Steers and Debonairs Pizza, two fast food chains, launched in Kenya sixteen years ago. Azam Samanani – managing director of Hoggers Limited, the firm that runs the two franchises – told How we made it in Africa’s Dinfin Mulupi about doing business in Kenya’s restaurant market. Below are excerpts. [hidepost=9][/hidepost]
Steers launched in Kenya sixteen years ago. What was the inspiration then?
Sixteen years ago, the vision was that there was a market here for people who wanted international quality offerings. We have done pretty well since the beginning. We now run eight Steers and five Debonairs Pizza stores. There has always been a market for excellence and sixteen years ago we were the only ones doing this whereas today there are more people doing it and more people trying to do it. There are unique business challenges to doing things right in different environments. Africa has its unique challenges, Kenya has its unique challenges and Nairobi has its unique challenges. Every time someone tries to take an experience that isn’t organic to the environment and tries to implement it, it’s going to be difficult… doing business here isn’t necessarily straightforward, and our ability to meet Kenyan needs has been our strength.
The market has changed a lot since you launched, with increased competition from other quality brands. How are you coping?
I think we all feel there is still a lot of room. Tastes are changing. The appetite for our kind of offering is increasing. I think part of it is exposure. Sixteen years ago we were excitement, we were news, but then it settled into ‘we were a niche’. We are largely going after people with disposable income… The market that is growing fastest in Kenya is the middle class and that is what everyone is looking at. Among the fast-growing middle class, we are targeting the upper half of that. It is people who have good jobs; it is people whose ends are already meeting. People have come into the market saying what they are going to do [to] it to bring in international quality. As Kenyans, we don’t believe that we need people from outside to teach us about quality. We have had quality all along. We may not have a huge restaurant and food gourmet community, but it’s starting, and our people and [our] products are among the best.
More international brands are entering the Kenyan market. What could be driving the interest of international brands?
Where do you go if you are coming into Africa? Most people think of South Africa but it is a developed economy. In many ways it is saturated on the basics whereas the rest is not. International brands are seeing other brands doing well here [in Kenya]. One of those brands is us.
If you are trying to grow an enterprise, why wouldn’t you do it here? Kenya is a market that is a trendsetter for the region… if you get it right here; the logical expansion is pretty big. Kenyans are educated and sophisticated. If you think about developing economies, Kenya is much more sophisticated than the level of development would lead you to believe. If you take the average Kenyan verses the average anyone else in another developing country, Kenyans know what it is going on in the world. They are smart, they are hard working, and their tastes are more sophisticated.
Is the Kenyan middle class as vibrant as we are made to believe?
While the overall population is growing, the number of people breaking into the middle class is probably a higher proportion than the overall growth, and therein lies the big opportunity… The average Kenyan is still having a tough time and it’s not getting better very quickly, but the number of people we’re looking at as heavy consumers in the middle class is about two million people (from Kenya’s 40 million population) and it’s growing fast.
Describe the challenges you face.
The biggest challenge, which I think we are actually doing a good job with, is consistency. We are a franchise, so the experience should be the same. There are actually over 500 Steers and 350 Debonairs Pizza franchises; not only does our experience have to match our own 13 stores, it needs to match all the other ones as well. The second biggest challenge, unfortunately, is theft. The life of the average Kenyan over the last number of years has gotten more difficult… as a result, the impulse and the willingness to steal has increased. The proportion of our own staff members who are willing to cross that line has gone up significantly because times have gotten harder. The cost of living has been going up every year and most businesses cannot match real inflation and still survive.
Several South African brands that have entered the Kenyan market have failed. Why and how have you managed 16 years here?
There are plenty of success stories of South African companies coming in and doing well, but the failures are more visible. I have a lot of South African friends, and the brand loyalty in South Africa is absolutely unparalleled; South Africans buy South African and they have homegrown brands like nowhere else. They are a fiercely loyal and patriotic people. But when some of those businesses leave South Africa to expand, something gets lost in translation. A lot of the people who lead the expansion of South African companies into other African countries function as if the markets are the same. That is the big challenge. Other foreigners, who come in, don’t think they know Africa. If you come in thinking you know too much that is when you run into trouble. Inside South Africa, South Africans recognise that the rest of Africa is a different market, but some of the people, when they land in other markets, forget how different it is and assume that they can do business the way they have done in South Africa, which doesn’t work. We have been successful because we are Kenyan, we look at our market and we figure out what is appropriate for our market. We don’t do things from the outside and assume they are just going to work.
Describe your future plans.
The future for us is to expand. One of the reasons we haven’t expanded outside Nairobi is because we want to do it through franchise partnerships. That is the biggest opportunity for us going forward. We are dying to do this. We think that the future here is to partner with entrepreneurs and leverage our brands and training to make them successful business owners. We are looking for people who have the drive and fire to do this. We are not looking for wealthy investors, we are looking for entrepreneurs. There is plenty of room for expansion in Nairobi and all of the other major towns and cities have an opportunity. We are also considering bringing other international brands into the Kenyan market. We are looking at one brand targeted at the higher end of the market. It will compete in the up-scale, casual dining category. There are opportunities above and below our market segment. There is an opportunity to provide the same quality and the same kind of experience at a lower price offering. That may be an organic brand that we may develop later.