Fierce competition awaits Uchumi’s return

Commodity prices in major supermarkets in East Africa could soon be drastically reduced after Kenya’s oldest supermarket chain — Uchumi — was officially lifted from receivership.

The official re-entry of the retail chain Uchumi Supermarkets into the market means competition in an already flooded retail sector will intensify even further.

This is likely to make consumers of basic commodities such as flour, sugar and cooking oil winners as the chains engage in a literal fight to increase their market share.

Critical in the looming competition is the move by supermarkets to cut down on their operating costs, expand their operations and cut price.

According to the chief executive officer Jonathan Ciano, Uchumi’s main assignment will be to consolidate its market share, eroded during the receivership period.

Already, the chain is putting up an “ultra-modern hypermarket” in Kampala, the second one after the so-called super hypermarket that occupies more than 60,000 square feet in Kampala’s Garden City.

“Our growth plans were not affected by the receivership as it has been widely perceived. We are firmly determined to exploit the massive opportunities that exist in East Africa.” Mr Ciano said.

In its annual general meeting held recently, it emerged that the government will hold 13.3 per cent of the firm’s total shares directly after it agreed to convert Ksh350 million ($4.67 million) of its loan into equity.

The step was taken after it was discovered that the chain would be turned into a parastatal were the government to convert its entire loan — Ksh875 million ($11.67 million) — into equity.

In addition, its investors approved the conversion of convertible debentures to shares worth more than Ksh477 million ($5.36 million) and agreed that outstanding loans from two commercial banks — Kenya Commercial Bank and PTA Bank — be restructured.

Analysts say the post-bankruptcy operations of the chain are likely to prove a hard nut to crack for the chain’s managers due to the increased competition.

Today, the number of supermarkets in East Africa have gone up, while the consumer and supplier needs have changed.

Currently, Nakumatt Holdings is virtually the driver of the retail business in the region.

“Due to obvious economic growth and lifestyle changes, consumers are demanding top quality shopping avenues which is what we seek to present to our customers,” Nakumatt CEO Shah told The EastAfrican.

The chain now has a total floor space of over 1.3 million square feet while its market share stands at approximately 12 per cent in Kenya. There are still no available figures on the chain’s market share in Rwanda and Uganda.