Talk of a foreign supermarket chain entering the Kenyan market has been doing the rounds for years now. But it will soon become reality when South African retailer Massmart opens its Game store at Nairobi’s Garden City Mall next month.
This will be followed by the launch of the French chain Carrefour later in September at the Two Rivers development in Nairobi, currently under construction. Carrefour has also signed up for a second store at The Hub – an upcoming mall in a wealthy suburb in Nairobi.
The Kenyan retail industry, dominated by local companies, is well advanced compared with its neighbours. The four leading players are Nakumatt, Tuskys, Naivas and Uchumi.
Nakumatt operates 52 stores in four countries, employing 7,000 people.
So what will happen when well-known foreign brands open stores in Nairobi this year?
“Nothing to worry about,” says Thiagarajan Ramamurthy, regional director for strategy and operations at Nakumatt, dismissing speculation that it will be hurt by the competition.
He believes the market is big enough for all players.
“I will go to Carrefour. I will go to Game. What is wrong [with that]? We travel on all the airlines. The owner of Emirates flies on Kenya Airways to find out how their services [are]. The cake is big. Local and international [retailers] can co-exist.
“There are many elephants in the field, but still this one elephant, Nakumatt, leads,” adds Ramamurthy. Nakumatt’s logo features the image of an elephant.
In fact Ramamurthy is optimistic about the future. By 2017 he envisions Nakumatt having 70 stores, 1.5 million customers (up from the current 1.1 million) and making $1bn in annual gross revenue (currently $700m).
Enough room for everyone
Speaking at the East Africa Property Investment Summit (EAPI) in Nairobi, Ramamurthy told delegates Nakumatt is focusing on 10% of the retail market in East Africa. “[This leaves] 90% for anybody who wants to come into the market, whether local or foreign,” he says. “The potential in East Africa – only for the 10% – is $7bn.”
He explains that in the last 11 years Nakumatt has invested to build a critical mass of customers through its loyalty card programme. “[Now] we have 1.1 million households which [represents] 4.4 million people, which is 10% of the population. So I have the 10% [of Kenya’s 44 million population].”
South African retailer Massmart has had an appetite for a piece of Kenya’s retail market for years now. A previous attempt to enter the market by acquiring a stake in Naivas flopped due to family wrangles.
As Game and Carrefour, which have both already hired staff, prepare to open their outlets, Ramamurthy offers them words of caution.
“Newcomers will have to align with the local supply chain,” he says. “You can’t have one or two branches and import a lot of things. It is important to work with local people.
“I want them to come. When two elephants fight, grass doesn’t suffer, customers benefit,” says Ramamurthy.