Unilever Looks to Recover Lost Indian Glory

As competition heats up, India’s top consumer-products company woos affluent shoppers with global brands like Dove, while cooking up its foods biz

by Nandini Lakshman

The middle-aged Briton strolling the aisles and checking out the products doesn’t attract much notice from other shoppers in Mumbai’s Hypercity, the India hypermarket chain. That’s how Douglas Baillie likes it. Baillie, the managing director of Hindustan Unilever, India’s premier consumer-products company, wants to see how his products are stocked, what consumers are buying, and how shoppers are reacting to competitive brands. It’s primary market research at its most elemental, and it’s best done incognito.

Hindustan Unilever has traditionally relied on small traders and mom-and-pop corner stores to retail its products. But India’s recent retail boom has created large stores and malls, so the company wants to make sure it’s in with the new marketing crowd. Hence Baillie’s Hypercity visits, and the calls he makes on the headquarters of the big retail chains.

This is quite a change for Hindustan Unilever, whose executives used to have emissaries make obeisance at Lever house in downtown Mumbai. “I can’t imagine any head from Lever House ever visiting other company offices like this,” says an amazed Damodar Mall, chief executive of innovation and incubation at Pantaloon Retail, India’s largest retailer, and a former manager at Hindustan Unilever.
Facing Competition from P&G and Others

The reason for this newfound egalitarianism is that the $3 billion Hindustan Unilever is facing serious competition. The company, which is practically synonymous with India, makes everything from detergents, soaps, and shampoos to soups, sauces and tea, and dominates most of those categories. Yet early this year, Finnish handset maker Nokia (NOK) dislodged it as the multinational with the highest revenues in India, after ringing up India-based sales of $3.5 billion.

Now Hindustan Unilever is under siege from aggressive Indian and foreign competitors such as Procter & Gamble (PG), Nivea, and L’Oréal. In the last year, ACNielsen data shows, Hindustan Unilever’s lead in hand soaps, including the popular Lux, is down from 55.2% to 54%. Favorite detergent brands like Surf Excel and Rin are barely hanging onto their 37% share. Hindustan Lever tea brands like Brooke Bond and Lipton have dipped from a combined market share of 29.2% to 24.3%.

All this has taken a toll on Hindustan Unilever’s operating margins, down from 21% a few years ago to just 11.84% now. That’s why the company is wooing consumers in big retail stores. These newly affluent shoppers present the best hope for the company’s future in India. According to retail consultant KSA Technopak, organized retail, currently just 3.5% of India’s total $336 billion retail market, will grow to 28% by 2017.
In Sync With Unilever’s Global Realignment

Hindustan Unilever’s managers hope their revenues from big retail will increase from 5% today to over 25% in 2012. “It is a big game for us,” says D. Sundaram, Hindustan Unilever’s finance director. Hindustan Unilever’s strategy is to market its premium products through the hundreds of megastores springing up across India.

That dovetails with parent company Unilever’s new global realignment of products. Parent Unilever will develop the brands and streamline product offerings across the world, while its subsidiaries will sell the products.
This means that all of Unilever’s brands will be available across global markets, fitting in quite nicely with India’s turn towards more international products being sold in supermarkets.

Yet this is still a dramatic change for Hindustan Unilever which, not long ago, was the most successful and profitable company in the Unilever group, the crown jewel whose managers had free rein to develop and build brands suitable for the local market. The takeover of Hindustan Lever by Unilever became evident in March, 2006, when Baillie, a Zimbabwe-born British national, became the first foreigner in four decades to head the Indian company.
From Local Player to Multinational, Overnight

The change sent shock waves through India. For many decades most Indians thought Hindustan Lever was a local company, not a multinational, and the cream of India’s management graduates made their careers there. Then in February, 2007, the company, then known as Hindustan Lever, was rechristened Hindustan Unilever to reflect its parentage.

Baillie first had to sort out some past problems. For instance, in 2002 the company adopted Unilever’s global strategy of focusing on just 30 power brands instead of the total basket of 110 more local brands. While the strategy aimed to conserve management energy, it also left the field wide open for competitors to attack Hindustan Unilever in the niche soap and detergent markets where its smaller brands held sway.

