What you need to know:
- At least, according to official inflation data from Uganda Bureau of Statistics, most businesses have experienced cost increases of above 10 percent over the last two years.
- Yet, there has been subdued sales growth, whose recovery from the impact of Covid-19 related restrictions, according to various surveys through the Stanbic's Purchasing Managers Index, has been dampened by inflation and high input costs.
When Carrefour first announced it would open in Uganda, the prospects were reading right.
Yes, the supermarket space, though a little volatile due to external factors from parent companies in Kenya, was moving in the right direction, anchored on glowing reviews for suburban shopping and growth in shopper footfall outside the Kampala Central Business District.
Indeed in the period between January and June 2017, a report by Knight Frank indicated that whereas the retail space had gone through serious headwinds, footfall traffic in major malls in and around Kampala had grown in double digits, peaking at 20 percent due a customer shift from high street retail units into shopping malls.
This was just months before Carrefour indicated in October 2018, it would enter Uganda under a cautious operating plan.
However, the entry would not be confirmed until almost a year later in June 2019 with the first outlet at Oasis Mall opened to the public almost six months later in December the same year.
In entering Uganda the French-based retail chain had indicated it would take on a cautious approach, stating with two stores in spaces formally occupied by Nakumatt at Oasis Mall in Kampala and Metroplex Mall in Nalya, on the outskirts of Kampala.
However, that was three years ago and a lot has since happened.
The retail space in Uganda has been facing a lot of volatility, worsened by runaway product prices and dampened spending appetite.
In the last three years, some product prices have almost doubled while others have registered increases of above 40 percent.
This has had a serious impact on retailers’ bottomlines, yet operating expenses have not made the situation any better.
At least, according to official inflation data from Uganda Bureau of Statistics, most businesses have experienced cost increases of above 10 percent over the last two years.
Yet, there has been subdued sales growth, whose recovery from the impact of Covid-19 related restrictions, according to various surveys through the Stanbic's Purchasing Managers Index, has been dampened by inflation and high input costs.
Therefore, it’s not surprising that within the two years, two foreign-owned retail giants – Shoprite and Game – that had withstood several turbulences, have since exited.
The reasons for their exit might vary but are a little different from those of Nakumat, Uchumi and, by extension, Taskys, all of which had their parent companies in Kenya.
Both Shoprite and Game, which, nevertheless had previously reviewed their operations and concluded that returns on investment were insufficient, cited sluggish growth in Uganda’s shopping culture as one of the reasons for their exit.
However, their exit has done little to dampen investment by others such as Carrefour, which within the period, has expanded beyond its own set targets. Of course, Shoprite’s exit handed Carrefour some strategic spaces and it is from these that it has expanded its operations, largely within Kampala.
Majid Al Futtaim, which launched its first Carrefour store in Uganda in December 2019 at Oasis Mall and a subsequent one in Naalya at Metroplex Mall in March 2021, owns the Carrefour franchise in Uganda.
Five additional stores have since been opened at Lugogo, Victoria, Acacia, Village and Arena Malls between October 2021 and January 2022.
There has been subdued expansion by other large retailers, which leaves Carrefour as the only chain store that has dared to spend at a time when almost everyone else is largely cautious.
However, the expansion is perhaps informed by market sentiments that have predicted recovery and growth in the retail sector.
A report by Knight Frank for the period ended December 2021 indicated that supermarkets recorded a 3 percent decline in turnover. However, this was lower compared to a 20 percent decline registered in 2020.
Whereas the figures above presented a risky investment environment, the report also noted that the highlight of 2021 was the expansion of Carrefour, which subsequently returned hope among suppliers, many of whom, had been dampened by the exit of Shoprite and Game.
From just two stores, Carrefour has in a space of two years expanded to seven stores, which is slightly above the five it had planned to have established within the first three years of operation.
All the seven stores, however, were acquisitions, two of which were acquired from Nakumatt, which closed due to sustained financial bleeding in 2015, while five were acquired from Shoprite, which chose to cut short its losses in August 2021 after years of mixed performance.
Carrefour had earlier indicated its investment appetite was informed by the desire to build a sustainable business, whose return on investment was expected in 10 or 20 years.
“We have a business model on the middle term and long term to be sure that what we are going to invest in will have a return within 10 to 20 years,” Frank Moreau, the Carrefour country manager for Uganda and Kenya, said while announcing the launch of the retailer’s first store at Oasis Mall.
This still the position as the business soldiers, amid numerous challenges.
The three years
And three years on, Moreau, who is now the regional director of Carrefour East Africa at Majid Al Futtaim Retail, says Carrefour has, and continues to play an active role in Uganda’s evolving retail business, in which, more is still expected.
“We look forward to contributing and serving our customers for more years,” he says.
Therefore, as part of the three years, Carrefour will check out free trollies and loyalty point to loyal customers.
This , Moreau says, is part “our mission to uplift communities around us” in a campaign that started last Thursday and will run up to February 12 with a target of paying for at least 1,000 customers’ shopping every day while MAF MyClub App members will be rewarded with loyalty points and discounts.
The Carrefour franchise is operated by UAE-based Majid Al Futtaim, which holds exclusive rights in more than 30 countries in the Middle East, Africa, and Asia.