Shoppers queue at the entrance of Naivas supermarket along Kenyatta Avenue, Nairobi. Kenya’s seemingly thriving retail sector has finally shown its true colours as a treacherous road to riches.
Yet Naivas has chosen to dive straight into the deep end of the pool, opening one supermarket branch after another, at a time when its peers are facing financial woes.
In 30 years, the retailer has 69 branches, the most that any Kenyan supermarket chain has ever had – many of them after the fall of their erstwhile larger rivals.
Even in their prime, Nakumatt, Uchumi and Tuskys never got past 65 branches.
Nakumatt has since collapsed and the other two are on their death beds. Read More
Despite the retailers’ crash due to unsustainable debts that sent shock waves through the sector, to Naivas, it was a lesson on what not to do.
The supermarket’s managers dismiss the claim that its rivals’ rapid expansion was to blame for their collapse.
“Expansion is not a problem. How you expand is. Stores like Shoprite have close to 3,000 stores in Africa. Here, we have towns that don’t have supermarkets. We will keep growing,” says Naivas Chief Commercial Officer Willy Kimani.
The blossoming retail chain has opened ten branches in 2020 and targets ten more next year.
Peter Kahi, a partner at PKF Consulting firm and insolvency practitioner, has previously faulted the expansions in the retail sector, saying they mostly lead to accumulation of debt.
“Due to the low-profit margins, the retailers are always in an expansion spree. This leads them to use even supplier money thus creating more debt,” he said. “The retail market is quite challenging; the margins are very low, that’s why you see them expanding so that they do volumes.”But Naivas insists its expansion is well strategised.It had to liaise with external investors even as it sought to unfurl its wings and open more branches. In an interview early this year, Naivas Managing Director David Mukuha said selling a 30 per cent minority stake to a consortium of investors last year to raise Sh6 billion was one of the best business decisions they ever took.Mr Mukuha said the supermarket bet on the credibility of the partners and their diverse range of investments. Private Equity fund Amethis became the first external investor into Naivas, alongside its partners DEG, MCB Equity Fund and International Finance Corporation, an investment arm of the World Bank.Amethis has helped Naivas in corporate governance, […]