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Uchumi plays catch-up in battle for shoppers

The supermarket reopened the Nakuru branch and plans to open new ones in Embakasi, Dar-es-Salaam and Kampala. Photo/FILE
The supermarket reopened the Nakuru branch and plans to open new ones in Embakasi, Dar-es-Salaam and Kampala. Photo/FILE 

Uchumi Supermarkets is back on the expansion trail, a move set to intensify the battle for control of the retail chain market in East Africa.

The supermarket reopened the Nakuru branch and plans to open new outlets in Embakasi, Dar-es-Salaam and Kampala.

“We will open a new branch in Dar-es-Salaam by mid February and two others in Uganda by June this year,” said Jonathan Ciano, the chief executive officer.

The retail chain which closed shop temporarily under the weight of debt following a botched expansion programme in June 2006, is upbeat having returned to the profit zone in 2008.

Uchumi is now playing catch-up as its rivals have expanded over the five years the retail chain has been in recovery mode.

The vacuum created by the collapse of the market leader has seen retail chains open super stores that are changing the local shopping experience.

Having offset most of its debt and backed by financial muscle, Uchumi has the headroom to fend off its well oiled competitors led by Nakumatt, Tuskys, Ukwala and Naivas supermarkets.

The chain is now offering fast foods and snacks in a bid to win new customers, especially the young to match up with Tuskys and Nakumatt which have similar operations.

In its five-year plan, it will open nine branches in Kenya, and five branches in Uganda, Tanzania and Southern Sudan.

The company doubled its profits to Sh865 million in the year ending June 30 last year from Sh420 million in 2009 and it is looking to boost its earnings by increasing sales and stringent cost cutting measures to help rev up trading margins.

17 branches

“We don’t take pride in branch expansion, but growing customer numbers,” said Mr Ciano.

The rapid expansion is expected to help it increase the number of transactions per month besides raising the basket value or an average spend per customer across its 17 branches.

Customer loyalty is also at the core of the expansion strategy with the introduction of new product ranges through speciality shops and competitive pricing being used as baits for wooing customers to the chain’s floors.

Although Uchumi has made a steady recovery since its near collapse, industry observers say the road ahead looks bumpy as top rivals and second tier players race to build their market share.

The number two brand, Tuskys, has embarked on ambitious expansion plans as its races to gain hold of the low-end of the retail market, which is to be supported by its low pricing model.

Already, Tuskys has bought outlets formerly run by Tesco, which had a franchising arrangement with Uchumi.

Nakumatt on its part has gone regional besides opening more branches locally as it seeks to reinforce its number one position in the retail mart.

Win lost market

But Mr Ciano is upbeat that the supermarket will win its lost market in the expansion plan and now remains with only Sh300 million out of the Sh675 million long-term loan owed to the government.

It has already paid Sh956 million to PTA Bank and Kenya Commercial Bank and another Sh40 million to ICDC and a number of suppliers.

The company said it is ploughing back the profits for the expansion.

“We have been making profits for the last three years and this is what is providing us with the money for the expansion,” said Mr Ciano.

Uchumi’s management reckons that the retail chain is now headed for full recovery buoyed by the sharp rise in sales, which it attributed to the ongoing economic recovery and the right product mix.

Uchumi is pushing for its shares to resume trading at the Nairobi Stock Exchange, a move that is awaiting the Capital Markets Authority’s nod.

This will come as good news for shareholders who have been out in the dark for over three years now.

pwafula@ke.nationmedia.com

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