Did you know there is a huge potential for the packaged drinking water business in Africa?
Because tap water in many parts of Africa is often unavailable and its quality is not always trusted, commercially-packaged drinking water has become a multi-billion dollar business on the continent.
It is now the fastest selling beverage ahead of soft drinks, beer, tea and coffee.
Africa’s climate, fast growing population and rapid urbanization are some of the factors that are putting pressure on the limited water supply on the continent.
As a result, both small and big businesses (including some of the world’s most popular brands like Nestlé and CocaCola) are now big players in the drinking water business across Africa.
This article takes a very close look at the drivers of the rising demand for safe drinking water in Africa and the opportunities that entrepreneurs like you can exploit in this very promising and lucrative market.
Why is drinking water such a big deal?
If drinking water seems ‘ordinary’ or ‘common’ to you, it is likely you may have been taking this precious resource for granted.
For starters, water makes up nearly 70 percent of the human body. Everything inside us – blood, muscles, organs and bones – contain water and will not function at all in its absence.
In fact, a human being may last a whole month without any food, but without water, it would be a miracle if you last beyond a week. Of all our daily needs – food, shelter, electricity and health – safe drinking water is arguably the most important.
Water is indeed a ‘drink or die’ affair.
Before we explore the interesting business opportunities in the rest of this article, it is important that you understand exactly what we mean by ‘safe drinking water’.
You may have noticed that water is very abundant on our planet; in fact, it makes up roughly 70 percent of the earth’s surface. The (small) remaining 30 percent is the dry land that we all live on.
However, not all of this ‘abundant’ water is drinkable; most of it is salt water. The type of water we humans drink is known as ‘fresh water’ which flows from rivers, lakes and streams. You can also find it underground when you dig a well or sink a borehole.
The problem is fresh water only makes up 3 percent of all the water on earth. Yes, we agree with you – that is a very very small portion! (photo credit: clutchmagonline.com)
For freshwater to be safe for drinking, it must be free of harmful microorganisms that can cause disease. To ensure that it is safe for human consumption, freshwater is often filtered and treated to remove germs and any other disease-causing organisms.
The type of water we shall refer to in the rest of this article is water that is drunk by human beings to quench thirst or used in cooking or preparing any food or drinks that may be consumed.
The water we refer to in this article is not the type used for washing clothes, bathing or flushing toilets. While that type of water is equally important, it is not the focus of this article.
Why has drinking water become such a huge business opportunity in Africa?
As is our usual tradition here on Smallstarter Africa, we would like to explore the underlying reasons behind this business opportunity and the factors that are responsible for the huge and growing demand for safe drinking water across Africa.
Understanding the reasons behind the drinking water business boom is crucial. They will help you to identify lucrative opportunities you can exploit if you currently live in an area where these factors exist. Some of them are already familiar to you and often taken for granted. Here they are…
1. Geography, Climate and Population…
Our continent’s peculiar geography, climate and population are partly responsible for driving up the already high demand for drinking water across Africa.
Roughly 40 percent of Africa’s landscape is dry land (semi-arid) while close to 30 percent is desert (arid). As a result, more than 300 of the 800 million people in sub-Saharan Africa live in water-scarce environments (NEPAD, 2006).
Africa’s climate is another reason why the continent is very ‘water hungry’.
The tropical climate across a wide area of the continent makes the weather hot and humid for most parts of the year. This is without taking into account the devastating effects of climate change which is causing more dryness and drought on the continent.
Think about it for a moment. Consider a place on earth that is dry, hot and humid for most times of the year and you will start to see why Africans are more likely to feel thirsty than people in other parts of the world. It is no surprise therefore that Africans drink over one billion litres of water every single day!
Apart from Africa’s geography and climate, its population is one of the main drivers of the huge volumes of water consumed everyday on the continent.
Africa’s population now stands at roughly one billion people and currently has one of the fastest growth rates in the world. Given a population growth rate of nearly 3 percent over the last 20 years, the number of Africans on earth is expected to more than double to 2.3 billion people in the next 40 years. (source: Population Reference Bureau).
