Category Archives: Nakumatt

Nairobi Supermarkets & Mall Moments

It has been an interesting few days in the Nairobi mall and supermarkets space.

It started off with a notice on social media from the Junction, a 26,000 square meter mall stating that Nakumatt had surrendered their space at the mall. Nakumatt was the anchor tenant of the mall which opened in 2004 and now has  115 stores.

But Nakumatt which has been having cash flow and supplier payment issues, and which have all resulted in  most common everyday products like fresh foods and supplies missing from their store shelves, then put out a statement alluding to ongoing talks with the Junction mall and their suppliers with advanced plans to restock their shelves.

Later on the same day Nakumatt got a court injunction temporarily stopping their removal from the Junction and issued another more formal statement about how the Junction management had tricked them and illegally took over their space after they had paid Kshs 20 million, hurting their image in the mind of employees, suppliers, and customers.

Knight Frank who manage the Junction also issued a statement acknowledging the court order, which they would follow, but stating that Nakumatt had signed a surrender on 15th September and then failed in its payment obligations and had not documented a commitment to restock the shelves by the surrender date.

Tuesday also saw an announcement by Majid Al Futtaim that they would be opening their third Carrefour store in Kenya at TRM (Thika Road Mall),  a 28,000 square meter mall on Thika Highway. The space had been surrendered by Nakumatt just two weeks before that. Carrefour operates stores at the Hub in Karen and Two River malls.

The release also contained some interesting stats on suppliers and employment:

– We are looking to stock over 30,000 items at the hypermarket, including fresh produce, groceries, a fresh bakery, and a butchery
– (We) work with over 640 suppliers, local manufacturers, producers, and farmers, which contribute to the overall economic growth in Kenya both directly and indirectly. Only one of the suppliers is foreign.
– The opening of the new branch at TRM will boost the staff employment count at Carrefour in Kenya to 800, with 600 already working at the other two branches located at The Hub in Karen and the Two Rivers Mall.

There has been quite a bit of clamour by customers of Carrefour, which was becoming quite crowded at Karen on month end, to expand.

An equity deal to rescue Nakumatt deal seems to have floundered, and a new announcement about ongoing discussions for a management partnership arrangement  between Nakumatt and a rival supermarket chain Tuskys have not inspired the confidence of supplier and financiers of Nakumatt.

Other believed beneficiaries of Nakumatt surrendering any more stores are expected to be Naivas and Khetia. This week also saw Naivas launched Naivas Pay in partnership with Interswitch. The launch was a Ciata Mall, at their store in a space Naivas took over after it had been previously booked by the management of Uchumi.

Uchumi itself is in the process of concluding a deal to raise Kshs 3.5 billion from a  private equity investor.

Another interesting concept in the supermarket space, is Seven 2 Seven, a franchise of mini market stores that only stock fast-moving consumer goods (FMCG) and serve as agents of some banks. They are on track to have 100 stores in Machakos, Kajiado, Nairobi, Kiambu, Muranga, Nyeri, Embu, Kirinyaga, Meru and Nakuru counties by year-end.

EDIT November 30 Majid Al Futtaim announced plans to open its fourth Carrefour hypermarket in Kenya, after taking up the anchor tenancy at the Junction Mall on Ngong Road. The new hypermarket will be opened in January 2018. 

Urban Inflation Index: July 2017

Comparing prices and inflation in Nairobi to four and five years ago. 

Price and inflation comparisons are made a bit difficult by the unprecedented (in recent years) shortage of certain food commodities. Back in 2008 as post-election violence rocked the country, supermarkets opening shop, receiving supplies, stocking shelves and selling fresh foodstuffs and household items were seen as one of the barometers that life was getting back to normal. But going into the August 8 elections, several supermarkets have had empty shelves, notably at Kenya’s largest chain, Nakumatt that is limping under debt, and empty shelves, with lawsuits from landlords and key suppliers and a delayed shareholder deal. Unlike Uchumi who faced a similar situation just over a year ago, Nakumatt has not shown humility in asking for a bailout from the government or relief from suppliers and partners.