And there was some stiff competition from rival Procter & Gamble; a 2004 price war with P&G in the detergent business forced Hindustan Unilever to slash prices on its premium brand Surf Excel. The effect: The company’s sales and operating profits stagnated at $2.5 billion for five years while operating profit plunged 37%, to $274 million in 2004. Last year operating profits reached $357 million, thanks to price increases. But the rich margins of the past have not returned.
Tougher to Hold On to Market Share

Baillie says he intends to get the company back “into the competitive growth zone and do this in a manner that we can consistently deliver.” He also wants to expand the foods business in conjunction with the parent, where foods bring in half the revenues globally. In India, the company’s home and personal care businesses account for 80% of revenues and 85% of profits at Hindustan Unilever, while the company’s track record in foods has been dismal. Indeed, it has phased out more food products—wheat flour, confectionery, frozen bread—than it has launched.

Hindustan Unilever executives are realistic about the new era in which it now operates. Nitin Paranjpe, executive director in charge of the home and personal care business, admits that it’s now “tougher to hold on to market share. If India is a great story, we aren’t the only ones seeing it.” Rivals like P&G and Nivea have also copied Hindustan Unilever’s best innovation: the small shampoo sachets it pioneered in the 1980s, which sold for less than 2 cents each and which expanded the market for Hindustan Unilever products among India’s rural masses. Currently, 80% of Indian shampoo sales come from sachets. But today even L’Oréal has sachets of its Fructis shampoo.

In June, the Tata Group’s beverage company Tata Tea overtook Hindustan Unilever as India’s largest selling tea brand. According to ACNielsen, Tata Tea’s market share increased from 16.7% in March, 2006, to 19.9% in July, 2007, while Hindustan Unilever slipped from 26.1% to 19.5%. Tata Tea is exultant. Managing Director Percy Siganporia says the gain is “a dream come true for us.”
Bringing high-end Dove to India

Baillie is fighting back. Over the past six months, Hindustan Unilever launched a high-end range of Pond’s skin care and Dove hair care products from Unilever’s international portfolio. These premium brands retail not in neighborhood small stores but in supermarkets and hypermarkets, where Indian customers love to touch and feel products.

Hindustan Unilever is also milking one of its top brands—Fair & Lovely, a hot-selling “fairness” cream, which promises a lighter skin tone for many of India’s complexion-conscious consumers. The advertising campaign, which suggests that regular use of the cream helps women gain confidence and makes them eligible for marriage, has made the brand a winner. That has spawned a host of competitive fairness creams, soaps, and sunblock lotions. But Hindustan Unilever’s brand is still tops.

Baillie is also getting aggressive on foods, focusing on the Knorr brand of soups and curry mixes—ideal for the Indian market. Analysts believe the company’s current strategy of concentrating on premium products and marketing them in the large retail stores is a winning one. Sumeet Budhraja, consumer analyst at Mumbai brokerage First Global Securities, says that Hindustan Unilever “could have addressed a lot more categories, but they are more focused and regaining their aggressiveness.” He points to the demand for safe drinking water in India, which Hindustan Unilever exploited with the launch of water purifier Pureit in 2005, at one-third the price of established Indian brands such as Aquaguard.

These efforts have delivered some promising results, and Baillie is pleased with the modest turnaround. In the quarter ended June, 2007, the company’s sales grew 13%, with net profit up 29.6%. Reason enough to keep patrolling those store aisles.

Lakshman covers India business for BusinessWeek.


KCB gets it right

Ad: “I wanna be with KCB ”

Client:  KCB

Kenya Commercial bank is one of Kenya’s largest indigenous banks with an asset base of over 100 billion shillings. After a period of bad losses and government interference in the 90’s, KCB re-branded and set course to reduce their non-performing loans portfolio, which has become one of their greatest success stories. This year they appointed a Kenyan CEO and announced an increase in after tax profits to keep up with other large international banks. This has seen them embark on a new corporate campaign.

