Africa is changing.
The question is: Who will master the dance?