‘Not too late to build FMCG brands in East Africa’
Kenyan diversified trading company Vivek Group was founded by Bharat Thacker in 1994, initially importing cookware and glassware. Over the following years it expanded its product portfolio to include PVC flooring, furniture, snacks, plastics and jewellery.
When Chintan Thacker joined his father in the business in 2004, he saw an opportunity “to go backwards in the supply chain”.
“I was getting bored. I was feeling ‘this is too easy’. I wanted to go into manufacturing something,” says Thacker, who is currently managing director of the company.
Since Vivek had no experience in manufacturing, it began with making methylated spirits, which Thacker says is relatively easy to produce.
It then started experimenting with soap manufacturing from a small lab. But in 2012, while still making arrangements to start producing its own cleaning products line, supermarket chain Nakumatt gave Vivek a contract to produce household cleaning goods for the retailer’s private-label range. (Private labels are goods sold under the brand of the retailer that sells them, rather than the name of the manufacturer.)
Although private-label manufacturing is profitable, Thacker says selling one’s own brand is even more lucrative. So last month Vivek eventually got around to unveil its own brand, Ezee, which comprises a range of household cleaning products. It, however, continues to manufacture for Nakumatt.
“We really don’t get the cream of the profit when it comes to manufacturing private labels. But the benefit is that about 50% of my manufacturing capacity is booked. I don’t have a problem looking for business, worried that half my machines are not working, which would be a bigger loss,” he explains.
“The cream of the profits is when you have your own brand – that is where the money is. Business today is about buying and selling brands. Hopefully 20 years from now my brand will be so strong that perhaps a multinational will come and buy me out – or I will be so big that I’d be able to buy out a multinational.”
Competing with multinationals
But manufacturing its own brand presents new challenges for Vivek, particularly in terms of marketing and brand building in a country where multinational labels such as Omo and Jik are deeply entrenched in consumers’ minds. In Kenya, it is not uncommon to hear a consumer talk about Omo when referring to a totally different brand of washing powder.
“This is a market that has a lot of competition and brand loyalty. A typical middle-class shopper who really doesn’t have the time knows Harpic (toilet cleaner) and that’s what they’ll pick without even looking at rival products on the shelf,” says Thacker.
“Also, if someone sees a well-known brand costs Ksh.200 (about US$2) and a new local brand costing Ksh.190, they are hesitant to risk buying it to save that 10 shillings. They have doubts about how that local brand will perform, so they go with the more well-known multinational brand.”
But Thacker says this is gradually changing as new homegrown companies use promotional tactics to get consumers to try them out.
“We know that as soon as they pick our products they will find we are equal, even better, than multinational brands.
“In the Kenyan market promotions work. I have been to high-end shopping malls and seen even A-class shoppers pick up items that are on promotion. People don’t mind trying when they see a value pack or a buy-one-get-one-free. So we, as a manufacturer, have to make sure the product is of high quality, because if it is not – that consumer will not come back.”
Thacker notes Vivek’s history in trading is an advantage as it tries to push its own brands. “The biggest benefit is to know how to sell before I manufacture. A lot of people manufacture but don’t really know how and where to sell.
“I already had contacts with so many retail outlets. I can go to any supermarket today and tell them to try my product – and they will give me shelf space because they know and they trust us,” he says.
‘Right place at right time’
Thacker adds there is opportunity to introduce more Ezee branded home-care products, including air freshener, aerosol disinfectant and fabric softener.
“I want to grow from home-care to manufacturing personal-care products and food products,” says Thacker. “I think in Kenya and East Africa it is not too late to build FMCG brands. If I wanted to do this in Europe it would be so difficult. But in East Africa, we are at the right place at the right time.”