Shoprite has now officially opened its first supermarket in Kenya, on schedule. The new store, in the former Nakumatt site in Nairobi’s Westgate Shopping Mall, is the first of more than seven stores the South African retailer plans to open in Kenya.

Shoprite has officially opened its first store in Kenya. It is the opening salvo of a battle that will see Shoprite take on Carrefour directly in Kenya. The two retailers are also set to compete in Uganda, where Carrefour will open its first store in Kampala’s Oasis Mall in January 2019. The new Shoprite Westgate store is a short distance from Carrefour’s new store in the Sarit Centre.

Carrefour already has the lead in Kenya, having opened 6 stores and also profited from the rapid closure of substantial numbers of Uchumi and Nakumatt stores (Nakumatt had 64 stores at its peak, and now has just five stores in Kenya). It already had flagship stores in Nairobi’s Two Rivers and Hub Karen shopping malls. In 2018, it has opened stores in Thika Road Mall, The Junction and Sarit Centre – all in Nairobi. In May 2018 Carrefour announced it would open its first, smaller format, Carrefour Market store in the space vacated by Nakumatt in the upmarket Village Mall, in Nairobi. Franchisee Majid Al Futtaim revealed that sales in Kenya in increased 143% in the first half of 2018.

Shoprite’s entry into Kenya has long been anticipated: the retailer has looked at entering for nearly two decades. It opened its first store in Uganda in 2000 and acquired Score Supermarkets’ stores in Tanzania in 2002. It has subsequently exited Tanzania and expanded in Uganda to just four stores. But Shoprite didn’t enter Kenya, because of the strength of domestic supermarket chains Nakumatt, Tuskys and Uchumi. Only Tuskys and Naivas are viable now as serious competition. Both Nakumatt and Uchumi are on the verge of collapse.

The wider implications of Shoprite’s entry are more important than just the competition its sales profile will provide to Carrefour, Tuskys, Naivas, Chandarana, Game and other smaller domestic supermarket chains. Along with Carrefour it heralds a step change in several areas:

• Price positioning: Shoprite and Carrefour are aiming for more affluent Kenyan consumers while attempting to be price competitive on around 1,000 core SKUs. At the same time Naivas, Tuskys and Chandarana are attempting, via newer flagship stores, to move more upmarket. Demand isn’t yet strong enough for all of these retailers to successfully attract higher spending middle class consumers, who are still the minority in Nairobi. The outcome will force clearer price positioning and store strategy from the top five players in Nairobi.
• Private label: Private label forms the cornerstone of Shoprite’s offer in its Southern African markets. Kenyan consumers have typically been wary of private label and divided over Nakumatt’s Blue Elephant brand, for example. Along with Carrefour, Choppies and Game we expect to see Shoprite wage an intensive price battle to win over consumers to its private label range.
• Operational efficiency: Domestic chains in Kenya lack scale – only Tuskys has more than fifty stores, compared to Shoprite’s store network across Africa of more than 2,000 outlets, just in grocery. Traditionally, Kenyan retailers have relied on strong supplier relationships to create a barrier to entry. That all changed as it was revealed that all the leading Kenyan supermarket chains were running substantial debts with suppliers. Shoprite has spent more than nine months building its local supply chain, has existing relationships it can leverage from its Uganda operations and has been actively courted by Kenyan suppliers. It will place considerable pressure on smaller chains to become more operationally efficient, and to pass those savings onto consumers in the form of lower prices.
• Non-food: We expect to see a transformation in non-food sales in Kenya, both areas of strength for Carrefour and Shoprite and which play better in their larger stores. Tusky’s, Naivas and Chandarana are especially weak in this area and will face additional threats from the expansion of Massmart’s Game discounter stores.