Competition in the retail sector in East Africa is set to intensify as Kenya based Uchumi Supermarkets plans to open six new branches – two in Uganda and four in Kenya — starting this month.
The chain will also open stores in Zanzibar and South Sudan, its executives said last week. Uchumi’s expansion plan targets reclaiming its market position now occupied by main rivals Tuskys and Nakumatt and second-tier players Naivas and Ukwala.
“We anticipate the opening of Ongata Rongai branch in Kenya and Natete and Mbale branches in Uganda,” Mr Francis Kiragu, marketing manager, Uchumi Supermarkets, said adding, “we also look forward to once again serving our loyal customers in towns such as Kisumu, Kisii and Mombasa in the not so distant future.”
Uchumi Supermarket presently operates 19 branches in Kenya, with the majority in Nairobi (13) and six in various up-country towns.
The retail chain, which only had one branch in Uganda, now has three branches in Kampala and one in Gulu. Tanzania, the newcomer in the region, has only one branch in Dar es Salaam.
However, Nakumatt and Tuskys have 30 and 32 branches in Kenya, and five branches each in Uganda, respectively.
Mr Kiragu, however, said the expansion plans into the rest of east African countries is being delayed by scarcity of appropriate premises to house the stores.
“We are in talks with developers in Zanzibar and South Sudan to put up structures so that we can open business,” Mr Kiragu said.
Retail chains on the African continent have gained momentum, attracting interest from investors who are keen to be part of the continent’s economic growth story.
Uchumi Supermarket started to experience financial and operational difficulties occasioned by a sub-optimal expansion strategy coupled with weak internal control systems around 2000, sparking off restructuring, which didn’t forestall the deteriorating performance of the company.
In June 2006, the company was closed down, albeit temporarily, due to huge debts to banks and suppliers amounting to KSh2.2 billion ($25.7million), of which Sh957 million ($11.2million) was owed to Kenya Commercial Bank and PTA Bank. Uchumi was simultaneously de-listed from the Nairobi Stock Exchange.
The company was only relisted in May 2011, with shares trading at an average of Ksh17 ($0.2) — Ksh19.5 ($23).
This year, however, the supermarket anticipates a turnover of Ksh16 billion($160 million) for the year ending June 30.
Uchumi Supermarkets registered a 26 per cent in pretax profit to Ksh204 million ($2.38 million) for the half year earning ending December 2011 compared to Sh162 million ($1.9 million) registered a year earlier.
The retailer’s expansion plans come even as inflation continues to bite around East Africa.
The supermarkets, however, say there is still room for growth because most shoppers still do their shopping at informal outlets like kiosks and small neighbourhood retail outlets.