This increase in Africa’s population will put a lot of pressure on the already high demand for safe drinking water on the continent.
The problem is that the volume of water available to Africa cannot grow with the size of its population. Africa still has the same amount of fresh water now as it did 2,000 years ago when its population was much less!
The average African requires at least two litres of drinking water every day (this does not include another one litre needed for cooking). With a limited supply of safe drinking water and its large and growing population, it appears that the demand (and price) of drinking water will explode in the near future.
2. More Africans are moving to the cities
In the 1980s, the population of Africans living in cities was less than 120 million. Today, more than 40 percent (400 million) of Africa’s one billion people now live in urban areas. In fact, the proportion of Africans who now live in cities is higher than India (30 percent) and roughly equal to China (45 percent).
According to a recent research, if Africans continue flocking to cities at the current rate, more than 300 million more of us will become city people within the next 20 years. (source: McKinsey Research).
Because of the concentrated populations, higher economic and physical activities in cities, demand and consumption of drinking water is much higher in urban than in the rural areas.
Unlike in the villages and rural areas where a drink of water is just a stream, lake or river away, people who live in cities have a much limited access to drinking water and are likely to buy the water they need or may depend on the erratic supply of government-run water corporations.
Many of the existing packaged drinking water businesses in Africa are concentrated in the cities. This is where the demand for drinking water products is highest. In addition, city people are more willing to pay for drinking water than rural dwellers.
At the moment, more than 50 African cities have a human population of over one million people; and more will join in the coming years. Cities like Lagos (Nigeria), Nairobi (Kenya) and Luanda (Angola) are likely to join the list of the world’s mega cities in the next decade.
African cities have become huge pools of demand and big markets for safe drinking water. They are now (and will become) the main sources of billions of dollars that will be made by companies and entrepreneurs in the drinking water business across Africa over the next decade.
3. Inadequate and poor drinking water supply infrastructure
Because of the strategic importance of water in human life, many governments across the world have taken responsibility for providing their citizens with safe and unpolluted drinking water.
Governments, municipal authorities and NGOs may be doing their best on the continent but millions of people in both rural and urban areas across Africa still do not have access to safe drinking water. In many parts of the continent, tap water is simply not safe to drink. (photo credit: fairshareproject.wordpress.com)
Access to safe drinking water is a bigger problem in Africa than anywhere else on earth.
Out of the 25 countries with the greatest percentage of people who do not have access to safe drinking water, 19 of them are in Africa. This means that three out of every four people on our continent rely on ground water that is not clean or safe.
Many African governments also lack the will, resources and finances to effectively manage and distribute drinking water. As a result, less than 10 percent of the available fresh water on our continent is used each year (source: EveryLittleDrop)
4. A growing middle class
The African Development Bank describes the ‘middle class’ as people who spend between $2 and $20 a day.
Currently, there are more than 300 million Africans who fit into this category.
A significant majority of Africans in this middle class category hold salaried jobs or own/run a small business. Many of these people are educated and aware of the dangers of drinking unsafe and untreated water.
Because they appreciate its value (and can afford it), many of these people in the middle class spend a sizeable portion of their income on safe, filtered and treated drinking water for themselves and their families.
According to a recent Deloitte report,
“Africa’s middle class has tripled over the last 30 years, with one in three people now considered to be living above the poverty line – but not among the wealthy. The current trend suggests that the African middle class will grow to 1.1 billion (42%) by the year 2060.
As more African economies grow (7 of the 10 fastest growing in the world are African), the wealth will continue to trickle down. Available evidence already suggests that Africa now has the fastest growing middle class in the whole world.”
Unlike in the past when bottled and packaged water was consumed by very few people, more Africans now consume these products.
In fact, bottled and packaged water have become the top selling beverage in Africa ahead of soft drinks, beer, coffee and tea! World class beverage makers like CocaCola, Nestlé and Pepsi now have their own bottled water products that are taking advantage of the increasing spending power of Africa’s middle class.
