A leading Botswana supermarket chain, Choppies Enterprise, is set to enter the Kenyan market by end of the year.
The retailer operates seven distribution centres and 125 retail outlets, comprising 72 stores in Botswana, 35 in South Africa and 18 stores in Zimbabwe.
Choppies, which is listed on the Botswana Stock Exchange, is attracted by the low development of Kenya’s formal retail market, estimated at about 30 per cent penetration.
“Sustainability can only be achieved through establishing networks outside the country,” said CEO Ramachandran Ottapath at a Conference in Botswana on Thursday.
The retailer, which was quoted by Reuters saying it is targeting acquisitions in Kenya and Tanzania, did not however disclose which Kenyan retailers it is targeting.
Choppies has a market capitalisation of Sh50 billion ($520 million).
It reported revenue of Sh48 billion ($501.2 million) last year.
The retailer is planning to carry out a secondary listing on the Johannesburg Stock Exchange (JSE) which it anticipates will raise an estimated Sh4.6 billion ($48 million).
The entry comes after Massmart, a South African supermarket chain, failed in its bid to acquire Naivas, a family-held Kenyan retailer and instead opted to set up from scratch.
The fact that most retail chains in Kenya are family owned has made it difficult for international supermarkets to buy them out.
Disagreements between family members have also interfered with management, expansion and acquisition decisions.
Only last week Tuskys Supermarkets, the second leading retailer in Kenya, had one of its brothers oppose the family’s plans to list on the Nairobi Securities Exchange saying the decision was not agreeable to all members.
A growing middle class consumers with disposable income has opened up Kenya’s formal retail market, luring global brands.
Kentucky Fried Chicken (KFC), Subway International, Cold Stone Creamery and French retailer Carrefour are some of the global brands that have entered the Kenyan market.
New York Stock Exchange-listed research firm Nielsen in March ranked Kenya as the second Africa’s biggest formalised retail economy after South Africa, in a consumer report that studied five sub-Saharan Africa economies.
This means 70 per cent of the local retail market is informal, a gap that is now attracting interest of international supermarket brands.
Ghana, Cameroon and Nigeria have only four and two per cent of shoppers visiting formal retail outlets.
Analysts at Standard Investment Bank (SIB) see Choppies as likely to be going on a head-to-head battle with Uchumi Supermarkets, Kenyan’s only listed retailer.
“In our view, though entry into Kenya may prove difficult, if successful the move will be a risk to Uchumi as Choppies has a similar strategy – focuses on fast moving consumer goods as well as service offerings. Additionally, Uchumi has been lagging behind competition in terms of opening stores in prime areas as well as revenue generated per store,” said an SIB research note.