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Local Supermarkets Vie for Market Share
[July 14, 2014]

Local Supermarkets Vie for Market Share


(AllAfrica Via Acquire Media NewsEdge) Capital Shoppers, an indigenous supermarket, recently opened a new branch at Garden City just below Uchumi, the international supermarkets chain, only a few hundred meters away from Nakumatt, another international brand based in Kenya. Anyone would have expected Capital Shoppers to keep away from the 'giants den' and opt for locations far away where there is less competition. However, the proprietors know exactly why they chose to open a new branch there; because that is where the other supermarkets are located.



This move is a testament to the confidence that the supermarket has gained in the market in recent years. The Garden City branch is its fourth in Kampala, and is expected to add to the 4, 000 customers who visit all the branches every day. "We have been operating for over a month now and I will tell you we are seeing the numbers growing," said Vicent Tubenawe, the manager at the branch. "Of course some people have asked us why we opened our branch in a place where there is Uchumi dealing in almost the same products of ours. But there are more banks here, many offices, similar businesses, so why not open more supermarkets here?" Indeed, Capital Shoppers, which currently employs over 1,000 people, has over the years come to muster the muscle to lock horns with big international brands - Shoprite, Game, Woolworth (from South Africa), Nakumatt, Uchumi and Tuskys (all from Kenya). Its success has also set the pace for local players such as Mega Supermarket, Kenjoy, Super Supermarket, Quality among others.

The Garden City branch is an addition to the other branches at Ntinda, at Nakawa located opposite MUBS and at Nakasero in the city centre, which was first to be established in 1997. Ponsiano Ngabirano, the proprietor, told The Independent that they have invested about $2 million (about Shs 5 billion) in the business so far.


Far from being worried about the competition, the officials are upbeat about the future and could consider going international. William Kakuru, the general manager for Capital Shoppers, Ntinda Branch said their expansion is supported by customer loyalty, committed local and foreign suppliers, committed staff, good customer service, the pricing strategy and financial support from commercial banks among other factors. In addition, the branches are strategically located in busy areas to attract customers. "For now we want to make sure we do our best with the four branches before we open new ones here and outside Uganda," Kakuru said.

Up to 30-40% of their products are procured locally and the balance (60-70%) from Kenya, South Africa, UAE, and Europe, not bad compared to some of their rivals that procure only less than 20% locally.

Asked whether they were in position to continue giving the foreign players a good run for their money, Kakuru was chest thumping. "We are the largest local supermarket and whoever enters our store is given a loyalty card, which earns them points whenever they shop with us," he said. The other supporting factor is that the proprietor owns the premises where the stores are located apart from Garden City, which gives the business a head start to expand and grow.

The supermarket currently has over 700, 000 customers on its Customer Loyalty Programme; for which they get discounts. Other supermarkets such as Uchumi, Shoprite and Quality also have a similar system but Capital Shoppers beats them on the rewards. For instance, a customer will get up to 4% discount on every Shs 5, 000 spent. Other players in the market are offering discounts of between 1.5-2% - half that of Capital Shoppers.

Supermarket craze: Uganda's growing middle class, the strengthening of the economy and growing population with a somewhat high purchasing power, has made supermarkets immensely popular as more Ugandans are now confortable with shopping in supermarkets unlike years before where many would fear to enter there. Official figures show a rise in Uganda's per capita expenditure and a drop in poverty levels, which is a plus for businesses retailing various goods and services.

For example, the 2013 Uganda Bureau of Statistics (UBOS) abstract data shows a 75% increase in Uganda's per capita expenditure (from Shs41, 300 to Shs72, 300 in 2009/10).

The percentage of people living below the poverty line has dropped to 19.7% in 2012/2013 from 56.4% in 1992/93-meaning, consumption of industrial goods and services will continue to improve, which will in turn result into more revenue for businesses and taxes to government.

Kakuru disagreed with some market observers that the increase in numbers of retail stores may in the long run completely phase out kiosks and small shops thus affecting the livelihoods of the poor who depend on them for survival.

"Of course there are still people who are comfortable with shopping in small shops," he said. On competition, Kakuru said the market is not saturated yet and can take on more players. "Of course some players will leave but they will be bought by companies dealing in the same industry," he said.

There is a rumor that Shoprite, which opened business here in 2000 could be bought off by one of the players in the market as the South African based retail giant finalizes a deal to sell its Tanzania three branches to Kenya-based Nakumatt.

Analysts say the acquisition could give Nakumatt a bigger presence in Tanzania where it debuted in December 2011 with the 34,000-square feet Nakumatt Moshi outlet.

Industry players say Shoprite could be planning to quit the East African market all together and cement its operations in more profitable markets at home and in some countries like Nigeria, Mauritius among others. According to the Group's financial results for the period up to June 2013, its profit after tax marginally grew to 3.61billion Rand in June 2013 from about three billion Rand in June 2012, while its total assets grew to about 33.5 billion from 31 billion a year earlier.

The group operates over 1,200 corporate and 270 franchise outlets in 16 countries across Africa and the Indian Ocean Islands.

When contacted to comment about their operations and the industry in general, Sarita van Wyk, Shoprite's manager for corporate communications & customer relations in a July 1 email declined to comment saying they would respond in future because Shoprite Holdings was then in a closed period in anticipation of the announcement of their financial results.

"The rules of the stock exchange donot allow us to make any comments with regard to our business during this time," Wyk said.

A source at Nakumatt Uganda who requested not to be identified because it is the country manager who speaks to the media, dismissed as untrue reports that they want to buy out Shoprite.

"Those are just rumors," the officer said, adding they remain committed to serving the market with excellent customer service together with their suppliers.

Similarly Patel Hardik, the manager at the six-year old Checkers Supermarket located at Kisementi in Kamyokya, said they don't fear competition because "whether you are a small or big player, what matters is serving your customers well." Retail giant Nakumatt, the obvious market leader in Uganda and the region, recently upped the ante by opening a new branch at Acacia Mall in Kamwokya, which increased its branch network in Uganda to eight stores. They include, Nakumatt Entebbe, Nakumatt Mbarara, Nakumatt Bugolobi Village, Nakumatt Bugolobi Express, Nakumatt Katwe, Nakumatt Bukoto, and the flagship Nakumatt Oasis store. Nakumatt branch count has now topped 45 branches across East Africa.

Uchumi, another hypermarket, opened its operations in Uganda in 2002 and has since grown its branches to four as well as cross listing on the USE and RSE to raise funds for further expansion across the region. In an interview with The Independent recently, Jonathan Ciano, the CEO, said they were motivated by the conviction that there is good potential in the Ugandan market and that the leadership was keen to see the emergence of regional institutions that would support and give credibility to the East African integration. Whether the indigenous players will continue to take on the giants head on is what remains to be seen, but ideally, the increasing number of stores is not only good for the economy but also for Ugandans in terms of jobs and suppliers of products and services.

Copyright The Independent. Distributed by AllAfrica Global Media (allAfrica.com).

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