Outflows in the UAE for Foreign Direct Investments in 2017 were approximately $16billion with substantial investments made into the emerging markets of Africa and Asia. The significant geographical spread of this area and population of consumers makes it a huge opportunity for the FMCG trade, in both rural and urban settings.
It is encouraging to find, when speaking to my network of senior finance professionals within FMCG, that there is increasing activity and emphasis in innovating in these markets. These investments are not only good for growth and prosperity of the organisation, but also hold philanthropic value which is a great business ethic. So what do FMCG CFO’s need to be thinking about when assessing strategic growth in emerging markets?
The key challenges are obviously the supply chain, technology, market and product development, but it is essential that the CFO drives growth through innovative strategies rather than being totally focused on cost and revenue. According to a recent survey by PwC, finance teams devote 25% more of their time to insight based activities. Most of the top performing companies in the world use finance to drive sales and marketing activity, using analytics to ensure that services offered are appropriate to what is actually needed by a customer base in an addressable market.
Understanding risk in terms of political situations, cultural differences, differing accounting standards and tax requirements are areas where one would expect the CFO to be deeply involved in, however the CFO needs to have a full understanding of digital opportunities or limitations in these markets. Despite perception, there is an emerging middle class in the developing market who are tech savvy, hence digital growth also needs to be considered as a serious strategic factor in decision making.
Assessing the opportunities for M&A activity, which will add value to the distribution network or the supply chain process is hugely important in these markets, as well as driving investment into core finance processes and capabilities within an emphasis on investment into analytics.
Over the next few months, I will be conducting interviews with FMCG CFO’s to get their insights into emerging markets and innovation, specifically focusing on success stories around innovative financial strategies, accounting principles in emerging markets and due diligence for investment opportunities.
This series will be of interest to CFO’s who are serious about growing their businesses in the untapped rural and urban markets within Africa and Asia.
Article written by Dhanu Asokkumar, Senior Consultant – Accounting & Finance