South Africa’s luxury fashion brand Woolworths is set to open its own outlets in Kenya after buying out Deacons Kenya’s stake in a joint venture the two formed in 2012.
Deacons was initially the local exclusive franchise holder of the Woolworths brand of clothes but the South African firm in 2012 decided to distribute its merchandise through a joint venture called Woolworth’s Kenya Proprietary Limited.
The multinational took a controlling 51 per cent stake in the joint venture, leaving Deacons with a 49 per cent equity and management rights in the new outfit. Woolworths is now set to take full ownership of the subsidiary, setting the stage for a complete split with Deacons.
“We had a franchise (agreement) then it moved to a joint venture and Woolworths will now be an independent brand run by them (Woolworths Holdings),” said Deacons chief executive Muchiri Wahome.
Deacons was compensated to the tune of Sh405.8 million for ceding majority control in the franchise, with the looming sale of the remaining 49 per cent stake potentially neighbouring this amount when it is completed later this month.
Proceeds from the sale will be used to fund ongoing operations. Woolworths’ plans for Kenya’s fashion market were not immediately clear but the multinational is now expected to develop and brand its own retail outlets.
The South African firm has in recent years moved to end franchise arrangements in several countries, transferring its business to subsidiaries in which it has full or majority ownership.
The move is meant to enable it standardise marketing and in-store experiences in the multiple markets it operates in, Woolworths has said.
While the multinational has focused on selling its line of clothes in Kenya, taking full ownership of the local subsidiary could see it expand its product range.
In its home market, the South African retailer offers clothes, general merchandise, food, loans, and credit cards.
For Deacons, the sale of its remaining interest in the subsidiary marks the end of its distributorship of Woolworths that previously accounted for nearly half of its sales.
The company has announced plans to bring in new brands in its area of clothing, fitness, and household goods by offering a stake to a global manufacturer or distributor of these merchandise.