Uchumi Plans Entry Into Tanzania Market

Business Daily (Nairobi)

John Gachiri

26 May 2011

Uchumi Supermarkets has announced plans to enter the Tanzanian market and increase its footprint in Kenya and Uganda, in an new expansion push that the management says will be executed differently from the botched strategy of five years ago.

Group chief executive Jonathan Ciano said that the supermarkets chain plans to open at least five branches by the end of the year with a possibility of opening an additional three. The new branches are projected to gross Sh7 billion revenue within the next two years.

With cost management and increased efficiency, it expects profit margins in the range of 20 per cent, which will increase the firm’s overall profitability.

Uchumi plans to open a branch on Outer Ring Road in July, another in Kisumu and Ongata Rongai by December.

In Uganda it plans to open two more stores, a hypermarket in Kampala, the capital city, and a supermarket in Gulu, (northern Uganda) 320km from the capital city, which would increase to three the number of branches in Uganda.

The Dar-es-Salaam branch should open, “any time now,” said Mr Ciano.

Uganda is said to have big potential to drive the retail chain’s revenue. Uchumi Kampala is a hyper market that brings in Sh30 million in monthly revenues and adding another hypermarket is expected to bring an equivalent amount. The Gulu branch is expected to bring Sh5 million in monthly revenue. “Uganda is a sleeping giant,” said Mr Ciano.

In total, the retailer has 16 branches that are operational.

Francis Mwangi, a research analyst at African Alliance Investment Bank, said that expansion is the only way to go to survive in the market since it helps a supermarket achieve economies of scale.

“Having a wider regional presence improves your bargaining power with suppliers,” said Mr Mwangi.

Larger retailers are at a better position to negotiate credit terms with suppliers and as such they save money since they do not need to go to the bank for short-term loans. A wider presence also builds on the company brand which is critical for client addition and retention.

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