5. The rising threat of water scarcity
In a few years from now, according to the United Nations Environmental Program (UNEP), almost all sub-Saharan countries will be below the level at which water supply is enough for everyone. Even worse, most of these countries will be in a state of ‘water-stress’ or ‘water scarcity’.
Water scarcity is a situation when less than 1,000 cubic meters of water are available to each person per year. If the available volume is less than 1,500 cubic meters of water per person per year, it is defined as a “water stress” situation.
For several reasons including population growth, climate change and rapid urbanization, African countries such as Egypt, Kenya, Ethiopia, South Africa and several others may start to experience water scarcity by the year 2025.
The chart below is from the United Nations and shows the volume of water available to an average African in all the countries on the continent. More than 70 percent of African countries are expected to go through water scarcity or stress by 2025.
(photo credit: United Nations Environment Program)
Africa’s population growth and its dwindling freshwater reserves are the main reasons for the rising pressure on drinking water supply. If the current situation continues, the price and demand for safe drinking water is very likely to skyrocket in the coming years.
The Top 2 Hot Selling Drinking Water Products in Africa
The drinking water business in Africa is worth several billion dollars in sales every year.
As revealed to you before, some of the world’s biggest brands (like CocaCola, Nestle and Pepsi) are now heavily invested in the production of drinking water that is sold across Africa.
The successes of the products we shall share with you in this section confirm the huge demand and lucrative market for safe drinking water across Africa. These products are now (and will continue to be) heavily consumed on our continent due to the reasons/factors discussed in the last section.
Let’s now meet the top two hot-selling drinking water products in Africa.
#1 – Sachet or Bagged Water
Sachet or bagged water is commonly sold by petty traders and hawkers in road traffic, markets and on busy roads across West and Central Africa (photo credit: naijagists.com)
If you have visited parts of West and Central Africa, you may have come in contact with this product popularly known as ‘Satchet water’ in Ghana and ‘Pure water’ in Nigeria. These hot-selling products are bags of sealed 500 ml (half of a litre) plastic sleeves that are filled with water from the municipal system or private wells and boreholes.
Sachet water, which sells for between $0.05 to $0.10 on the street, is the common man’s cheapest and easiest access to safe drinking water in these parts of Africa. Its low cost and high availability has made this product the top-selling drink/beverage in West Africa.
Every day, on the hot and busy streets, markets and centres of many of Africa’s famous capitals, sachet water is in top demand as millions of people desperately reach out for this relatively cheap and convenient product.
At the moment, there are thousands of sachet water brands in many West and Central African cities.
The producers are small scale businesses that operate small plants and factors. These plants typically include a water treatment or filtration system that sterilizes the water and makes it safe for drinking.
There are also bagging and sealing machines that use transparent (and often branded) plastic bags to measure and seal the water.
The product is then sold in bulk (large volumes) to wholesalers and retailers who cool them with refrigerators or ice blocks before selling to thirsty people on the street.
Due to the worsening water problem in many parts of the continent, some households wholly depend on sachet water for drinking and cooking. It is very cheap and convenient except for its pollution side effects; used sachets are causing an environmental sanitation problem in some cities where they clog gutters and drains and often lead to flooding.
#2 – Bottled water
Bottled water is the king of the drinking water business across Africa. It costs more to produce and sells for a much higher price than its sachet counterpart.
These popular, transparent and often branded plastic bottles come in a wide range of volumes – from the small half a litre bottles to 20-litre containers.
The small volumes (500mL and 1 litre) are targeted at individual consumers while the larger volumes are preferred by families, offices, businesses and other large organisations who use them in water dispensers.
Depending on the brand, a one-litre bottle can sell for between $0.75 and $1.50. These products are marketed and sold as a safe and health-enhancing alternative to middle and upper class Africans who are more health-conscious and can afford the price of bottled water.
However, due to its higher cost of production, the bottled water business is dominated by medium and large local and international companies.
For example, Nestlé is a big player in this business with its Pure Life label which makes billions of dollars in sales every year for the company in several African countries.
