Majid Al Futtaim’s (MAF) annual report makes clear the extent to which Carrefour is making inroads into the Kenyan market. With seven supermarkets open, all in Nairobi, MAF saw sales increase by 71% in 2018 to $137m. It is the third largest supermarket chain in Kenya.
Majid Al Futtaim’s store numbers in Kenya are deceptive: its stores average 4,850m², more than double than those of rivals Naivas and Tuskys. MAF opened its first Carrefour in Kenya atthe Hub Karen mall in May 2016 and followed with a second at Nairobi’s Two Rivers Mall. It accelerated its store opening program following the collapse of Uchumi and Nakumatt’s store networks. When it opened its six store in Nairobi in July 2018 it was the fourth new store in as many months.
Average annual revenues per store are approximately $28m – based on revenues through 2018 of $136.6m, but we expect that to rise: MAF opened some stores with reduced floorspace while it renovated and Carrefour is still a new player in Kenya with little historic customer loyalty to work off.
Kenya is MAF’s highest growth market. But the company is accelerating across the Middle East and Africa: MAF, Carrefour’s Middle East and Africa franchisee, also operates shopping malls (under the Festival City brand) is enjoying year on year revenue growth of more than 20% in Kuwait, Bahrain, Lebanon, Armenia, Egypt and Georgia.
MAF has said is looking at 12 new markets to enter. At least six of those will be speculative. The next store to activate will be its Oasis Mall supermarket in Kampala, which was supposed to open in January. We think it is a given that MAF will move into Rwanda – Nakumatt’s four store network has now closed, leaving just one remaining store and prime space to fill. Tanzania should be an obvious choice for expansion but is challenging and unforgiving to operate in. Shoprite called it quits after a decade and is in no rush to return despite having stores in Uganda and Kenya. Similarly, Ethiopia will be on MAF’s list but – with good reason – has no international supermarket chains present despite strong economic growth and a large population engine.
The headline news is that MAF has said it will acquire an existing retailer in South Africa rather than attempt to grow organically, if it chooses to enter.
It is tempting to speculate which retailer it means. The obvious target is Pick n Pay, which is the best brand fit, operates in several southern African countries but doesn’t overlap with Carrefour’s existing profile. .. for now: Pick n Pay is planning to enter both Ghana and Nigeria shortly, while Carrefour (through its West Africa franchisee CFAO) will also enter Nigeria in 2020. In fact, Pick n Pay founder Raymond Ackerman used Carrefour as its template in 1975 for what a South African hypermarket should be.
There are other links between the two brands – Pick n Pay CEO Richard Brasher ran Tesco UK before taking the Pick n Pay role, and Tesco now have a global buying alliance with Carrefour. Acquiring Pick n Pay would be a lot of for MAF to chew, but would also take the fight right onto Shoprite’s doorstep (and maybe refocus Shoprite more on South Africa).
