The remaining five Tuskys stores that had stayed open as the retailer limped to collapse have now closed, we understand. Although the closures are locally communicated as “temporary”, they will almost certainly be permanent. It means the end of what was, until recently, Kenya’s largest retailer.
The slow motion collapse of Kenyan supermarket chain Tuskys, a play-for-play rerun of Nakumatt’s demise, is now complete, we understand. It means the end of the road for Nakumatt’s half brother (the two retailers shared founders) and a further blow to the Kenyan retail scene. Like both Nakumatt and Uchumi, Tuskys rapidly expanded in the early 2000s by taking on significant supplier debt and massaging its cash flow. As problems with Nakumatt emerged and Kenyan suppliers made distress calls to the government, it emerged that Nakumatt and Tuskys had racked up tens of millions of debt. Debt that has proved to be insurmountable – for both retailers, the much sought after white knight investor never came and trading out of a financial crisis never seemed viable.
The news has come as it emerges what ex-Tuskys Dan Githua is doing next. His apparent exit from Tuskys five months ago was kept secret from the Kenyan media, who only learnt about it last week.
Githua is fronting Anko Retail, a new digital business that promises to cut prices by 20% compared to “regular supermarkets”. Anko Retail is apparently backed by financing from a Mauritius-based investor. It covers Nairobi only although its focus on non-food makes it an interesting change from other online supermarkets and which could, with proper funding, see it compete with Copia.
We have speculated several times what this means for modern retail in Kenya. Certainly, we believe that commonly used estimates of modern trade penetration are massively overstated, based on our close store-by-store audit of the market.
The exit of Tuskys makes little difference right now – Tuskys’ trading volume have been diminishing rapidly for 24 months and competing retailers like Naivas, Tuskys, Chandarana and Quickmart have already been able to pick up customers.
Tuskys’ collapse was a long time coming. The fact that Shoprite’s CEO Pieter Engelbrecht still elected to exit Kenya, knowing that Tuskys’ store network would be up for grab and a yawning space would emerge for a strong mainstream chain, strongly suggests there was an oversupply. Will Shoprite change course? We doubt it. It has already given up its flagship store in Nairobi’s Westgate Mall and the only reason it is still in Kenya is because it is taking longer than it planned to finalise its exit.
Will another supermarket chain enter Kenya? If one is, we haven’t heard about it. There is still plenty of long term opportunity but the finalisation of Tuskys’ exit from Kenya hands the advantage to Naivas, Tuskys, Chandarana and Quickmart – all of whom can choose to fight over what remains of the Tuskys estate. We still think Chandarana and other small domestic chains look vulnerable given their lack of external investment and relative lack of sophistication. Kenya still has a long list of small domestic chains run by local entrepreneurs and which are ill suited for sustained competition against larger international chains.