New KCC has once more halted supply of milk products to Nakumatt Holdings in what it says is a bid to protect its business in the wake of uncertainties at the East Africa’s largest retailer.
Githunguri Dairy also stopped supplies to Nakumatt last year citing non-payment. The processor has been holding talks with the retailer on how to resume supplies.
This is the second time in three months the State-owned processor is pulling out stocks at Nakumatt owing to huge arrears from previous supplies.
New KCC managing director Nixon Sigey said the decision was reached last week to allow consultations on whether the creamery should continue supplying goods or not.
“We suspended the supplies last week informed by the prevailing business environment at Nakumatt because we have a business to protect,” said Mr Sigey in an interview with the Business Daily.
Nakumatt is grappling with huge debt from suppliers, which has seen manufacturers hold back leaving the once vibrant outlet with empty shelves.
New KCC withdrew its stocks last February in protest over delayed payments that went beyond the agreed credit period of 90 days.
However, it resumed supplies a month later under a special arrangement with Nakumatt that saw the processor cut supplies by about 20 per cent of the original agreement.
Mr Sigey said they are still open to negotiations with the retailer to see if New KCC might come up with a plan that would see resumption of supplies.
Kenya Dairy Board managing director Margaret Kibogy said lack of payment to processors affects the entire value chain by making it difficult for factories to pay farmers.
She said retail chains have to pay their dues in 30 days instead of taking three months, which has a negative impact on processors.
“We have pushed the matter with the ministry of trade who are now coming up with measures that will ensure goods are paid for within 30 days,” said Ms Kibogy.
As of late last year, all major supermarkets owed milk factories Sh3.5 billion according to the regulator.
Manufacturers have been complaining of facing a serious cash flow challenge following delays by retailers with the outstanding debt estimated at Sh40 billion.