Companies

South Africa’s Bounty Brands eyes Nairobi after IFC funding

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A beauty store in Nairobi. Demand for personal care products is growing. PHOTO | FILE

Summary

  • Firm to create a wide distribution network with SMEs in growth plans.

South Africa’s fast-moving consumer goods firm Bounty Brands is set to enter the Kenyan market in a move that is expected to raise competition for existing players.

The company, which has announced plans to list on the Johannesburg Stock Exchange, deals in food, personal care and home care products. It currently sells its products in more than 40 countries in Africa and Eastern Europe, with Kenya among the new markets it is expanding into.

“The company will be working with SME distributors to expand its Pan-African network into Botswana, Mozambique, Zambia and Kenya,” the International Finance Corporation (IFC) said in a notice announcing its proposed investment in Bounty.

The IFC is set to lend the company €20 million (Sh2.1 billion) to be used in acquisitions and geographical expansion over the medium term, including the Kenya entry.

The local packed food, personal and home care markets are recording significant growth driven by rapid urbanisation, population growth, expansion of formal retailing and higher consumer spending by the middle class, according to market research firm Euromonitor International.

Some of the major players in these consumer markets include Unilever Kenya, L’Oréal East Africa and Haco Tiger Brands. Unilever’s brands include BlueBand (margarine), OMO (detergent), and Fair & Lovely (cream).

Haco, which is majority owned by South Africa’s fast moving consumer goods manufacturer Tiger Brands, deals in TCB (hair care products) and So Soft (fabric softener) among others.

L’Oréal’s brands include SoftSheen Carson (hair care products) and the Nice & lovely range of beauty products which it acquired from Interconsumer Products Limited.

Bounty was established in 2014 and has quickly amassed a broad range of consumer brands through a series of acquisitions that have raised its revenues and operating profit to $223 million (Sh23 billion) and $35 million (Sh3.6 billion) respectively.

IFC says personal care accounts for 36 per cent of the company’s sales, followed by food (36 per cent) and home care (27 per cent). It currently focuses on wholesale and direct selling of the products, relying on contract manufacturers.

Bounty, however, plans to start direct manufacturing in the medium term. Its food business consists of the Sonko rice brand, Liberty (canned food), and Rieses (dried groceries, confectionery and oils).

Brands in the personal care include Essence (cosmetics) and Bounty Wear (apparel).

The home care division includes brands such as Goldenmarc (household cleaning and kitchenware) and Tuffy (food packaging and kitchen apparel).

Euromonitor projects strong growth in consumer spending in Kenya over the coming years, with major towns leading in essential and discretionary purchases.

“The beauty and personal care industry in Kenya is set to post a stronger positive performance over the forecast period,” the research firm said in a statement.

“Population growth, projected positive economic growth and heightened marketing activities are set to promote value growth across the industry over the forecast period.”

Euromonitor in a recent report projected consumer spending in Kisumu to rise the fastest among Kenyan towns at 277 per cent from $0.6 billion (Sh61 billion) in 2015 to $2.2 billion (Sh226 billion) in 2030 at the equivalent of the 2015 prices.

The Kenyan lakeside city is followed by Mombasa whose consumption is forecast to rise 221 per cent from $1.6 billion (Sh164 billion) to $5.1 billion (Sh525 billion) over the same period as per the Euromonitor projections.

Nairobi is third with a predicted 208 per cent expansion rate in consumer expenditure from $5.6 billion (Sh576 billion) to $17.2 billion (Sh1.7 trillion).