Tuskys finally takes over Ukwala stores in consolidation bid


An Ukwala Supermarket outlet on Tom Mboya Street in Nairobi. Tuskys Supermarket has taken over operations of outlets owned by rival Ukwala in Nairobi. Photo/Salaton Njau

Tuskys Supermarket has taken over operations of outlets owned by rival Ukwala in a bid to consolidate its business in Nairobi.

Kenya’s second-largest retailer is now steering Ukwala stores in the city ahead of a complete rebrand of the outlets.

However, the Business Daily could not establish whether Tuskys has bought out Ukwala Supermarkets or acquired the outlets and that its rival would continue operating in other locations.

Both retailers refused to comment on the issue, but sales receipts from Ukwala stores in the central business district (CBD) bore the TML (Tusker Mattresses Limited) logo and phone contacts.   

Talks about a deal in the offing have been rife since May, but it is only last month that Tuskys moved into the Ukwala stores, according to sources familiar with the transactions.

“Tuskys started its operation in three Ukwala outlets two weeks ago. They absorbed Ukwala’s permanent staff and let go the temporary workers,” said a source at Tuskys on condition of anonymity.

The three Ukwala outlets operated by Tuskys are Ronald Ngala, Jogoo Road and Tom Mboya branches — cementing Tuskys hold of the central business district where it had nine branches. Nakumatt Supermarkets has four branches while Uchumi and Naivas have two stores each in the city centre.

Ukwala Supermarkets had three branches and it has trailed rivals Nakumatt, Tuskys, Naivas and Uchumi in expansion. This has seen Ukwala’s market share shrink and dislodged as Kenya’s fourth-largest retailer by Naivas.

The Tuskys move could be the second major deal among Kenya’s top retailers in a business that is dominated by family-owned retail chains.

In 2010, Woolmatt sold its entire operations to Nakumatt for undisclosed amount to gain a larger share of the CBD market, which had been hurt following the destruction of its Downtown branch in a fire tragedy in 2009.

READ: Nakumatt intensifies CBD market war

It is also the first major deal involving Tuskys, which has been the subject on an acquisition target.

Tuskys had 48 branches in Kenya by October and reported sales of Sh25.2 billion last year, making it the second-largest retailer based on sales behind Nakumatt.

Players in the market reckon that Tuskys’ moves are informed by the need to consolidate its market share ahead of rivals, especially cash-rich foreign firms that are showing a keen interest for a piece of the Kenyan market.

South Africa’s Massmart has said it will enter the Kenyan market before December next year and is in talks to buy a majority stake in Naivas.

The entry of Massmart, which operates 105 stores in 12 African countries, will shake up Kenya’s formal retail market and offer the South African retailer a piece of the market after the exit of retail chain Metro Cash and Carry in 2005.

Nakumatt, which has 41 branches spread across Kenya and the neighbouring countries, has been mulling over selling a significant stake to a foreign investors to help support its expansion across East Africa.

Tuskys shareholders are currently involved in a court battle for control, with some of the directors blaming the power struggle on outsiders engineering an aggressive take over.

READ: Watchdog probe on Deloitte over Tuskys family feud derails

Analysts said that Kenya is set to witness increased deal making in coming years given that the dominance of the sector by the top four retailers has acted as barrier for entry of new players.

“East Africa is where SA retailers lack scale due to strong local retailers. Acquisition looks to be the easiest route to build scale in this region,” said Citigroup in a recent report.

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