Global brands in developing markets: The unseen environmental and commercial gaps

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Over 40% of market sales happen in informal retailers with indirect purchasing relationships, resulting in limited data for brands.

Plastic waste generated by consumer purchases in these low-income economies is a significant environmental issue. While global statistics on supermarket waste are staggering, with estimates indicating that supermarkets contribute to nearly 100 million tons of plastic waste annually, the reality in low-income markets is even more alarming.

In township areas, the plastic waste multiplies. It seeps into informal retail, where street vendors and small shop owners routinely purchase products in bulk, repackaging them into smaller units for resale. This practice has become essential in markets where consumers face financial constraints and prefer to buy in small quantities.

This informal “sachet economy” is available for everything. From coffee creamer to sweets, products can be purchased in “jiffy bags“ to meet consumers’ affordability needs.

The plastic crisis is further exacerbated by the proliferation of affordable, single-use packets produced by global brands to cater to the purchasing power of lower-income markets. This model is widely used to penetrate emerging markets across Asia, Africa, and Latin America.

The developing pollution crisis

The irony is that while high-income economies focus on reducing plastic packaging, low-income markets see a surge in the use of plastic due to the fragmentation of products. Research shows that the amount of packaging per unit of product is significantly higher in these markets than in high-income economies.

While a brand might know the number of large packets it sells to wholesalers, it often has no insight into how these are broken down into smaller units and sold to end consumers. This lack of visibility not only hampers the brand’s ability to respond to market needs, but also means that they are blind to the full extent of their environmental impact in these markets.

Consequently, the environmental footprint of these global brands is vastly underestimated, and rarely accounted for in global assessments, leading to inadequate responses from both brands and regulators.

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Trust and consumer preference: branded dispensers vs. informal packaging

An often overlooked aspect of consumer behaviour in low-income markets is the trust factor. Consumers in these areas, while constrained by affordability, value the reliability and quality assurance that comes from purchasing branded products.

This is particularly evident in the choice between buying a product from a branded dispenser versus a makeshift package, such as a sandwich plastic bag tied at the counter of a spaza shop.

Branded dispensers offer not only the convenience of purchasing exactly the quantity needed but also the assurance of quality and hygiene. Consumers have been shown to trust a product that comes from a dispenser bearing a recognisable brand name, as it signals a certain level of quality control and consistency. In contrast, products sold in unbranded, informal packaging often carry a stigma of being of lower quality or possibly even unsafe.

The refill dispenser market is rapidly evolving

There are many examples of branded dispensers in markets now. Milk ATMs are available in Kenya, cooking oil dispensers can be found in most developing countries and even LPG and paraffin can be purchased in small/refillable containers.

In the latest trials of the smart IoT dispenser, Smartfill, in Spaza stores (informal stores) in Tembisa, South Africa, we tested a product mix offering salted peanuts to drive use and adoption. As small packets of peanuts are currently sold in clear plastic bags by the spaza shops, this was a good test of behaviour change.

We sold over 20kg in the first month using the dispenser in a single spaza store, at a margin to the spaza shop of 75% and an average dispensing size of 70g. The price to consumers is about 10% lower too. Adoption has been immediate. Consumers are using paper bags offered by the store (as in just plain recycled paper, no wax etc), which are both cheaper and better for the environment than the plastic packet. The spaza shop has now stopped selling the nut packets and is only selling from the dispenser as they are selling more than before, and making more margin.

Dispensing in a spaza shop in Tembisa. Image supplied

Branding and commercial opportunities: Engaging with the realities on the ground

Global brands who leverage smart dispensers will rapidly gain market share. Not only can they meet consumer demand for portion size and pricing flexibly and easily, their access to real time sales data means they have better insight into the effectiveness of their marketing and promotions.

Brands that stick to making smaller packaging will not only face ever-increasing costs, they will be promoting an environmental hazard and inevitably face ethical, legislative and consumer negativity consequences.