The corporate campaign, which started flighting a few weeks back, involves a series of TV ads each speaking to a different audience. In one ad an executively dressed lady talks about her needs from a bank and the fact that she wants to deposit money here and use it elsewhere, in another, a mama mboga is shown talking about how she wants to expand her small business and make it grow and in another a college student talks about how he would like to become independent but still have his mum to do his laundry.  Other executions include a Kenyan Businessman, an Indian businessman, a newly employed graduate, among others.

While the scenes are almost the same, they all tell a different story that reflects how they would like a bank to fit into their current stage in life. They all end with them saying “I want to be with KCB.”

This campaign is a first for a Kenyan Bank as it brings out the banks diverse audiences and how the same bank fits in with all of them, instead of cramming them all into one ad. It is refreshingly different and also has an emotive appeal tied into a patriotic theme; from the song chosen to some of the words used to describe the bank.  It seems to say, don’t just choose KCB, choose KCB because you’re a Kenyan and we understand your ambitions.

Africa’s mobile revolution

Check out this report on Africa’s mobile revolution from Businessweek.com, Africa is rising up and the whole world is taking notice.

Upwardly Mobile In Africa
How basic cell phones are sparking economic hope and growth in emerging—and even non-emerging—nations

Slide Show >>

Precious little would seem to connect the Kenyan village of Muruguru to the 21st century. The red dirt roads become impassable in the rainy season. Only a few homes have electricity, indoor plumbing, or even a floor other than earth packed by bare feet. The villagers survive on corn, potatoes, and bananas they raise in hand-tilled fields, and earn a little extra cash by cultivating coffee beans that they dry outdoors on burlap sacks. <!– if (!window.OAS_sitepage) { var BW_site; // use for new ad site var BW_page = “/magazine”; var OAS_listpos; // use to restrict the number of available page positions document.write(”); } //–>

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But a couple of years ago, a red and white tower appeared on a nearby hill. The structure is a cell-phone base station, and its arrival has changed life in Muruguru as much as any development in the past century. “I’m saving time, I’m saving money,” says Grace Wachira, who runs a small business knitting cardigan sweaters in the village. Before the tower was built, she had to walk several hours to the nearest town or ride in a communal taxi to buy yarn or meet customers, and she never knew whether the person she wanted to see would be there. Now she uses her Motorola (MOT ) handset to arrange for delivery of yarn and to communicate with buyers.

These days, just about every tradesman, shopkeeper, and farmer in town has a phone—or at least access to one. “Customers give my number to other customers. The business has grown,” says Susan Wairimu, whose tailor shop sits in the row of one-story buildings that constitute the village center. And Willson Maragua’s transport business in Muruguru, which consists of him and a used pickup truck, could hardly function without mobile technology. Local farmers, members of the Kikuyu tribe prevalent in the area, summon him to haul their coffee beans to a growers’ cooperative in a nearby valley. Now Maragua, an ebullient man wearing a baseball cap that says “Bachelorette Party,” lives in a home with a concrete floor and a solar panel on the roof to power a radio and a lightbulb—and recharge his family’s two handsets. With a mobile phone, he says over a lunch of corn, potatoes, and stewed goat, “You can manage your business.”

Only a few years ago, places like Muruguru didn’t even register in the plans of handset makers and service providers. What would a Kenyan farmer want with a mobile phone? Plenty, as it turns out. To the astonishment of the industry, people living on a few dollars a day have proven avid phone users, and in many parts of the world cellular airtime has become a de facto currency. The reason is simple: A mobile phone can dramatically improve living standards by saving wasted trips, providing information about crop prices, summoning medical help, and even serving as a conduit to banking services. “The cell phone is the single most transformative technology for development,” says Columbia University economist and emerging markets expert Jeffrey Sachs.

Mobile phones are changing developing markets faster than anyone imagined. Today there are some 3 billion mobile subscriptions worldwide, and that will grow to 5 billion by 2015, when two-thirds of the people on earth will have phones, predicts Finnish handset maker Nokia Corp. Nowhere is the effect more dramatic than in Africa, where mobile technology often represents the first modern infrastructure of any kind. The 134 million citizens of Nigeria, Africa’s most populous country, had just 500,000 telephone lines in 2001 when the government began encouraging competition in telecommunications. Now Nigeria has more than 30 million cellular subscribers. Muruguru, meanwhile, had just a single pay phone before people started getting handsets a few years ago. “Communications used to be a barrier,” says Paul Ndiritu, the former village head man. Since the advent of mobile phones, he says, “the burden has eased.”

