Nakumatt Supermarkets generated about Sh2 billion in sales from in-house packaged goods that are branded with “Nakumatt Blue Label”, pointing to a potentially lucrative growth opportunity for the retailer.
About one year since launch of the Nakumatt-labelled brands that include sugar, wheat flour, maize flour, detergents and selected grains, sales made up about five per cent of the total Sh52.2 billion ($600 million) revenue generated in the financial year ended February 2014, the retailer said in an interview.
Nakumatt attributed the performance of the self-packaged goods to their relatively cheaper price compared to producer-branded goods, which makes them a favourite with Kenya’s price-sensitive shoppers.
“Our private brands Nakumatt Blue Label and Nakumatt Select are still edging up the chain. We shall significantly expand the scope of our private brands,” said Nakumatt managing director Atul Shah in a trading update covering the last financial year.
The supermarket chain plans to increase the range of goods under the Nakumatt Blue Label as a strategy to win a bigger market share and fend off competition from rival retailers Tuskys, Naivas and Uchumi. The retailer, which is Kenya’s biggest by sales volume, said in-store-packaged goods are up to 20 per cent cheaper than consumer packaged goods from the factory.
Nakumatt invested Sh200 million in January last year to venture into repackaging in smaller quantities of fast-moving consumer goods. The private label concept was pioneered in Kenya by Tuskys Supermarkets which embraced the “kadogo” economy by repackaging mostly sugar and cereal grains under its own brand and in smaller units, offering consumers discounted prices.
The strategy was quickly embraced by other retailers to even include in-store bakeries, delicatessens, milk dispensers and butcheries. Nakumatt has beefed up its private label catalogue to include milk, mineral water, toiletries, spices, snacks and ice cream.
A survey of shopping behaviour carried out last year by research firm Consumer Insight found that the market share of in-store repackaged sugar in Kenyan supermarkets more than doubled from seven per cent to 18 per cent as consumers became more price-sensitive.
Findings of the study show that retailer-owned brands are set to upset brand names in the near future, riding on highly effective in-store advertising and consumer price preferences. A study by consulting firm Deloitte & Touché also notes that private label goods are the next frontier in the retail industry due to their price points.
“Many consumers who used to be loyal to national brands have opened their eyes, minds and wallets to private label products and many have found little or no difference between the two,” says Deloitte in the study titled Brand Loyalty and the Impact of Private Label Products.