The retail chain intends to enter the market through acquisitions when expanding as its management has hinted at the possibility of an acquisition in order to establish a footprint in Kenya.
“Choppies has entered into a joint venture agreement with a strong local partner for expansion into East Africa,” the firm said in their financial statements for the six months ended 31st December 2014, without disclosing the intended local partner.
The firm says Kenya formal retail channel makes up 49 percent of the retail market, with the grocery retail market expected to grow at 30.2 percent by 2019.
The retail chain is currently listed on the Botswana Stock Exchange with plans to carry out a secondary listing on the Johannesburg Stock Exchange (JSE) which it anticipates will raise an estimated 48 million dollars.
Choppies will join multinational stores such as Massmart and Carrefour seeking to set up in Kenya currently dominated by several family owned retail chains with Uchumi being the only listed supermarket.
Previously, Massmart, a South African retail chain, had attempted to acquire Naivas Supermarket (3rd largest retail chain by revenue) though it opted to set up shop individually after the buyout failed.
“In our view, though entry into Kenya may prove difficult, if successful the move will be a risk to Uchumi as Choppies has a similar strategy – focuses on Fast Moving Consumer Goods as well as service offerings.”
“Additionally, Uchumi has been lagging behind competition in terms of opening stores in prime areas as well as revenue generated per store,” said Standard Investment Bank Research commenting on the entry.
The firm also plans to enter Tanzania in the period under review as well as Zambia and Namibia.