Business
Nakumatt: The growth of an African retail chain
(Reuters) – Nakumatt, Kenya’s largest retailer, plans to expand across Africa by focusing on opening stores in more eastern Africa countries over the next two years, its managing director said on Thursday.
After starting three decades ago as a small mattress shop in the provincial town of Nakuru, family-owned Nakumatt has grown into a firm with US$500 million annual turnover and pan-African ambitions.
It aims to raise sales to 50 billion shillings (US$600 million) this year from last year’s 40 billion (US$480 million), at its 36 stores in Kenya, Uganda, Rwanda and Tanzania, Atul Shah told the Reuters Africa Investment Summit.
He said Burundi and South Sudan were the next targets and space had already been identified in both.
“It is a 12-18 months project to get what we want,” Shah said at the Reuters office in Nairobi. The stores would cost Nakumatt between US$ 2.5 and 4 million.
Shah said he was not concerned at the growing conflict between South Sudan and Sudan, expecting it to be resolved by the time Nakumatt moved in.
Shah said he was also looking to set up a joint venture in Ethiopia, one of the most populous countries in Africa, and hoped to be established in a couple of years.
Nakumatt then aims to turn its sights to the rest of the continent, going head-to-head with South African retailers who dominate the southern part of the continent and are opening stories in West Africa.
“We are looking at how we can take this brand to the west, to the south and north. Of course once we get onto Ethiopia there is nothing stopping us going all the way,” he said.
Suitors
At least 10 parties were interested in a 25 percent stake that Nakumatt is selling to fund expansion, Shah said, illustrating the potential of a sector with annual growth of 15-20 percent even before accounting for any takeovers.
“Everybody is talking about Africa, especially east Africa, which is growing faster than any other region,” he said.
The interested parties include larger foreign chains and private equity firms. “Private equity would be more favorable for us,” he said.
Strong economic growth rates in Africa in recent years have given rise to a new breed of consumers, helping drive up shares in local retailers such as Kenya’s Uchumi, which are up 85 percent this year to date.
Consumers have also caught the eye of global retailers such as Wal-Mart, which acquired South Africa’s Massmart last year in a US$2.4 billion deal.
Shah, a 40-year veteran of the retail business, said consumer patterns have changed in the last five years.
“At one time it was price, price, price. Now it is not price any more, it is brand, quality,” he said, adding that shoppers want “the latest of everything” as populations grow and middle classes expand.
“The growth is assured for the next 10 years,” he said.