CocaCola’s Eva Water brand is the leading drinking water product in several countries in Africa with up to a 10 percent market share in Nigeria, one of Africa’s largest and most populated markets.
In Kenya, bottled water sales now exceed 1.3 billion Shillings (over $10 million) every year. The bottled water product category is now the fastest growing segment in the beverage industry.
This is a huge leap in a market where bottled water used to be regarded as a product for tourists, rich people and big businesses. The short video you’re about to watch below explores the success of the bottled water industry in Kenya.
Some important things you should know before starting a drinking water business…
Yes, the drinking water business in Africa may be big and booming but it is not a walk in the park. There are some important things to consider before starting this business and we will look at these in this section. It is critical that you consider these points very seriously before you invest your time, effort and money.
Here they are…
Water is a volume business
Unless you are a top brand, it may be impossible to sell water at a high profit margin. Volume (or quantity) is the secret of making money in the water business.
Because water is a commodity product, it is only profitable if you can sell it in large volumes. The profit you can make by selling a single bottle or sachet of water is usually very small, but if you can sell a lot of bottles (or sachets), the profit you make starts to make sense.
In summary, the more water you can sell, the more money (profit) you can make.
So, why are we telling you this?
It’s important because you will need to consider the size of your target market before you start this business. The more people who live (or work) in the area, the more water they will drink, and the more volumes you can sell.
This makes heavily-populated areas like markets, schools, university campuses, office areas, construction sites and other places where people are concentrated very good targets.
If your product is too far from these high-activity areas, you may be losing your profits to high transportation and delivery costs.
(photo credit: quietenvironmentalist.com)
How much capital will you need?
The simple answer is – it depends!
Do you want to produce drinking water or be a seller of the product as a wholesaler or retailer?
Which of the products are you interested in – sachet or bottled water?
Depending on your choice and the scale at which you want to start, the amount of capital you will need will vary. Producing or packaging the product will be more capital intensive than if you were a wholesaler or retailer.
Whether it is packaged in sachets or bottles, producing drinking water to meet the demands of today’s markets requires some significant investment in machines and equipment.
You will need water treatment, purification and distillation systems, filling machines and automatic sealers. The sachet water production plants are much cheaper, simpler and less sophisticated than the bottled water plants.
Other things to consider as a producer include a good source of water (a borehole most likely), electricity, delivery vans and a steady supply of plastic sleeves and bottles.
You may need to get a government license or approval
Water-borne diseases like cholera, diarrhoea, Hepatitis A and typhoid fever are a daily threat to millions of Africans.
The micro organisms which cause these diseases (which are present in contaminated and untreated water) kill many people on the continent every year. As a result, businesses involved in producing and packaging drinking water are now closely monitored by the government.
Before you start this business in some African countries, you may need to get an approval or license from a government health office or department. As a result, your production plant/facility may be inspected from time and may be closed down if you do not meet the required health, cleanliness and sanitary standards.
Always watch out for quality!
The main reason why millions of Africans would not drink tap water and prefer to buy sachet or bottled water instead is because of the assurance of quality they get when they drink packaged water.
As a result, quality is the most powerful selling point of the drinking water business in Africa.
Quality means that your product is harmless and safe. Safe drinking water is tasteless, odourless and colourless. It must be well treated, purified and should not contain any disease causing organisms.
Quality is so important in the water business because when customers are no longer assured that your sachet or bottled water is safe for drinking, your business WILL die!
Never, never, ever compromise on quality! The day you forget this advice is the day your water business fails!
Now you know more about the packaged drinking water business in Africa…
Wow! It’s been a really long article (more than 3,000 words). We just had to make sure that we didn’t leave out any important pieces of information about the opportunities in the water business in Africa.
We hope you have learned a thing or two about this very critical and strategic product and its huge potentials now and in Africa’s future.
We believe that the opportunities we have shared with you in this article will be taken further by your creativity and energy.
You could also choose from many more lucrative business ideas in the Business ideas section of this website.
Please leave a comment, share your views and ideas or ask any questions you may have in the Comments section below.
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To your success!