On to the index

Gotten Cheaper (in four years)

Finance: Bank loans are 14.0% due to the interest capping law of 2016. Average bank rates were 17% in July 2013

Fuel: A litre of petrol is Kshs 97.1 (~$4.25/gallon) today in Nairobi. It was 109.52 per litre in July 2013 (and 117.6 five years ago).

About the Same

Staple Food: With just under two weeks to the elections, maize has been hard to find, even at the government subsidized prices of Kshs 90 per pack. In July 2013 the pack cost Kshs 104 (and it was 118 five years ago) But just how long it will stay at 90 is not clear as the 2017/18 budget drafted at a time of high maize prices and low supplies, zero-rated the importation of white maize for a period of four months. Will it go back up after this window closes?

Communications: Phone call rates flattened in 2013 even though at the time Airtel and Yu were bringing the prices down, while now Safaricom battles distant Telkom Kenya (rebranded from Orange) and Airtel, as well as Equitel from Equity Bank, with competition more on data pricing, and mobile money transfers – where M-Pesa still dominates.

Beer/Entertainment: A 200 bottle of Tusker beer is Kshs 200 at the local pub. This is the same price it was in July 2013. (And it was 180 five years ago)

Utilities: Pre-paid electricity is about Kshs 2,500 per month, which is unchanged from the last review. The calculation of pre-paid tokens remains a complicated exercise.

More Expensive

Other food item: Sugar is hard to find, more so for traditional brands like Mumias. A 2kg bag of Chemelil sugar is Kshs 290  compared to 250 in July 2013 and five years ago it was 237. Prices of other food commodities like milk and butter have also gone up.

Foreign Exchange: 1 US$ equals Kshs. 103.9 compared to 87.15 in July 2013 and 84.25 five years ago.

There has been quite some outward flow of currency ahead of the election.

Plastic Bag Ban in Kenya 2017

A visit to Nakumatt yesterday showed how the supermarket is trying to lead the proposed Kenya plastic bag ban by not packing any more shopping in plastic/polythene bags.

Neighboring Rwanda has had a plastic bag ban for a few years, and is now famed for its enforcement of the ban which has contributed to greener and cleaner image of the country. But the plastic ban was a shock, and the Government needs to champion consumer awareness before enforcement, and target food manufacturers, kiosks, fast food vendors, and the informal sector, which are all heavily dependent on the thin plastic packaging. While some have  commented that cash-strapped Nakumatt is cutting back on overheads such as free bags to shoppers, at the checkout line, Nakumatt offers customers #ThinkGreenGoBlue eco-bags which retail for 75/= large and 50/= small.

In a recent interview, Environment Secretary Judi Wakhungu who gazetted a ban on use of plastic bags, which is set to come into effect in September. She said it will be done in phases, as she spoke about the urgent need to clamp down on plastics, which has the support of most Kenyans and countered claims of job losses as a result of the ban

All you have to do is just go outside Nairobi. And how will you know you are approaching a town or a city? You will see plastic bags everywhere.

EDIT On the plastic deadline date (Aug 28) Nakumatt now packs shopping in some hybrid thing white bags that it sells for Kshs 5/=  each. 

Nakumatt Deal Time

Last week there was a surprising newspaper story that businessman and former MP Harun Mwau had sold his (7.7%) shares in Nakumatt supermarkets.

Businessman John Harun Mwau has sold his 7.7 per cent minority stake in Nakumatt Supermarkets ahead of the retail chain’s plan to take on board a new shareholder with deep pockets to pull it out of a bourgeoning debt crisis.

Late last year, when Nakumatt acquired three stores in Western Kenya they had released a statement which noted that:

Currently enjoying a less than 25% market share of the formal retail space, Nakumatt Holdings, is actively seeking to retain a bigger slice of the mid to premium segment. Through the strategy, the retailer has been working, to grow its gross revenue to over US$1billion in the medium term period while growing its network footprint across East Africa.

