Category Archives: Nairobi cost of living

Nairobi Supermarket Shoppers and Economics Trends

Chris (@blackorwa) has a blog on Kenya supermarket buyers, deciphering consumer patterns and habits of Nairobi shoppers by analyzing and decoding their discarded supermarket receipts.  This is an interesting experiment, in which they actually paid street kids to dig and dive for recipes in the garbage. They based their search for trends on a previous study at Walmart to draw out patterns of shoppers.

some interesting findings

  • Supermarkets not within malls have 61%  of their customers buying less than 3 items and spending Kshs 200 (~$2) on average.
  • M-PESA is yet to dominate retail – it was used for just 3.6% of supermarket transactions, with cards (credit/debit) used for 1.8% of transactions – as cash is still king at supermarkets. Safari com hopes to change that with 1tap which makes it faster to make purchases.
  • On a typical weekday, a small well-positioned supermarket does 2,350 transactions with a value of about Kshs 360,000. This translates to about Kshs 10.8 million in revenue a month.
  • Margins are thin, and supermarket profits are determined by controlling labour expenses.
  • Cooked food, mineral water, and bakery drive a lot of sales – they have the highest sales volume and greatest profit margins.

Take a look at the study.

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.

Milk Pricing in Kenya

Most supermarkets in Nairobi now have ATM’s/’bars’ which are machines where customers can bring their own containers and buy their own quantities of unbranded milk. Today at one ATM, milk was Kshs 80 compared to about Kshs 110-120 per litre (sold in half litre packs for 55/= or 60/=) for branded milk packs.

Branded milk sachets

But how does milk pricing work? M-Farm tracked a milk trader called Wangondu,  who sells 1 litre of milk at 70/- at his milk bar.

  • Farmers usually use donkeys to transport milk. The wholesaler is introduced into the supply chain at the point which motorbikes transport milk to a center. When there was Mid March scarcity – the majority of the milk was sourced from Kinangop at 35 to 37/= per litre.
  • Boda boda people who bring 100 litres to the main road are paid 250/- meaning, the milk bar trader has to add 2.50 per litre bringing the total cost to 40/- per litre. The road is bad; lot’s of push and pull which adds another cost to the milk.
  • Milk is very sensitive and has to be moved quickly. If one is collecting 1,000 litres, it means there will be 20 motorbikes from different sourcing points and have a vehicle using a particular route to collect aggregated milk. At the end of the day, milk per litre costs a trader about 40/- to 50/- given the circumstances.
  • Pasteurization costs 6/- per litre bringing the total cost thus far to 56/- per litre.
  • Each vehicle collecting aggregated milk has to have 3 people; a driver and 2 loaders. At this point, transport cost of the milk is charged at 6/- per litre. A wholesaler trader calculates his/her profit margin at 3/-.
  • If milk is being sold to a retailer at 65/- they add 5/- margin to retail the milk to 70/- litre. When there’s surplus milk, a trader reduces 5/- per litre by demanding that the farmer delivers the milk to the aggregation center and bears the cost.   Were it not for the rains, the wholesalers had an agreement that on the Saturday before the start of April rains, milk pricing would have retailed from 80/- per litre.
  • When the rains come, they hire an escort to help with the pushing of vehicles who are paid 2/-. “We as traders, take advantage, don’t see the reason why we should sell the milk at 80/- and we see the way farmer and consumers suffer and we have to be neutral. When we have mercy on both the farmer and consumer, the consumer ends up claiming that my milk is cheap because it has been tampered with and therefore, of poor quality.”

  • Bars have lower milk pricing at some supermarkets

    But all the same, the little margins I make are able to pay licenses and pay my handymen in my milk bars. Even after all deductions, I am able to make 1/- or 2/- per litre as profit.

  • When there’s scarcity of milk, we source from Kikuyu and Limuru dairies. Harvesting, transportation to the milk buyer in town, management of milk at the milk bar – this is my business solely. I have to buy from the joint business source, make sure there are no additives, and we have to be there to make sure the quality you get from the shamba is what we give the customer.

Milk is also being sourced from other countries in East Africa as there is a butter shortage (affecting bakers like Sugarpie). 500 grams of butter is retailing at Kshs 1,000/- and this is just ridiculous.

$1 = Kshs 103.

Urban Inflation Index: March 2017

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

It’s exactly four years since the last election and we are back into campaign mode for an election on August 8. How has life changed since the Jubilee government came to power? There are many reports about economic growth and food inflation, and the budget speech that was read last week had a planned expenditure of Kshs 2.6 trillion (~$25.2 billion) compared to the government’s first budget  that was Kshs 1.6 trillion for 2013/14.

On to the index comparing prices of basic urban commodities.

Gotten Cheaper

Finance: Bank loans are 14.0% due to the interest capping law of 2016. The Central Bank of Kenya’s bank supervision annual report for 2014 notes that the average lending rate was  16.99%  in December 2013 and 15.98% in December 2014.

