Haco venture signals a new trend

January 1, 2008
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, NAIROBI, October 1 – Local manufacturers have in the recent past raised concern over rising energy costs, with the industry warning of massive job cuts or closures altogether.

Interestingly, however, South African Fast Moving Consumer Goods (FMCG) giant Tiger Brands is injecting in excess of Sh250 million to the Kenyan market as part of its incursion into East Africa.

Tiger has acquired a 51 percent stake in local manufacturer Haco Industries, and they have now announced a joint venture.

Peter Matlare, the South African firm’s Chief Executive, observed that his country experienced serious electricity shortages early this year, but local companies survived it. He told Capital Business that it is in this same spirit that the company is getting into business in the country and expressed optimism it would work.

“You cannot deny that Kenya is a very attractive investment destination especially considering its location and a huge skilled workforce that is able to work anywhere in the world,” Mr Matlare observed.

The partnership between the two companies marks an investment in Capex, Information Technology, sales distribution, marketing and people talent.

Tiger Brands, which is worth R23 billion, employing 16,000 staff and listed on the Johannesburg Stock Exchange is a branded food company that operates mainly in emerging markets.

According to Mr Matlare, the company targets all income groups and controls between 15 and 20 percent of the South Africa’s FMCG market share.

A number of South African firms seem not have faired well in Kenya, but Mr Matlare is ufazed, saying they have taken a different approach of entry.

“When you move into new jurisdictions you cannot pretend that you fully understand the culture of the people you are trying to work with, what you do is to try and embed yourself like we are doing with the Haco partnership,” he explained.

He also assures that Haco’s future is guaranteed: “Never fear that one day you will wake up and Haco will be gone, absolutely not! This is Haco country and what we will do is complement the local manufacturers’ products here.”

Industrialist Chris Kirubi and Polycarp Igathe will remain as chairman and Managing Director of Haco respectively. They will work closely with Tiger’s director in charge of international business who in turn reports to Mr Matlare in South Africa.

Why Haco?

Tiger Brands, Mr Matlare revealed, had been searching for a partner in East Africa for a while and was impressed with the quality of Haco products and its organisational practices as well as management style.

The company hopes to use its new venture as a stepping stone in the region. It is targeting East Africa, West and Central Africa.

Challenges

Mr Matlare is convinced that the issue of counterfeit that has dogged Haco products could be dealt with through proper enforcement of the law.

On the issue of competition, Mr Matlare describes himself as a firms believer of the ‘driver for perfection’ arguing that competition compels product innovation. He says the new product range to be introduced in the market as result of the partnership will fair quite well.

Partnerships for growth

Haco Chairman Chris Kirubi was candid on the reason for selling a majority stake of his flagship company.

“The usual business thing for Kenyans is to cry and complain of the competitive heat our industries are feeling from China and India. The unusual thing is for entrepreneurs such as myself to actively seek out partners especially from economies of strength and geographical proximity such as South Africa in readiness for competition,” said Mr Kirubi.

He continued: “Business in Kenya must engage and partner with South Africa to enhance competitiveness against Asia and Egypt. It’s a most obvious option that we have for along time fought off. I have no doubt my venture with Tiger Brands at Haco will show the way.

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