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Companies take the path of extreme makeover

In April 2020, Sameer Africa dropped shocker. After 50 years in tyre business, it called it quits.
In April 2020, Sameer Africa dropped shocker. After 50 years in tyre business, it called it quits. FILE PHOTO | NMG 
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Kenyan firms are joining the global trend of complete reinvention in seeking to seize opportunities presented by the fast-changing customer needs.

For 25 years, Magana Flowers Kenya Limited has been synonymous with flowers, just as its company name indicates.

But it is now ditching the floriculture industry in a major restructuring of its business operations as it sets eyes on real estate.

Paul Salim, the chief executive, broke the news on July 30, saying the firm will no longer produce and export flowers.

“The industry has gone through significant changes which have greatly affected Magana Flowers and on review of our business, we find that it is no longer possible to continue with our business operations based on the current business model,” said Mr Salim.

The firm now wants to use its vast land of about 25 acres for real estate development, marking the beginning of complete reinvention.

The reinvention will have a heavy bearing on its logo of a red rose flower hugging the world map in line with what has been its target market — Middle East, Europe and China.

Magana Flowers is not alone. Many other firms are taking cue from local and international examples to ditch their traditional businesses for different offerings.

International examples such as mobile phone maker Nokia that started off selling rubber boots and oil giant Shell that used to import and sell actual cowrie shells offers hope.

CORE BUSINESS

Kenya’s Car & General in 1996, then loss-making, took the market by surprise when it quit all its core business, including manufacturing re-tread tyres.

CEO Vijay Gidoomal says that the business environment is changing fast and only firms that are ready to reinvent remain relevant and thrive.

“The shelf life for businesses in one form is growing shorter. Today if a single business line lasts beyond 10 years, one would be very fortunate,” says Mr Gidoomal.

“It is where you see relevance and competitive advantage. You have to be on top of trends, if possible using predictive analysis.”

Firms such as Tuskys Supermarket did not start off with the idea of selling a range of household goods as it is today.

Tuskys’ founder Joram Kamau in 1985 started off with Magic, a store that was only selling mattresses.

This humble beginning would give birth to one of the largest retail stores, with more than 50 branches and stocking mattresses as one of the thousands of its range of products.

Nairobi Securities Exchange (NSE)-listed firm Sameer Africa was synonymous with taglines such as ‘Africa rides on Yana tyres’ to signify one of its popular products — Yana tyres.

Once known for manufacturing tyres, the firm turned into an importer of tyres in 2016, citing stiff competition from cheap tyres from markets such as China.

But in April 2020, Sameer Africa dropped another shocker. After 50 years in tyre business, it called it quits.

Established in Kenya in 1969 as Firestone East Africa Limited, the company’s principal business has now been abandoned as it seeks its fortunes in real estate.

Sameer chairman Erastus Mwongera said the board considered options and settled on property portfolio development and management.

“The board on 20 April 2020 took the weighty decision to cease operations of the tyre business and focus on the group’s real estate portfolio,” said Mr Mwongera.

“We have been in the real estate business for many years and have achieved growth and profitability from this segment of the business.”

Sameer’s experience with tyres was almost similar to what Car & General experienced in the 1990s before change strategy.

Since launching in Nakuru in 1936 it, Car & General is now the company behind a wide range of power generation, automotive and engineering products in East Africa.

But that is not what it wanted to do at the beginning. The firm was for long involved in the manufacture and sale of retread tyres. But a string of losses forced it into a radical restructuring in 1996 with net loss having increased 100 times to Sh106.5 million.

IMPORTS COMPETITION

“When we look at our revenue mix today, just about under one percent comes from the business lines we had in 1996,” says Mr Gidoomal.

“What we realised at that point is that with the liberalisation of Kenya, it would be impossible to compete with imported goods that were coming from places such as China.”

The radical changes included selling operations such as Car & General Industries and Car & General Automotive which were manufacturing and selling re-tread tyres, brake linings and gumboots among other products.

Another entity, Eveready East Africa, is undergoing a radical change. Once known for its Eveready batteries and the nine lives logo, the firm is no longer stocking this brand.

The firm had a complicated relationship with Energizer International which owns 10.03 percent of Eveready.

While Energizer owned 10.03 percent stake it controlled more than 80 percent of the company's revenues as a chief supplier of Eveready batteries cut the 50-year old contract in 2015.

This left Eveready bearing a company name yet it could no longer supply the Eveready batteries.

The management has had to start working on a new brand, Turbo and embarked on selling imported dry cells and car batteries and also trading in a range of flashlights and detergents.

Eveready’s task of re-organising the business was completed in March last year as it pledges to focus on growing this new brand — Turbo.

In the financial sector, Housing Finance or simply HF Group, is also on a strategic shift.

RESIDENTIAL ESTATES

At the end of last year, the group divested from property development.

This means that all ongoing projects will be finalised as earlier planned, but no new property development projects will be initiated.

The move is aimed at reducing HF exposure to the real estate market that has slowed down considerably in the past few years as uptake of houses stalled.

HF was founded in 1913 as the Housing Finance Company of Kenya and incorporated as the premier mortgage finance institution running under the slogan ‘In pursuit of shelter’.

The firm was behind major projects such as thousands of residential houses in Buruburu Estate between 1973 and 1978 as well as the Komarock Estate in 1980s.

But a series of rebranding and expanding into new areas such as banking services has seen it reduce focus on this key business that made it to be defined as a mortgage financier.

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