Yet billions of people around the world have still never used a telephone. Most of these unconnected masses live in rural areas that are much poorer and more remote than Muruguru. Now cell-phone makers and service providers understand that they can make money by bringing cell-phone service within reach of people who live on $2 a day. Users buy new phones for as little as $20—and secondhand models for far less—as well as airtime in increments of just 75 cents in Kenya, enough for nearly 10 minutes of off-peak calling.

That’s a far cry from the European or U.S. monthly subscription model, but it works for such outfits as Millicom International Cellular. The Luxembourg-based company invests almost exclusively in poor countries often rocked by violence, and in the second quarter of this year saw its profits climb 65%, to $263 million. Millicom doesn’t even wait for the gunfire to die down before moving into new markets, which include the Democratic Republic of Congo, Sri Lanka, and Colombia. “When you build the network you find really good customers,” says CEO Marc J. Beuls.

Many economists would agree. A growing body of evidence suggests that access to communications boosts incomes and makes local economies far more efficient. Consider a group of poor fishermen in the Indian state of Kerala studied by Robert Jensen, an associate professor at Brown University. They increased their profits by an average of 8% after they began using mobile phones to find out which coastal marketplaces were offering the best prices for sardines. Yet consumer prices for fish dropped 4% because the fishermen no longer had to throw away the catch they couldn’t sell when they sailed into a port after all the buyers had left. “That’s what economic efficiencies are about—everyone is better off,” says Jensen.

With characteristic ingenuity and resourcefulness, villagers are proving that handsets aren’t just for talking. Mobile phones, for instance, are becoming a way to extend financial services to the billions of poor people who have never seen the inside of a bank. David Omuchilili, who works as a security guard at a church in the town of Ngong, outside Nairobi, uses his battered, 1990s-era Ericsson (ERIC ) to send a portion of his modest wages to his wife and five children in a village 180 miles away. Omuchilili pays cash to an agent for M-Pesa, a service offered by carrier Safaricom Ltd. In this case, the agent is a cell-phone dealer on a Ngong street that is crowded with stray goats and donkey carts hauling cans of water. The agent then sends a code number via text message to Omuchilili’s wife, who uses the code to redeem cash from an M-Pesa agent close to her home.

Although few Kenyans have any experience with e-commerce, the M-Pesa service—pesa is Swahili for “money”—has been a runaway success since Safaricom launched it in March. Some 6,000 people a day are signing up, and Vodafone Group PLC (VOD )—which owns 40% of Safaricom—is thinking of extending the concept to India. “I used to travel home myself. This saves money,” Omuchilili says after sending his wife a few dollars. “She needed money to buy food,” he explains.

Economists are still trying to calculate the macroeconomic effect of this communications explosion, but no one doubts that it’s big. Leonard Waverman, chairman of the economics faculty at London Business School, figures that a 10% increase in a developing country’s mobile-phone penetration adds 0.6 percentage points to the economic growth rate. Indeed, the advent of mobile communications in Africa coincides with a surge in growth. The continent’s economy will expand as much as 7% this year, a 25-year high, according to the International Monetary Fund. Many other factors are contributing, including high commodity prices, fewer armed conflicts, and better government in countries such as Kenya and Tanzania. But a fundamental principle of economics is that markets need information to function efficiently, and cell phones are providing information to people who never had it before.

The telecommunications industry itself is enjoying a new level of entrepreneurship and job creation in the developing world. Nahashon M. Macharia, a Nairobi-based businessman, is opening new stores selling cell phones and airtime in step with the expansion of Safaricom’s network. “Whenever they put up a new mast, we try to provide coverage,” Macharia says above the blare of reggae music during opening celebrations for a new outlet in Othaya, a town about 50 miles from Nairobi.

