Written by West FM Team 2011-12-15 16:14:00 Read 9392 Times

The Shariff Supermarket rebranded Khetia Supermarktet on Moi Avenue Bungoma [Photo by Protus Simiyu/ West FM]

With more than 40 million inhabitants, Kenya is a comparatively affluent market in East Africa and is likely to experience faster growth in the modern retail sector as the economy continues its upward trend. This is despite the challenges that the economy is going through with spiraling inflation, a weak shilling and uncertainty in the political world as the country takes a bold step develop central power to the counties.

In fact, Kenya's modern grocery retail sales are forecast to more than triple by the end of the 2012 trading period thanks to the government's continued effort to improve the country's business environment.

Even though the retail sector is dominated by traditional retail channels and independent supermarkets in the countryside, the development of modern grocery chains has taken root in urban areas. Domestic players such as Nakumatt are beginning to open stores in smaller towns outside the capital city Nairobi, whilst Pan-African player Shoprite has been rumored to be considering market entry through the acquisition of the re-emerging local player Uchumi.

Consumption trends have continued to emerge as the rural population become enlightened through continued media (read) radio campaign awareness and with the emerging of the county module for business, a paradigm shift in retail business is taking shape with major players training their guns to the rural and semi-urban population in densely populated areas, especially in Western Kenya.

The retail business in Western Kenya, especially in the two most populated counties of Kakamega and Bungoma has taken an interesting turn in the last couple of months with national retailers like Nakumatt and Tuskys locking horns and fighting for the enlightened population with the local giants like Yako, Shariffs and Khetia Drapers.

Nakumatt Kakamega branch. Touted as the best performing Nakumatt outlet

Nakumatt’s most profitable chain is the Kakamega branch and that’s with a good reason. It’s the second most populated county with an emerging institution of MMUST whose students are spending over 1.7B a year on retail services and products. With this in mind, Western has become the new ultimate ground to determine who are the kings of retail business in this country with a population of over 8M people.

The customer is always right and is always the king, so the saying goes. The scramble and partition of the western customer has brought about interesting results with Shariffs exiting the retail business after 20 years in the industry under circumstances that are not clear.

Lack of products on the shelves of their expansive chains of supermarkets for months on end created speculations that the major player in the retail business, that is worth over 8B in Bungoma alone were running broke with mounting debts of over 50M and internal family feuds that was crippling efficient management and the daily operations with a demoralized staff, increasing competition from new entrants into the retail industry has seen Shariffs exit the business in a deal that has the locals seeking the truth. 

Acquisition and Merger

It’s said that Shariffs has quit the business after selling his chain of supermarkets to Khetia Drapers. Some say that it’s a management deal with shared profits and losses at the end of any agreed fiscal period but content emerging now as Khetia Drapers rebrands all the Shariff outlets, it’s clear that Khetia Drapers has bought Shariff out in deal believed to have cost more than 200M.

Interview with West FM

The Shariffs supermarket sold its downtown outlet, Shariff Centre and Mumias braches  to his perennial rival Khetia Drapers early this month with the later rebranding the branches to his names with immediate effect.

Speaking to West FM Shariff’s Director Arif Shariff said that they were going to venture in other lines of business. “We are out of the supermarket business but will are still going to be in supplies business,” he said.

Arif however said that they had not sold out the Shariffs Centre plaza but leased it to Khetia Drapers who will be paying rent to them.

He further said that Shariffs had entered into a partnership with Khetia Drapers that will see them be selling meat products in the Khetia chains of supermarkets who traditionally don’t sell meat and sausages in their shops.

Competitive environment

Khetia supermarket only enjoyed a few days of monopoly with new entrant Yako supermarket opening up a multibillion complex in the town, setting the stage for a fierce battle for the customers, even though the owners of the two chains of supermarkets are cousins. According to reliable sources who intimated to West FM, the new entrant Yako, the director is a first cousin to Khetia supermarket directors.

Khetia Drapers owns a chain of supermarkets in Kitale and two others in Bungoma  and sources in the know further said that Khetia Drapers are scheduled to open another outlet in Kisii early next year.

Yako supermarket opened a Sh150 million outlet in Bungoma town which has drawn in scores of Christmas shoppers.  Director Sudhir Khetia said the investment is bound to be profitable as Bungoma lies at a junction in the Nzoia sugar belt along the Great North Road backed by a fast growing population.

The Newly opened Yako Mart in Bungoma town. The new entrant has changed the dynamics of retail business in the town [Photo by David Indeje/WESTFM]

With the busy town being a conduit for over 960M daily, he said any investment in Bungoma is right because of the availability of customers with over 100,000 urban residents in Bungoma town alone and over 1.9M in semi-urban and rural areas, retail business is the business to do.

Khetia said the project mooted several years ago opened to the public last weekend and would hold its own against competitors because of its unique features. Which include a confectionery, a restaurant, and children’s toys bazaar, among others.

He explained that the decision to construct the mall followed the success of their other Yako supermarket in Kakamega that was opened awhile back.

The Newly opened Tuskys in Kakemega Town. [Photo By John Kabaka /WestFM]

With Tuskys having opened up in Kakamega, it’s clear that Yako is trying to leverage the competition and spread risk by moving to other key towns in the region before Tuskys and Nakumatt break ground in Bungoma the first quarter of next year.

According to Synovate’s research in 2009, it indicated that 40% of the country’s affluent families live in the countryside.  They are infact rural populace. This is something that seems to be the driving factor for the massive and speedy expansion of the retail businesses in emerging markets of the country that for long have been traditionally been ignored by the corporates.

Western is a virgin market that any sensible business man will ignore it at their own business downfall. With a population that is awakening to the myriad of products and services with a keen interest that has been sharpened by increasing literacy, retail business is just one of the businesses that will definitely thrive here.

Analysis by: Steve Biko Wafula, David Burudi and Protus Simiyu. Photos by Protus Simiyu and John Kabaka.

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