Changing retail environment a key factor to dairy industry growth
Modern retailers are the leading distribution channels for packaged premium milk and milk products in Kenya, with the bulk of the lower value products reaching consumers through informal kiosks and dukas that dote the country.
While Kenya records some of the highest formal retail penetration in Africa at about 30% of all purchases, a significant development in the last five years has been the upheaval and drastic changes in the retail industry, significantly impacting the dairy operators in the country.
Nakumatt Supermarkets, which was at its peak just a few years back and had grown into Eastern Africa’s largest retailer, has been reduced to a shell and is in administration as we went to press, while Uchumi Supermarkets has dwindled to a shadow of its former shelf.
The fall of these two giants, which was in quick succession hit the sector hard, with reduced sales of premium products such as yoghurts, and leaving the companies with piles of debt, with reports that Nakumatt owes Brookside Dairy KSH 457 million (US$4.57 million) while New KCC is owed KSH 290 million (US$2.9 million).
However, with the giants falling, the last three years has seen the emergence of Naivas Supermarket, Quickmart Supermarket and other regional retailers; and the strengthening of Tuskys Supermarket, while the entry of international giants Carrefour and Shoprite Supermarkets has opened new opportunities for the sector to thrive.
The dairy industry in Kenya faces many threats and challenges but the future is bright for those companies with adequate resources and skills to weather the new dispensation, which will require strong partnerships with farmers, retailers and suppliers of various technologies to the sector.
The country has taken a number of steps in promoting policy dialogue, forging links, fostering partnerships, building capacities and developing best practice within the dairy sector.
In October 2019, Kenya joined the International Dairy Federation (IDF), the leading global source of science-based dairy expertise.
As a member of IDF – which currently has 43 member states representing over 75% of the world’s milk supply – Kenya will benefit from being part of a dynamic network of dairy experts whose aim it is to support and develop the global dairy sector.