There is even a whiff of startup frenzy as companies spring up to serve the mobile industry. Lagos (Nigeria)-based M-Tech Communications, founded in 2001, develops content—everything from ringtones to crop price information—for mobile-service providers in Kenya, Uganda, Ivory Coast, and elsewhere. “There is significant value in those markets, purely because of the numbers” of people, says co-founder and CEO Chika Nwobi, a graduate of East Tennessee State University. Everyone, it seems, is getting into the act. In Kenya, where Safaricom lets anyone be an airtime dealer, it’s common to see vegetable stands selling bananas, tomatoes, cabbage—and scratch cards with codes that grant access to additional calling minutes.

Surprisingly, the per-minute cost of mobile service is often more expen- sive than in developed markets. Prepaid customers of Vodacom in the Democratic Republic of Congo, a joint venture of Vodafone and African investors, pay 26 cents per minute to make daytime calls within the network, compared with peak rates of roughly 10 cents a minute for U.S. cellular subscribers and 7 cents in Germany. That’s because users in poor rural areas often must bear the higher cost of building out networks in areas without electricity or good highways. Safaricom, for instance, wrecks a vehicle a month on Kenyan roads. And theft of generators and fuel means some companies post armed guards at their cell towers.

To keep calling costs to a bare minimum, villagers keep conversations extremely short and make heavy use of text messaging. Flashing—calling and hanging up after the first ring—is also popular. The flash can signify, “I’ve arrived,” “call me,” or any number of other prearranged meanings. Phone sharing is also common. Some users just buy a SIM card (which is plugged into the phone to grant access to the network) for less than a dollar and borrow a phone from someone else. Many users rarely make outgoing calls, maintaining just enough prepaid credit to keep their accounts active and receive calls. Meshack Onsinyo Getuba, a TV and radio repairman in the Nairobi suburb of Rongai, alternates between SIM cards from two rival carriers, choosing the one that’s cheapest at any given time. Mobile technology, he says, “has improved the lifestyle I am living,” because he can call for delivery of spare parts rather than having to fetch them from a dealer himself.

As mobile networks proliferate, they’re pushing the development of other infrastructure. Some operators, frustrated with slow-moving power monopolies, build their own electrical lines to base stations. And mobile operators are the driving force behind new networks of fiber-optic cables. South Africa-based MTN, for instance, has installed its own fiber in Nigeria. That will likely lead to better broadband connections, which could enable English-speaking countries such as Nigeria and Kenya to become major outsourcing centers.

The spread of rural telephone service to the world’s poor got an early boost in the villages of Bangladesh. In 1997, microlender Grameen Bank started giving advice and credit to local entrepreneurs, encouraging them to operate communal phone services using mobile handsets—so-called village phones. Since then the concept has spread around the world, and has become a profitable business for operators such as MTN. In Uganda, the carrier rolled them out in partnership with the Washington (D.C.)-based Grameen Foundation but last year took full control of the operation, which now includes 13,000 small-time entrepreneurs. “Village phones made us realize that rural areas were a market,” says Francis Ssebuggwawo, a sales supervisor for MTN in Uganda.

Ssebuggwawo makes that observation while steering a Ford (F ) pickup along a potholed highway that provides a neck-wrenching lesson in the shortcomings of African infrastructure. He is bound for a settlement called Wabusana, where he plans to check in with village phone operators. Wabusana is only about 50 miles north of the capital, Kampala, but the trip takes nearly three hours each way on badly paved or dirt roads marked by plots of pineapple and six-foot-high conical anthills (which provide a local specialty, sautéed ants). In a clearing, a crowd waits to receive free mosquito nets, the most affordable way to prevent malaria, rampant in this part of Africa.

Finally, Ssebuggwawo brakes at a collection of grim concrete and brick buildings situated at the crossing of two dirt roads. The outpost supports four village phone operators, whose stories show how the spread of telecommunications is providing a livelihood for thousands of Africans. Hasifa Nakitio, who looks to be in her early 30s, feeds 11 children—five of her own, plus six she takes care of for various reasons—with income from the village phone and by peddling cups full of matoke, a mashed-potato-like dish made from plantains. Nakitio says she is saving to buy a plot of land and her own house.

