Kenya’s Haco Industries and Société BIC, the French owner of a popular ball-pen brand, are reviewing their partnership in a move that could see the multinational sell its products directly in East Africa or form a joint venture with the Kenyan firm.
BIC has in recent years incorporated subsidiaries in foreign markets, including Morocco to undertake distribution of its brand of stationery, lighters and shavers.
Haco, which is owned by billionaire Chris Kirubi, has been the exclusive distributor of BIC products in East Africa for more than two decades.
BIC did not specify which new arrangement it is pursuing with Haco, but confirmed that talks are ongoing to change the current partnership.
“Haco operates the manufacturing and distributorship of BIC products in the region and Haco and BIC are engaged in ongoing discussions about the alignment of their future business relationship,” BIC said in a statement adding that both companies will revert with a joint statement once a formal agreement has been reached.
“In the meantime, Haco continues to serve the market fully in full collaboration with BIC as it has always done,” BIC said.
Peter Kangethe, the Haco chief executive, said he could not comment because the talks are being held at shareholder level and are yet to cascade down to management.
“If there are talks, they are at shareholder level. We are yet to be involved as management,” Mr Kangethe said. Mr Kirubi, who has been unwell, was not available for comment.
BIC’s move adds to the emerging trend in retail and fast moving consumer goods sector, where multinationals have squeezed out local franchises by buying them out or forcing them into joint ventures.
Such moves have been seen to arise from the desire to take a bigger chunk of profits as well as enforce standards, including pricing, marketing and customer service.
Fashion retailer Deacons East Africa has, for instance, suffered a major revenue setback after it relinquished prime Woolworths and Mr Price franchises to South Africa-based owners.
A joint venture or buyout by BIC has the potential of eroding Haco’s earnings from the multinational’s products, especially the BiC brand of pens, which is believed to have the largest market share in the region. Haco, a private company, does not publish its results but its annual net sales are known to stand above Sh1 billion. BiC pens and shavers are among Haco’s most valuable products besides Black Silk and Miadi (hair care).
Besides their high quality, sales of BiC pens have been helped by strong relationships with large customers, including companies that order branded units from Haco.
The ongoing negotiations with BIC come soon after Mr Kirubi regained full control of Haco with the buy-back of the 51 per cent stake he had sold to Johannesburg-based Tiger Brands.
Mr Kirubi in June 2008 sold the stake in the firm to Tiger Brands for more than Sh300 million and bought it all back after the partners disagreed over the company’s strategic direction.
An Sh845 million fraud was also discovered at Haco in 2015, hurting the multinational’s consolidated earnings.
Tiger said it no longer supported Haco’s model of manufacturing and distributing various consumer goods under licence, adding that it wanted to focus on its own fast moving consumer goods brands.
Haco has agreements with several multinationals to manufacture and sell their brands in Kenya and East Africa.
The company, for instance, deals in Palmer’s Cocoa Butter (under licence from E.T. Brown Drug Company) and washroom cleaner Jeyes Bloo (Jeyes Plc).
Tiger said the entrenched partnerships that Haco has developed over the years made it difficult to boost the uptake of its brands, including Purity (baby food) and Ingram’s (personal care) in East Africa.
Mr Kirubi, on the other hand, believes in the current model that has helped Haco grow since its establishment in the early 1970s, prompting him to buy out Tiger Brands to maintain the status quo.
Haco is among several private companies owned by Mr Kirubi, who also holds a 45 per cent stake in agrochemical firm Bayer East Africa. His investment firm Centum, in which he has a 30 per cent stake, has interests in most sectors of the economy.