Plans by US retail giant Walmart and French retailer Carrefour to enter the Kenyan market and roll out expansion projects in Africa are tipped to intensify the competition for the continent’s burgeoning middle class.
Carrefour has already booked space at the Two Rivers Mall, whose construction is set to be completed in October this year, paving the way for the entry of the multinational retailer into the Kenyan retail market.
Kenya will be the Majid Al Futtaim-owned retailer’s second destination in Africa after Egypt, in a market that also has the world’s largest supermarket chain, Walmart, very interested.
Carrefour has expanded across the globe, with a presence in 38 countries in the Middle East, Asia, Russia and Africa. The supermarket is, however, expected to expand to more countries in sub-Saharan Africa after Two Rivers. This year, it is expected to enter six new markets.
Walmart, through its South African subsidiary, Massmart, projects to open 90 new outlets across Africa in three years, and has also booked space at the Garden City Mall along Thika Road.
The supermarket, which bought a 53 per cent majority stake in South Africa’s Massmart in 2012, has an aggressive expansion strategy that will kick off next year with an outlet in Kenya. The store will be branded Game Store and will retail under its South African subsidiary brand name, Massmart.
“The Kenyan store is part of our plans to open 90 stores (in Africa), including in South Africa,” Massmart’s communications manager, Annaleigh Vallie, said in an e-mail interview.
The retailer has 346 stores in South Africa alone, 11 in Botswana, seven in Mozambique, three outlets each in Namibia and Lesotho, two each in Malawi and Nigeria, and one each in Zambia, Ghana, Swaziland, Tanzania and Uganda.
Ms Vallie said Massmart has identified many compelling growth opportunities in African countries outside of South Africa, with the priority now being centred on East and West Africa.
Consultancy firm Deloitte estimates that Africa’s middle class has tripled over the last 30 years, and is expected to grow to 1.1 billion by 2060.
Kenya’s largest retail store, Nakumatt, also has plans to open stores in Ethiopia, Nigeria, Botswana and Zambia.
“This is part of our pan-African expansion, and are currently engaged in a series of feasibility studies,” said Nakumatt Holdings managing director Atul Shah in an interview with the Sunday Nation.
Massmart could have made a footprint in Kenya last year, but plans to take over local retailer Naivas never succeeded. Its entry in the local market is nevertheless expected to enhance competition in a market dominated by Nakumatt, Tuskys, Uchumi, Naivas, Chandarana and other relatively smaller supermarkets spread across the country.
Nakumatt, which previously targeted the high end of the market, is now diversifying to capture even the mass market that has traditionally appealed to Tuskys, Uchumi and Naivas.
Tuskys, the third-largest supermarket in the East African region, acquired its rival Ukwala sometime last year to consolidate its operations especially within Nairobi County.
But with another competitor, from France, already with one foot in the country, the competition is set to get even sweeter, though the country’s retail potential is still huge given that only 20 per cent of that market has been exploited.
French multinational Carrefour, one of the largest supermarkets globally, has leased 100,000 square feet of space in the upcoming Two Rivers shopping mall in Runda, Nairobi.
The shopping complex is almost the same size as Garden City mall, which is being constructed on Thika Road, and is scheduled to be completed by October 2014, earlier than Garden City.
Last month, Uchumi Supermarket’s chief executive officer, Nicholas Ciano, said the retail chain plans to roll out more branches in Kenya, Uganda and Tanzania targeting an expanded consumer base in the region.
The retailer, which is listed on the Nairobi Securities Exchange (NSE), has 33 branches across East Africa and is looking to raise Sh1.5 billion through a rights issue to finance its regional expansion drive.
“In the next financial year, we plan to open several retail branches across East Africa in a bid to competitively and strategically position our business.
“We also want to proactively position ourselves and be able to adequately finance working capital for our subsidiaries, with a consequent growth in market share and sales volumes, reflective of demographic and economic regional growth,” said Mr Ciano.
APPETITE FOR AFRICA
But given the global supermarkets’ appetite for the continent, Nakumatt, which had laid out a pan-African growth plan, will in the meantime consolidate its East African operations and expand within the region.
In Kenya, the retailer has 35 stores, one outlet in Tanzania, eight in Uganda and two in Rwanda.
“Remember, we operate in Uganda, alongside some of the global players, and our differentiated quality of service has allowed us to emerge as the preferred and number one retail player. With formal retail penetration rates standing at less than 20 per cent, we are of the opinion that on a level playing field, the cake is quite large for existing and potential retail players,” Mr. Shah noted.
Although there is still room for growth in Kenya and across East Africa, with only about 20 per cent penetration of the formal retail sector, Naivas, the third-largest supermarket in Kenya has put on hold its East African expansion plans.
“The market has much more opportunities, but we want to expand internally first,” said Naivas’s business development manager, Mr. Willy Kimani.
The challenge for most retailers is the scarcity of suitable space from where to start operations.