Ezeresi Serukeera, a mother of four who runs her village phone in Wabusana from a crude wooden booth, enlarged her house after she obtained a loan of about $385 to buy the phone gear. Serukeera, who paid back the loan in six months, even serves as a kind of local banker, a conduit for relatives in Kampala to send money home to their families. These people transfer airtime to Serukeera electronically, and she passes on the equivalent in cash minus a small commission, then resells the airtime minutes to other callers.

The operators gather with Ssebuggwawo in the dimly lit interior of one of the buildings, which quickly fills with curious children. The operators bombard him with complaints and suggestions. Why isn’t MTN doing more to promote village phones? Why can’t they sell talk time in increments of less than a minute? Why doesn’t MTN’s text message-based information service have more news relevant to farmers, providing, say, the price of pineapple rather than reports on the Iraq war? As more villagers get handsets, the village phone operators point out, they will need other sources of revenue, such as providing information. “We have to think of ways we can add value,” Ssebuggwawo agrees, taking notes.

The mobile-phone industry is increasingly listening to people like these village operators, who are at the frontier of telecommunications expansion. Nokia’s (NOK ) latest phone for emerging markets, which retails for about $37 in Kenya, contains features such as a hookup for an external antenna, to better reach distant base stations, and software making it easier to track the length and cost of calls. “If we look at the next billion subscribers, the vast majority will come from emerging markets,” says Kai Öistämö, Nokia’s general manager for mobile phones. In India, Nokia Siemens Networks, an equipment joint venture with Germany’s Siemens (SI ), is taking the village phone concept a step further. The company is testing its so-called Village Connection, which allows a local entrepreneur to set up a wireless phone network for a few thousand dollars. Villagers can talk within the local system at a reduced rate, connecting to the more costly national network only for long-distance calls.

Of course, the spread of technology to places that have had none is bound to bring unforeseen consequences. Mobile phones can also be used to organize a guerrilla army. (The region around Wabusana was already the focal point of an armed conflict in the 1980s after the fall of Ugandan strongman Idi Amin.) And a new class of resentful have-nots could emerge among the millions of extremely poor people who still can’t afford cell phones. Abraham Waigwa, a 28-year-old bricklayer who lives in Muruguru, complains he’s having trouble competing with other masons whose phones allow them to be reached by potential employers. “I don’t get jobs as often,” he says. “My life is dragging.”

But that seems to be the minority view. “Mobile technology has brought many fruits, and no bad things,” insists Isaac Mahenia, a schoolteacher and part-time farmer in Muruguru. Abraham Maragua, truck driver Willson Maragua’s 77-year-old father, agrees that life is finally getting better in the village, and that mobile phones are part of the change. “We feel it,” says Maragua, who lives in a house with a dirt floor and old newspapers covering the interior walls. As a onetime political prisoner during Kenya’s civil strife in the 1950s, he knows what he’s talking about. Says Maragua: “We didn’t suffer for nothing.”

Another one from Nokia, Grey SA

Commercial break

Ad:        “New Job ”
Client:        Nokia 2110 – Nokia Corporation

From humble beginnings way back in 1865 as a paper mill, Nokia  a Finish company has grown to be the number 1 handset manufacturer worldwide. In Africa they have designed different types of handsets that are unique to African conditions and that has seen them take a lead as the telecommunications reach continually expands. In Kenya the majority of mobile phone subscribers own a Nokia phone.

Nokia’s advertising especially in Kenya has been quite consistent and the use of humour has made their ads stand out. From the Nokia auditions ad where people are waiting to enter and they start dancing to Music from a Nokia 2310 to the 1110 with the voice recorder that a guy uses to record his boss singing then shares it with his colleagues. Although most of these ads are done is SA, they are quite relevant in this market.

In their most recent ad for the 2110, we see as someone gets a phone call, which they pick and talk. In true African fashion good news always needs to be shared and the woman spreads the news around, it’s about her gtandson who has gotten a new job at a computer chip firm.  As it moves from person to person it changes from Computer Chip firm, to potato dip firma and ends up as news reporter.

