Business
Kenyan retail chain expanding rapidly – expected to post 20 percent growth
(Reuters) – Nakumatt Holdings, Kenya’s leading supermarket chain, expects to grow sales 20 percent in its 2012/13 year, helped by expansion into east Africa’s fast-growing middle-class which may be part-funded by selling a stake in the firm.
The chain, which targets middle and upper income customers in Kenya, Rwanda, Tanzania and Uganda, navigated double-digit inflation in the region last year, and is on course to hit its 40 billion shillings (US$ 485 million) sales target for 2011/12, managing director Atul Shah told Reuters on Wednesday.
The supermarket hopes to add four branches, two in Kenya, one in Rwanda and one in Uganda, during 2012/13, giving it 40 branches across East Africa.
Kenya, East Africa’s biggest economy, contributes about 85 percent of the chain’s sales volume. The four new outlets, which will cost 500 million shillings (US$ 6 million), have already been factored into the retailer’s cash flow, Shah said.
“This year, we are looking at a minimum growth of 20 percent on turnover, due to growing demand across the region,” Shah said. “People are changing, lifestyles are changing. The middle class is growing, pushing demand for consumer goods and they are aspiring to buy better things.”
As the continent’s middle class continues to expand, with more disposable incomes and a refined taste in consumer goods, Nakumatt plans to increase the number of branches to 50 across Africa by 2014.
It plans to sell a stake to international retailers and equity investors to raise funds for its expansion.
Shah has said the chain would initially seek to sell a 15-18 percent stake for US$50 million, and attract international retailers to take up about another 25-30 percent thereafter, to speed up expansion into new African countries.
“Talks will begin sometime in June, we will be looking at equity investments to take the company one step further from where we are,” Shah said.
“The equity investors are going to fund the next phase of growth; part of the greater east Africa, southern Africa and a little out of west Africa,” Shah said.
Shah was optimistic there would be more money floating around this year with intense campaign spending from candidates preparing for the Kenyan presidential elections due by March 2013, which would trickle down to consumer spending.