Sustainable growth of Clover's premium product portfolio in South Africa's lower income market segment

Abstract

Clover Industries Limited has a long and successful history in South Africa whilst playing a definitive role in the development of the local dairy and FMCG industries. The organisation has been a household name in South Africa for over 100 years with roots stemming as far back as 1898. On the 14th of December 2010, Clover listed on the main board of the local Johannesburg Stock Exchange (JSE) and continues to be a prominent company in the South African dairy market.

The South African Audience Research Foundation (SAARF) introduced the Living Standards Measure (LSM) as a marketing research tool in South Africa which groups people by living standards, using criteria that cuts across conventional groupings such as race, and instead evaluates specific criteria such as the level of urbanisation and ownership of motor vehicles and appliances.

An increase in both population and income in Africa have resulted in rapid urbanization making Africa an attractive target market for global businesses. According to SAARF, lower income groups (LSM 1–6) account for 63% of the South African population (SAARF 2014) and it is against this backdrop that an opportunity for exploratory research about consumer behaviour has emerged.

This study focused on business strategies and aimed to investigate whether Clover’s premium product portfolio can grow sustainably in the LSM 1–6 segments. The justification for this study is based on the paradoxical nature of the LSM 1–6 segment that has income constraints, aspirational attributes and brand attraction.

The main objective of this research study is to understand the key factors affecting consumer purchasing habits in this segment of the market. The findings could potentially provide direction for Clover’s business strategy to achieve its growth ambitions in the local market. Objectives have been classified into four categories to assist in answering research questions that lead to a better understanding of the salient factors affecting the purchasing decisions. These insights led

to the development of recommendations that will help improve the per capita consumption by making Clover’s premium beverages more attractive across the affinity groups defined as LSM 1-6.

To achieve the objectives, the research methodology took the form of a mixed method approach to ensure that the qualitative detail is captured in order to supplement the quantitative research data.

The literature review provided detailed insight into global trends pertaining to the beverage industry. A cross-industry analysis was carried out to explore innovative trends and developments that could provide direction for the research project. The literature review, at both the local and global level, provided the foundation for the research questionnaire and the SME interview questions.

Based on the findings from the qualitative SME interviews and the quantitative surveys that were carried out, specific themes have emerged. These themes have been categorised and have helped provide clarity on the existing gaps in literature. There are specific factors that influence how business can be carried out responsibly within the LSM 1–6 segments without having an undertone of being exploitive. There are trends that have emerged which profile the typical LSM 1–6 consumer and businesses need to understand these specific needs and behaviour.

This study aimed to contribute to the body of knowledge by providing business organisations with insight into LSM 1–6 and how to succeed responsibly in this segment.