When Adenia, an Africa-focused private equity firm, was weighing up whether to invest in Kenyan retail, it did not seem like an obvious sector in which to get involved. Several Kenyan supermarkets, Uchumi, Nakumatt and Tuskys, had either gone bust or were about to do so, while foreign retailers, including the mighty Shoprite of South Africa, would soon pack up and leave.
Adenia went ahead anyway, taking over not one but two family-run concerns. In 2018 it bought Tumaini. The following year, after adding five new stores, it acquired the Quick Mart business, bringing the number of outlets to 24.
At first, growth was breakneck, with a new store opening nearly every month, a strategy made easier by the fact that Quick Mart leases all its properties. It became the fastest-growing supermarket chain in Kenya and in 2022 was number 11 in the FT/Statista ranking.
Growth has slowed since then, more than management intended. After the Covid pandemic, which finished off several competitors, the business environment remained tough as inflation spiralled and the Kenyan shilling plummeted. That added to the cost of imported goods, which make up about 40 per cent of Quick Mart’s offering, including made-in-China electronics. Adding to its woes, President William Ruto, elected in 2022, increased payroll taxes, squeezing customers’ disposable income.
The company is adding about five stores a year and is up to 60 in 14 of Kenya’s 47 counties, with more openings planned. Adenia has put in about $25mn to fund expansion, though it is mainly funded through cash flow derived from high operating margins. This year, Quick Mart comes 34 in the FT/Statista ranking.
Martha Osier, head of investor relations at Adenia, says that, before taking on Kenyan retail, her firm consulted with Jérôme Loubère, a former executive at French retailer Carrefour, who is now Quick Mart’s chair.
Loubère judged Kenya a nascent retail market with potential to grow in both scale and sophistication — the sort he had witnessed develop in eastern Europe.
Adenia’s strategy was two-fold. First, it replaced the Kinuthia founding family with professional management, bringing in Peter Kangi’iri, with a background in retail, logistics and finance, as chief executive, and Jacques Dôme, who had been in retail in Dubai for 15 years, as his deputy. Members of the Kinuthia family retain two seats on the seven-member board, which includes Osier.
Second, it sought to strike better deals with Kenyan suppliers, many of which enjoy dominant market positions. They command high prices and determine the terms of distribution, such as the size of packaging, even if these do not always meet customers’ preferences.
Quick Mart says it has been able to negotiate better terms thanks partly to Carrefour, which blazed a trail after it entered the market in 2016 by using its bargaining muscle. Quick Mart, now the second-largest retailer after Naivas and ahead of Carrefour and Chandarana Food Plus, has acquired the scale to follow suit, it says.
The FT visited two Quick Mart outlets, including its very first, opened in 2006 in the bustling Shabab neighbourhood of Nakuru, Kenya’s fourth-largest city, where the company was founded. The shop floor was cramped and the shelves crammed with a variety of goods. A quick scan revealed tubs of Cowboy cooking fat, Quencher orange-flavoured drink, Pure Wimbi porridge and crisps in flavours including grilled goat meat, as well as aisles of flour, pulses, biscuits, spices and other dried goods.
Betty Komuhangi, an auditor and regular customer, was in the pasta section. Prices had skyrocketed, she said. Though a professional, she had to watch her budget, and was looking at Butterfly pasta, a cheaper brand than she normally bought. “This is a bit more affordable,” she said, adding that Quick Mart was generally price competitive with good customer service.
At the other end of the scale, in Kileleshwa, a fast-growing high-rise residential area in Nairobi, a new much larger and more modern store offers customers 13,000 different items in a shop floor space of 20,000 square feet. Kileleshwa is one of 25 Quick Mart outlets that open 24 hours a day. Customers can shop online, in a partnership with Glovo, the Spain-based delivery app, but this accounts for less than 1 per cent of business.
Unlike the store in Nakuru, the Kileleshwa outlet has its own bakery and large fresh fruit and vegetable section, an attempt to entice customers accustomed to shopping in open-air markets. Food aisles offer ugali, a maize staple, mabuyu (baobab tree seeds) and little dried omena fish. A range of Geisha soaps promises upwardly mobile consumers that they are “sustainably sourced”.
Even the Kileleshwa branch caters to more price-conscious shoppers: a “milk ATM” allows customers to fill their own containers more cheaply than pre-packaged equivalents.
Dôme says that although the macro-environment is not easy, Kenya remains a growth market, with only 30 per cent of retail done in modern shops, against 70 per cent in South Africa, leaving room to grow. Women work in Kenya, he adds, meaning middle class families have two incomes, plus political devolution had spread wealth, making it profitable to open outlets in secondary cities.
Quick Mart is looking to expand into other east African countries, possibly starting in neighbouring Uganda. Eventually it hopes to do business in the Democratic Republic of Congo, where it deems that Kinshasa, the capital, is ripe for the sort of retail modernisation Kenya is undergoing.