The next time he comes to visit one of his neighbours congratulates him for getting a job as a new reporter. He is quite perplexed and we change to a shot where he calls his grandma again. He instructs her to put the phone on loudspeaker and proceeds to explain that it’s a computer chip firm to which the grandmother remarks, “these youngsters they never stay in one place” The ad ends with a shot of the phone and the highlighted feature of the loud speaker and tagline.

Another ad from Nokia, which is not only creative but relevant. In Africa news spreads as people keep sharing the good tidings they have received with others. Unfortunately like the broken telephone information tends to get altered more often than not. That’s why Nokia phones come with a loud speaker, so the information can be shared without being altered. Finally an ad that is creative and very relevant, such ads are few and far between

Celtel Rebranding yet again? new service to be called Zein…

After the recent completion of the purchase of Celtel International by Kuwait’s MTC word on the street is Celtel is set to rebrand to Zein in the African market. As much as this decision might make alot of sense in a boardroom in Netherlands here on the ground in Nairobi it seems to be a fool hardy decision. After rebranding 3 years ago from Kencell, Celtel has not found its footing yet as Safaricom takes an early lead in the local market.

Its true that Celtel has become more agressive especially in Kenya making sure what Safaricom offers they offer if not better. Unfortuanately Kenyans have not quite gotten to relate to it completely and quite a large percentage still relate to it as Kencell. A name change to Zein would move it even further off the consumers mind as no one can relate too it. That might even give Econet, if they ever launch in Kenya a fair chance of catching up with them…

It will be interesting to see how this unfolds…

My bet is it wont be pretty and will take a long time 3 -5 years before that name gets entrenched here.

if i was to venture an opinion i would have said they were better off with the Kencell name

the makings of a local giant

NAIROBI – Just outside the Nakumatt offices on a quiet dusty road off Mombasa Road, stands an imposing sculpture of an elephant. Probably in this building, nothing else gets more prominence than this signature. Several of them seat on a large cabinet next to the Operations Director Mr Thiagarajan Ramamurthy’s desk. Could be a sign of motivation, or a believe maybe, but Mr Ramamurthy talks in a quiet, deliberate tone, as he explains the making of the fastest growing retail chain in Kenya and the region. “You win in business only when you win the hearts of the customers,” he says. “Retail business is a service business where you need customer support.”

To many, the rise of Nakumatt came as a surprise. A small family business, it started out in the small, Rift Valley town of Nakuru and found its way to Nairobi to become the largest and the first retailer to introduce the hypermarket concept – all-under-one-roof. It has grown 150 percent in the last three years.

A recent survey by Planet Retail of UK ranked it 25 th among supermarket chains in the Gulf and Africa. The company is ISO certified, and has been awarded for two years running, the Most Respected Company in East Africa award in the services sector in a ranking by Nation Media Group and PriceWater Coopers – East Africa’s Most Respected Company Awards.

Mr Ramamurthy says Nakumatt stands to gain more awards in future for their innovation and creativity. His strategy? “You need to have a clear-cut concept in your mind,” he said in an interview with Smartbiz Africa. He talks sturdily about fundamentals for a company in the services sector, like strategic locations, pricing and value proposition. “You need to know what kind of service you are offering to the people, and consistency. And then, corporate governance, which is very critical to the business,” he says. Other things like Corporate Social Responsibility (CSR) and partnerships are vital. The company, for instance, gives out Kshs5 million every back-to-school periods, provides lighting around their stores, among others.

Round-the-clock shopping

Nakumatt recently introduced 24-hour shopping, by opening up its Ukay branch in Westlands, Nairobi, to shoppers around the clock. This makes the first one in Africa, and Mr Ramamurthy says they are watching the response before opening up more stores. “In the first month, the response is very positive, and it is a motivation for us to move on,” he says. “More than 1,000 people buy between 9pm and 6am every night, and the basket value at night is more than the day at the shop.” Nakumatt has also maintained same prices across the country, a unique feature in retail where many charge differently in different branches.

