Chandarana Foodplus set to open its first store in Kisumu

Sep 13, 2018

Kenyan supermarket retailer Chandarana Foodplus is set to take up the space formerly occupied by Uchumi in Kisumu’s West End Mall. It marks another tentative step for the upmarket chain to extend out of the competitive Nairobi supermarket sector.

Chandarana Foodplus now has 16 outlets in Kenya – 11 of which are in Nairobi. The others are in Mombasa, Diani Nanyuki and Eldoret – and now Kisumu. Although Nakumatt and Uchumi’s decline should have eased competition levels for Chandarana in Nairobi, it is finding itself under increasing pressure from Carrefour. It will soon come under threat from Shoprite. Shoprite has chosen to enter Kenya with its more upmarket Checkers banner, which competes directly against Chandarana’s upmarket positioning.

Trendtype recently mapped the major supermarket chains in Nairobi and a key observation is how vulnerable Chandarana is. As an example, Chandarana’s new outlet in the Two Rivers Mall gets a fraction of the footfall that Carrefour’s hypermarket in the mall enjoys. We understand that its only saving grace is that Chandarana agreed a profit share model for rent: otherwise the store would be unsustainable.

Outside Nairobi, where Carrefour, Shoprite and Massmart’s Game have yet to open a store (although Shoprite will shortly open in Mombasa), demand is lower and more volatile but the main competition is typically small regional chains. Chandarana has traditionally been a Nairobi-based supermarket chain but has sought to reduce its dependency on the capital. With this new store, almost one third of its stores are now outside Nairobi.

Kisumu has been a popular city for supermarket chains, however. Naivas and Tuskys both have a store each in the city. The new Lemigo Dala Supermarket, owned and operated by former Nakumatt employees, operates in Kondele, to the north of the city. Kisumu is also a core market for Choppies, which bought up the Ukwala chain in the city. Choppies, which aims to provide value products to mass market consumers, has five stores in the city.

Nakumatt still has a store in Kisumu, just. Chandarana is betting, correctly, that Nakumatt’s supermarket in Mega City Mall will shortly close. However, the relief may be temporary: Trendtype believes that Shoprite will take a strong interest in available space in Eldoret, Nakuru and Kisumu. Kisumu’s West End Mall (Chandarana) and Mega City Mall (Nakumatt) are a five minute drive from one another.

The two main challenges for Chandarana are:

– To manage its non-Nairobi stores efficiently: Chandarana has doubled its store network in the past few years. It is trying to follow the Nakumatt model of growing organically into a national player. The challenge is managing operating costs while it opens stores far away from its Nairobi base, and from one another.

– To maintain a coherent price positioning: In Nairobi, Chandarana has a relatively clear positioning as a premium supermarket chain. Both Tuskys and Naivas are challenging that positioning (for example, Tuskys’ store in Nairobi’s Diamond Plaza is bigger, newer and nicer than Chandarana’s store in the same complex). And as Chandarana opens more up country stores it faces a question about whether it positions its stores as more mainstream or premium.

Chandarana’s challenge is not unique. The threat comes because Carrefour and Shoprite are strong at targeting the mainstream of the supermarket sector and have the buying power to compete effectively on the price of core SKUs. What we see with both Tuskys and Naivas attempting to reposition some stores as more upmarket is an attempt to fill the gap left by Nakumatt (which was more premium than either of them) and win over the customers they had. This potentially makes the more premium end of the supermarket sector – where Chandarana operates – as more congested for everyone. But where Chandarana is unique is that it has less than half the number of stores than either Tuskys or Naivas. It’s not clear yet if it has the scale or operational competence to compete effectively.

 

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