Fuel: A liter of petrol is Kshs 101 (~$4.41/gallon) today in Nairobi. It was  Kshs. 111.6 per litre in March 2012 and Kshs 117.6 in March 2013.

Cooking Gas: A cylinder of LPG (cooking gas) is Kshs  2,030 today. It was about Kshs. 3,000 ($37) in 2012 for the 13kg cylinder.

Communications: Safaricom dominates. Prices are coming down and both Safaricom and Airtel have combined packages called Flex and Unliminet respectively . With Unliminet, Airtel customers get free WhatsApp, Facebook & Twitter of up to 100MB per day and at Safaricom, every reload of M-PESA  gets someone 3 free FLEX units. On the money transfer side,  Equitel and Pesalink are driving down the cost of mobile money usage.

About the Same

Beer/Entertainment: A bottle of Tusker beer is Kshs 200 at the local pub. This is the same price it was in March 2013.

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

Staple Food: A 2kg pack of (Unga) Maize flour which is used to make Ugali that is eaten by a majority of Kenyans daily, costs Kshs. 147 up from Kshs 97 in March 2012 and Kshs 105 in March 2013. But in his budget speech last week, the Minister proposed to zero-rate bread and maize flour to remove VAT. “ Manufacturers, Wholesalers, and Retailers who sell such goods will be expected to reduce the prices of these basic commodities, failure to which, I will reverse the policy. In addition to further lower the cost to Wananchi, the importation of maize during the next four months will be duty free. I expect, therefore to see a reduction of prices for these basic commodities which enjoyed by majority of our people.”

Other food item: Sugar: A 2 kg. Mumias Sugar pack is now Kshs 292; it was Kshs 245 in March 2012 and Kshs 250 in March 2013. It has hard to find Mumias sugar which is going through some issues, so this is the price of Chemelil sugar at the supermarket.

Foreign Exchange: 1 US$ equals Kshs. about Ksh 103 today compared to Kshs 83 in March 2012 and Kshs 85 in March 2013.

Utility: Water in Nairobi is more expensive.

Wadi Degla and Kenyan Clientele

Sports clubs have been in Kenya for over 100 years. The oldest is said to be Royal Nairobi that was founded back in 1906, and many of the other well-known golf and membership clubs, all started back in the 1920’s and 1930’s.

They still rule to this day, many with memberships of a few thousand each, and they are seen largely as the preserve of the very wealthy. Applying to join a club is a formal process, through introduction, approval by other members (a period in which one’s mini-C.V is placed on a wall for others to review) and some applicants even have to be interviewed for suitability.

wadi-degla-tennis-courtsThe clubs started in the colonial era with a focus on activities like golf and hunting and with the large acreage mostly for male member sports. But today the needs of members have changed.

The clubs are now on modernization sprees to accommodate the modern needs of their members. Some, which used to have large men’s only bars, are now re-doing clubhouses to better use the space, buildings and land they have, They have all had to re-invest in new facilities like meeting rooms, indoor sports equipment, gyms, restaurants and kids pools.

Wadi Degla clubs have modern designs that take into account the sports, social and leisure needs of modern families. Today sports club members, both male and female, desire the exclusivity of the clubs for networking and for business. They want facilities to exercise, and also for their children and families to also enjoy and perhaps get specialized sports training. Wadi Degla has a lot of these, with heated swimming pools (including an Olympic-size one), running and walking tracks, and exercise gyms for up to 200 people.  They have business lounges and restaurants, top spas, shopping and kids training clubs to get specialized training in sports like soccer (by Arsenal Soccer), tennis, squash and (in Kenya) athletics – which will be done by Kenyan marathon champion Douglas Wakihuri at a new running school. They will have access to the five facilities in Nairobi including an 18-hole golf course and the largest gym in East Africa.

Wadi Degla also targets expatriates (expats), and people new in the country.e.g.  all the engineers and managers building infrastructure and running companies around Kenya, They may not know the ropes of the city, or have people to introduce them to networks to get into other other clubs, but they can at Wadi Degla.

wadi-degla-gymThey also have special plans for expats and expat families can pay special fees that match the duration of their stay in Nairobi. For others who travel and live for long periods in different countries in the region, there is a provision for a member to commute (suspend) their membership while they are out of the country.

There are finance plans to ease payments for members, and there’s an ongoing discount on the one-off joining fee of Kshs 923,000 fee (~$9,230) for membership that allows access to all the clubs. They also allow up to 9 family members, and the cost is a total of Kshs 1.2 million for a typical family of four. Each family person gets their own card membership card and can access any of the clubs, and when kids become adults, at 21, they can graduate to full membership at about 1/3 of the cost. The costs are in line with the other top membership clubs in Nairobi where the joining fees range from between 300,000 – 500,000 per person), and while the joining fees are a bit lower, they have more capital raising and additional fees to fund infrastructure modernization projects. The discount on the membership runs through October 13 when the first Wadi Degla facility opens in Runda.

$1 = Kshs 101