Unilever Kenya plans new Sh17 billion factory, warehouse
Unilever CEO Paul Polman. PHOTO | FILE | AFP
What you need to know:
The new factory is expected to replace the current one that has been in existence since the global firm opened shop in Kenya in the early 1950s through acquisition of a 50 per cent stake in the then East African Industries.
Unilever Kenya plans to invest about Sh17 billion in a new factory and warehouse as it seeks to benefit from the surging demand for consumer goods in the region. The rising uptake of products is triggered by growing regional economies and increasing population.
The plant is to be constructed on between 70 and 100 acres of land that is yet to be identified. The new factory is expected to replace the current one that has been in existence since the global firm opened shop in Kenya in the early 1950s through acquisition of a 50 per cent stake in the then East African Industries.
The company’s current factory output will be outpaced by demand in the next two years, the Unilever chief executive, Mr Paul Polman, told Smart Company in an interview. “Our Nairobi-based site, which is the hub of the East African business, will not be able to meet the rapidly growing business needs of our consumers by 2016,” he said.
Unilever estimates the current demand for its products in East Africa at 80,000 tonnes a year. However, demand is expected to grow by 40 per cent over the next four years, hence making expansion necessary.
The new project could also be an attempt by the firm to address its fading market dominance by fending off increasing competition in the region.
A number of global brands that have set up base in Kenya over the past two years are targeting East Africa. This trend has challenged Unilever’s long-held grip on the consumer goods market.
London-listed cosmetics giant L’Oreal acquired a local beauty firm, Interconsumer Products, the makers of Nice & Lovely brands, last year. The company is targeting consumers in the low-end segment of the beauty market.
L’Oreal came in soon after New York-listed Revlon Cosmetics entered the country and penned an agreement with retail giant Nakumatt Holdings as its exclusive dealer.
In July this year, Bidco Oil, a firm that has over the years grown to be a fierce competitor of Unilever, received a Sh3.2 billion loan from the International Finance Corporation to finance the expansion and diversification of its consumer goods. Bidco Oil plans to use the funds to increase its annual production of soaps and detergents by between 2,000 and 3,000 tonnes.
Overall, Bidco Oil plans to step up its annual turnover to about Sh35.1 billion from the current Sh21.9 billion in three years, putting pressure on other players, including Unilever.
Procter & Gamble, another foreign firm with deep local roots, has also proved to be a bitter rival to Unilever after the two took their battle over the advertising of P&G’s washing powder, Ariel, to court. Unilever has since moved to rebrand its flagship washing powder, OMO, in an attempt to control Kenya’s detergent market.
Mr Polman said Unilever’s investment will more than triple its current capacity to 250,000 tonnes annually upon completion of the new plant by 2017 from the current 80,000 tonnes. “Competition in the region is stiff but our strength lies in our reputation that we have built over the years,” he said.
The factory is expected to provide the company with the necessary infrastructure to meet its growth targets. The Sh17 billion investment will be the largest for Unilever in sub-Saharan Africa, said Mr Polman. It underlines the importance the London-headquartered company attaches to East Africa, which is considered the ninth largest single market in the world in terms of population.
Unilever, which also has considerable interests in the tea sector both in Kenya and Tanzania, recently doubled its local factory capacity to 36,000 tonnes annually at a cost of Sh1.14 billion.
