How companies struggle to control markets

A number of billboards promoting different products on Entebbe road. A number of companies spend through media to control the market. Photo by Abubakar Lubowa

What you need to know:

However, an analysis note from the Ipsos report says newspapers need to think of innovative ways of building content to stand out from online platforms

In 2014, at least 20 companies spent a screaming Shs613b on image building and brand marketing.
The expenditure, according to Ipsos, an international research organisation, indicates a 5 per cent growth on media spending compared to Shs584b in 2013.
Data collected since 2011 shows a continuous growth trajectory, especially among corporate companies and government agencies as they struggle to have a share of Uganda’s small middle class and the urban youth.
Uganda, according to the 2014 Population and National Housing Census, has a youth population of 75 per cent out of the country’s nearly 35 million people.
However, only 17 per cent of these are in urban or town settings and only 9 per cent are gainfully employed.
The country, according to the National Planning Authority, has a middle class of less than one million people but with an ambitious growth of about 6 per cent per annum.
So how significant are the above figures to any company doing business in Uganda?
Considerably, any company needs to know competition is the catch here, which calls for strategic engagements and planning to edge market rivalry.
“True, companies are injecting billions of shillings in advertising but competition for market shares is indeed serious,” says Alex Rukundo, the Metropolitan Republic managing director.
However, he notes real market share can only be achieved through investment and serious engagement.
Metropolitan Republic, a media and advertising agency, handles some of Uganda’s key advertisers including MTN, Vivo Energy (Shell), and Uganda Health Marketing Group among others.
Additionally, Rukundo says the industry is benefiting from the entry of government agencies like the army, police and parastatals that have taken on advertising as a key image building tool.
This, he says partly explains the tremendous growth that has been registered in Uganda’s advertising industry.
Rukundo’s narrative is upheld by Muhereza Kyamutetera, who says the growth has been largely driven by competition but as he argues, it is concentrated among the ‘usual suspects’.
At least 15 companies, according to Kyamutetera, who is the general manger of Brainchild Burson-Marsteller, a public relations agency with links to Fireworks Advertising, have in the last 10 years appeared among Uganda’s largest media spenders with notable examples from the telecom and beverages sectors.
This, Kyamutetera says, helps one to understand that not many companies which have the potential to advertise have entered Uganda in the last 10 years.
For more than 10 years, Uganda has had principal advertisers spending billions of shillings on advertising.
The two companies, MTN and Airtel, which has mutated through various brand names, have at least in the last two years shared between them more than Shs134.7b. The large expenditure perhaps helps to explain why the two companies have more than 17 million subscribers shared between them. The number is also 95 per cent of the entire country’s subscriber numbers in the telecom sector.
Uganda currently has more than 19.5 million mobile phone subscribers, according to the 2015 State of Uganda Communication, which was recently released by Uganda Communications Commission.
But what explains the tilted market share in a country that has more than five telecom companies.
According to Isma Lule, the Ipsos senior media analyst, the power to spend is a key determinant in terms of who wins over the hearts. Indeed as Lule says the power to spend is a key convergence, which according to analysts afforded Airtel the luxury to acquire Warid Telecom in 2013. The acquisition drove Airtel’s fortunes from 4 million to more than 7 million subscribers.
More importantly, analysts including former MTN managing director, Mazen Mroue, think Uganda’s service market is still small and seems to be saturated.
The saturation perhaps might be a key pointer that explains Warid’s decision to sell its stake to Airtel and the exit from Uganda of French telecom giant – Orange Telecom. Orange Uganda, which was a subsidiary of Orange Telecom, was last year sold to Gambia telecom firm – Africell.
Ironically, the two firms had heavily spent on advertising ranking among Uganda’s top five advertising companies for at least four subsequent years.
For instance, Orange Uganda, which is currently transiting to Africell, spent more than Shs21b on advertising compared to Warid’s more than Shs30b sell in 2012.
Telecoms, according to data contributed more than 40 per cent of total advertising revenue in 2014.
Similar duplications [stiff competition] are also seen in the beverages and beer sector. For instance, in 2014 Century Bottling Company, the manufacturers of Coco Cola spent more than Shs19b in advertising compared to Crown Beverages, the Pepsi Cola licensee, which spent more than Shs12.3b.
The two firms, just like telecoms operate in a semi-monopoly that seems to squeeze out new entrants. In the beer sector, Nile Breweries spent more than Shs9.6b compared Uganda Breweries’ Shs8.8b.
Key among other spenders, according to data provided by Ipsos includes Multichoice Uganda, Unilever, Ministry of Health, Movit, Mukwano Group, Haris International, Bidco and Stanbic Bank.
Haris International, the manufacturers of Riham brands, which entered Uganda’s beverages market in 2013, continues to make major inroads in the soda industry.
The above companies form some of Uganda’s largest advertisers, which spend billions of shillings through different communication mediums as they seek to cement their hold on the market as well as capturing new markets.

Preferred mediums

About five years ago companies were comfortable using traditional media channels to promote or advertise their products.
However, the arrival of new media, although not substantially, seems to have tilted the market by providing alternative platforms.
Whereas companies are exploring the option of online advertising, they seem to have more trust in traditional mediums including radio, television, newspapers and magazines, according to data obtained from Ipsos.
For instance in 2014, 56 per cent of the adverting budget was shared between more than 200 radio stations yet 28 per cent was shared between more than 20 television stations. Sixteen per cent was shared between print media.
The total budget for the top 20 advertisers stood at more than Shs613b.
However, estimates indicate that less than Shs4.8b went to online advertising. Subsequently, Lule says traditional mediums; especially radios remain the key preferences, considering that they have a wide reach and have proven potential.
Televisions, he adds have been making gains because of technological advancement and sustained efforts to build relevant content.
Similarly, analysts say newspapers, not considering their reach continue to be a preferred medium of advertising, especially for the elite and urban populace.
However, an analysis note from the Ipsos report says newspapers need to think of innovative ways of building content to stand out from online platforms.

2014 top 20 advertisers
Company Spend
Airtel Shs40.1b
MTN Uganda Shs27.5b
Orange Shs21.5b
Century Bottling Shs19.8b
Multichoice Uganda Shs17.1b
Unilever Shs16.1b
Ministry of Health Shs13.5b
Crown Beverages Shs12.3b
Movit Shs11.6b
Nile Breweries Shs9.6b
Uganda Breweries Shs8.84
Mukwano Group Shs8.81b
Harris International Shs8.2b
Bidco Uganda Shs8.16b
Stanbic Bank Shs8.14b
Samona Products Shs7.8b
Uganda Government Shs7.2b
Vision Group Shs6.8b
Nation Media Group Shs5.8b
Uganda Telecom Shs4.1b
Total Shs613b


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