Standing at 19 stores, seven in Nairobi, two in Mombasa and others in major towns like Kisumu, Kisii, Eldoret and Meru, majority of which are hypermarkets, the company handles 250 categories of more than 55,000 products. Established 25 years ago to acquire its brand name in 1992, its first branch, now Nakumatt Mega located on Uhuru Highway, is the largest measuring 14,400 square feet, from 4,000 sq-ft at inception. “We do not import anything by ourselves,” says Mr Ramamurthy. “We put money only in two areas; getting the products available, and having them available all the time.”

In developing countries, he says, the fundamental thing is logistics. Not all the products are manufactured locally, so they have to be imported. Nakumatt, for instance, serves more than 165 nationalities, each with different needs. The trick is travelling extensively to countries, identifying some of the products and categories with significance, and partnering with importers. Taking care of employees is another winner. Apart from fair wages, his 3,300 workers enjoy other benefits like free lunch, uniforms and one month bonus that help in building loyalty. The company targets to raise employees to 5,000 in two years. To boost skill development, it is also working with a local university to promote a diploma course in retail management.

Giving extra to customers

Partnerships like, for instance in Nakumatt’s case with financial services providers, also chip in. All their tills are like ATMs, thanks to partnerships with banks like Barclays and recently, Equity Bank. The Nakumatt Barclays Visa Card has more than 10,000 holders. “People use the Visa Card constantly to support certain brands,” he says and it comes with benefits not available with other cards. The company is looking at other markets to venture into, starting with Uganda, where plans are under way to launch in Kampala in April next year, before proceeding on to Rwanda and Tanzania before December 2008. Six branches are also to be opened in various towns in Kenya, in the next 12 months.

Someone would say the expansion is too fast, given examples of supermarkets that have found themselves burning their fingers, like one-time retail giant Uchumi Supermarkets. But Mr Ramamurthy says a retail business has to grow to sustain costs. “As we look at expanding and providing variety, there are a lot of investments that are taking place,” he says. ” It is a people driven business, and all the time you need to increase the number of customers coming in. You can’t do it in one branch.”

Allegations of tax evasion in Parliament sometime back dealt the company a public relations blow. But Mr Ramamurthy came out fighting. He says Nakumatt paid Kshs600,000 million in taxes to government last year and could pay Kshs10 million more this year. At the end, he says there are a lot of local supermarket chains that have a lot to gain from the economic growth and the retail explosion. Nakumatt, a Kenyan Wal-Mart? “Yes,” says Mr Ramamurthy, adding they plan to list on the Nairobi Stock Exchange in June 2009. “When we go public, when shoppers become part of us, then Nakumatt’s growth will simply double.” It will have a stronger muscle to bargain in terms of prices and become, what do we say? A Kenyan Wal-Mart?”

Safaricom goofs…

Safaricom mobile phone subscribers now have reason to smile after the phone company promised to refund KSh260,000 to subscribers for 53,410 failed short message services that were sent to Telkom Kenya’s wireless network.

On Monday, Alex Gakuru, chair of the ICT Consumers Association of Kenya circulated an email requesting petitions by consumers to assist in filing a suit against Safaricom. “It has come to our notice that Safaricom is charging but blocking SMS sent to Telkom Wireless network. Charging for undelivered goods and services is
outright theft, and criminal acts under Kenya Laws,” read the email.

Three days later, Safaricom CEO Michael Joseph has been quoted in a media report saying the company “received a complaint.” Consumers complained that their network (Safaricom) accepts SMS from Telkom Wireless but when replying the sender receives a “message sending failed” report and money is deducted from the account.

“The important message here is not the amount to be refunded but that in principle we caught them in continued theft, forced them to own up and to agree to refund that what was stolen,” says Gakuru.

He says the Communication Commission of Kenya (CCK) should put in place mechanisms that report daily failed SMS volumes from all mobile operators to pro-actively protect consumers.

A recent Gartner study says worldwide revenues from SMS reached US$ 50b in 2006 they are expected to grow another 20% annually for the next 3-4 years and SMS
volume is expected to more than double in the same period (to over 2.3 trillion messages).

by Carol Kimutai http://www.bizcommunity.co.za/africa