Tuskys has joined the NSE’s IBUKA accelerator board, which is aimed at fast-tracking Kenyan companies going public. The leading Kenyan supermarket chain is seeking to list on the NSE in late 2020 to aid its expansion programme.
Tuskys, which was founded in 1990, claims to serve over 10m million customers monthly. It has 63 supermarkets, mostly in Kenya. It also has stores in Uganda, but we understand it has scaled back underperforming stores, closing four of its seven outlets.
Tuskys is currently trialling its first franchise outlet, located in Nairobi. Like Uchumi, Tuskys sees franchising as a way to capitalise in its brand recognition, supplier contracts and back end operations but offloading most of the risk and all of the set up costs and speeding up the rate of expansion.
According to CEO Dan Githua, Tuskys has several growth strategies that include franchising and consolidation with smaller retailers over the next five years. It has also partnered with Shell franchisee Vivo Energy to open “express” outlets on Shell and Engen service station forecourts.
Certainly the company needs to change tack, which investors will recognise: the impact Carrefour has had on the Kenyan retailing landscape cannot be overstated. It has already opened six stores, profiting from Uchumi and Nakumatt closures, and seen sales increase year on year by 71% in 2018 to $137m. It is the third largest supermarket chain in Kenya but on track to become the largest within the next 18 months to two years. Added to this, fellow Kenyan retailer Naivas is also expanding – although it is unclear how sustainable that growth really is – and South African market leader Shoprite is slowly opening its first stores in Kenya.
Tuskys is going after the long tail of Kenyan retailing – the large number of small, typically regional Kenyan supermarket chains that lack the scale and resources to compete with large chains but are sited in unserved neighbourhoods in Nairobi or up country, where competition is lower.
Tuskys is also seeking to appeal to investors by promoting the brand as a potential option for expansion across East Africa. This is more risky: Nakumatt haemorrhaged cash trying to expand in Tanzania, Rwanda and Uganda. Even a seasoned operator like Shoprite exited Tanzania, while its pace of growth in Uganda has been extremely slow (and at one point its store network was shrank). Tuskys has had to close stores in Uganda and has little practical experience internationally.