Nakumatt has been in the news for the last 6 or 7 years. It was embroiled in the closure of Charterhouse Bank in which it owned 10% and was widely accused of using the bank to launder money and evade taxes. Nakumatt then went ahead and published a lengthy declaration of defense explaining its’ relations with Charterhouse, tax payments (in relation to income), revenue, stores, and compliance with Kenyan law etc.

The new Nakumatt deal comes at a time of unprecedented activity in the retail sector activity both in mall development and supermarket chains.  It also coincides with reports of cash flow issues at Nakumatt, seen in slow payments to suppliers, as have had other supermarket chains, including Uchumi earlier this year.

It is expected that exit of Mwau will lead to another deal at Nakumatt that will bring on board new shareholders, both local or foreign.

Nairobi Mall and Supermarket Moment

A research report by Knight Frank notes that Nairobi has about 470,000 square meters of shopping center space under  development underway and is one of the five largest cities in Africa (excluding South Africa) in that regard (it currently has 391,000 square meters of shop space).

Knight Frank Shop Africa Nairobi spotlight

Knight Frank Shop Africa Nairobi spotlight

Knight Frank notes that, aside from Actis (the pioneering UK investor), most of the developers and landlords of Nairobi’s shopping centres are local Kenyan property owners.

A second Buffalo Mall is to be built in Eldoret. This comes after the Pivotal Fund acquired 50% of Buffalo Mall Naivasha.

Carrefour: This week opened their first store in East Africa. a 60,000 square foot hypermarket at the Hub in Karen, one of 57 stores that have opened there. Carrefour will be the anchor tenant and are run under the franchise of Majid Al Futtaim Retail of Dubai.   EdIt – Carrefour Kenya have an app for shoppers 

(The) Game operated by Massmart. in which Walmart has a majority stake, opened at Garden City Mall as the anchor tenant. 

Khetia:  are in the midst of a Kshs 1  billion expansion in western Kenya. They plan to open up stores in Kisii, Busia and Kericho, each of which requires Kshs  200 million.

Nakumatt: Just launched their 59th branch in Kakamega – the Nakumatt Midtown Supermarket. It was remodeled after Nakumatt acquired three supermarket stores in Western Kenya (Kakamega, Bungoma, Busia) from Yako Supermarkets in a Kshs 260 million investment program. They have also added new stores like Sports Planet departmental  at the reopened Westgate mall. 

Naivas The ownership of widely admired chain is subject to an inheritance court case. 

Sarit Center: Nairobi’s first formal mall is undergoing an expansion program to add more stores.  

Society Stores: An offshoot of a Khetia family member  – Trushar Khetia, hopes to grow the store brand. He says that they had the first chance to buy out Ukwala, but it wasn’t backed by the board and the deal fell through.

Two Rivers backed by Centum and built by Avic will also house a Carrefour store at the 62,000 square meter site in Ruaka that sits on 100 acres.

Tuskys: is focusing this year on staff welfare and streamlining customer service delivery through the deployment of  digital platforms for e-commerce. Shareholders are also trying to settle issues in readiness for a listing at the NSE by 2018.

Uchumi:  Is under new management and, once again, in search of a restructuring deal that involves working with suppliers, sale of assets (such as Ngong Road and Langata branches) and a share sale to a new anchor investor for about Kshs 5 billion. This has been complicated by some suppliers who sued to wind up the company, but talks are ongoing with the government, and it  appears that majority of the  suppliers will agree to convert Kshs 1.8 billion of the debt owed to them into equity at Uchumi.

Ukwala was bought by Choppies of South Africa. The deal was completed after a tax agreement deal  was reached with the Kenya Revenue Authority who were demanding back taxes from Ukwala. Ukwala had admitted to owing the taxman Kshs 101 million but appealed the additional Kshs 845 million that KRA was demanding. 

Finally, suppliers,  have complained about delayed payments by supermarkets retail chains. This was highlighted in a letter from the Kenya Association of Manufacturers (KAM) to Tuskys, Nakumatt and Naivas.

$1 = Kshs 100