In Store in Kenya Flag
March 2nd, 2021
Research

Navigating the Kenyan Retail Landscape

88% of shoppers in Kenya are ready to try a new retailer or to try a new brand. Disloyalty is the new normal! Innovation has become essential to remain relevant.

Nielsen Research, 2019.

CURRENT SCENARIO

The presentation kicked off with a comparison of 8 countries in sub-Saharan Africa and as we can see, in the last quarter of 2018 and the first quarter of 2019, Kenya took a lead in the retail space.

Picture 1

Kenya reports weaker business and retail prospects but is offset by strong economic prospects where it is No#1. Consumer concepts remain challenging in Cote d’Ivoire – only 15% are open to new products.


Picture 2 shows the expectations of business subjects vs real business growth.

In Kenya, Business subjects expect 6.7% growth vs real 6.2% growth and that is a positive sign that subjects can work in the present environment.


COMPLICATED TRADE

Picture 3 

Trading in Kenya is very complex. In the last 5 years, the number of outlets increased to 95,494 outlets which represent a growth of 54%.

Growth dominantly comes from grocery growth that almost doubled in the last 5 years.

Regions with the highest rate of growth are Central (113% growth) and Lake region (134%).

The total number of groceries in Kenya is 272,400, but if we include butcheries and beauty shops we come to a number of 310,000 outlets that are an opportunity in the Kenyan market. 


Picture 4 

We can see the trade channels in Kenya. As we saw in previous Picture 3, there is a significant growth of groceries, but that is not the case in modern trade.

Modern trade is here for convenience, choice and price games. Except for the mentioned growth in an independent trade, everything else is in circumstance and proximity out of the home.

Talking about all categories, around 6-7% of all purchases are in E-commerce. Here it is important to highlight that not all purchases come from Kenya. There are a lot of cross border purchases that come from abroad. Wholesale channels are important for clients that like to buy in bulk in order to save shilling or two.


Picture 5 

The development of distribution patterns is shown in Picture 5. During the time when we listened to tape recorders, manufacturers were selling to distributors, distributors to wholesalers and outlets were coming to buy goods in wholesalers warehouses.

Today, there are multiple channels from manufacturer to consumer. Manufacturers can even deliver to the final consumer directly.

Today, even a hairdresser can buy FMCG goods and sell them to his clients. Everything is about changes. The question is how ready are you for these changes?


Picture 6 

In Picture 6 some basic facts are notable. FMCG is still very strong in traditional trade. What is interesting in Picture 6.

Having penetration of many foreign retailers and the development of local modern trade, there is no growth in modern trade.

The growth is in small groceries, kiosks, and Dukas.


Picture 7 

All super categories, food, drugs, beverage and household, and personal care grow in traditional trade. For food and beverages, every growth above 2% is significant.

Double-digit growth is recorded in household and personal care. Before maybe we used bar soap to wash our hair, today we are using shampoos, hair conditions, body lotions, and all new modern products. 

 


In picture 8 you can see which manufacturers are growing.

Top 5 manufacturers, we cannot highlight them, growing 3.6%. The majority of growth, double-digit growth is coming from the top 11- 30 manufacturers in Kenya. 

What exactly is driving that growth? 


Picture 9

Out of 168 categories in Nielsen panel, the top 10 categories account for 64.2% and an additional 10 categories from 11 – 20 accounts for an additional 18.8% of the shopping basket. 

Which categories are winning?


Picture 10 

It is interesting that Kenyans are moving from basic to nice to have. In declining categories, it is not the case that all manufacturers are losing. There are some manufacturers who are winning in declining categories as well, but general categories like fresh milk do not follow big growth rates like some other categories. 

Let’s look at price points. Around 70% of shopping trips are below 55 shillings. See in Picture 11 split of price points.


Picture 11 

Kenya is still a very low purchase per shopping trip economy. In our kiosks, Dukas and supermarkets still, 18.1% of shopping trips are below 10 shillings.


COMPLICATED SHOPPER

Picture 12

Consumers are not doing one shopping trip every month. Average Kenyan shopper is buying 21 times per month. We go to supermarkets, but we go to buy milk, or vegetables in the nearest duka or kiosk.

Comparing general habits, habits in Africa and the Middle East, Kenyan shopping trips are 41% with the purpose of top-up essentials, and that makes Kenyan shoppers different.


Picture 13 

Kenyan shoppers are extremely pricing sensitive. 98% of shoppers will notice price changes which were shown on Picture 13 based on a study executed in 2019.


Picture 14

As it’s shown in Picture 14 convenience is the most important for Kenyan shoppers. When they enter the supermarket, they expect to find everything under one roof. 


Picture 15

To conclude the story about shoppers in Kenya, we can look at Picture 15. 53% of shoppers go to supermarkets, but the frequency of visiting a kiosk and grocery shops is very high (around 20 trips per month) and this makes traditional trade in Kenya so important. 


FUTURE TRENDS AND WAY TO GO  

88% of shoppers in Kenya are ready to try a new retailer or to try a new brand. Disloyalty is the new normal! Innovation has become essential to remain relevant. But winning with innovation is challenging! Only 32% of innovations will stay on the shelf for more than 1 year. This is because of 3 factors: 

  • Weak proposition 
  • Weak execution 
  • Weak activation 

Picture 16

Like the illustration in Picture 16, manufacturers must understand consumer and shopper changing habits and ideally become a trendsetter. Focus on the right product, right channel and offer it for the right price.

Retailers should create moments of magic and ensure shoppers will find everything under their roof. Both manufacturers and retailers must embrace future trends.

Faith Wanderi is the Managing Director of Nielsen East Africa.