In Kenya, a rapid expansion of the consumer class represents a growing opportunity for Fast-Moving Consumer Goods (FMCG), this is reinforced by the strong demand for food and beverages and personal care products. Some of the renowned FMCG multinational companies operating Kenya are Coca-Cola, Unilever and Procter’s & Gamble.
Between 2004 and 2016, the country’s economy expanded at an average growth of 5.46 %. The growth is expected to remain robust at a rate of 6.8-7 % from 2016 to 2020. In turn, consumer spending which currently stands at $25bn is expected to nearly double by 2020. Rising personal income will bring up a new middle-income class that is more likely to spend money on FMCG.
According to a survey conducted by Nielsen in the year 2015, Kenya is Africa’s second biggest formalized retail economy after South Africa; the survey further indicates that 30% of Kenyans do their shopping in retail outlets. From a PWC report, Nakumatt, Tuskys, Naivas and Uchumi are the four largest home-grown supermarket retail chains in Kenya, and they all stock a variety of food, home and personal care, electronics and clothing products. The attractiveness of this market has encouraged international companies like Massmart Holding’s Game, Botswana’s Choppies and Carrefour to enter the market. Expansion and spread of retail outlets throughout the country increase options for FMCG sales and make global brands available to new customers.
In the year 1998, Kenya experienced a major terrorist attack when the US Embassy was bombed by the Al-Qaida group, resulting in a significant number of deaths and injuries. Since the Kenyan military incursion into Somalia through an operation called “Operation Linda Nchi” in 2011, there has been an upsurge in terrorist attacks that emanates from the Al Shabaab group and homegrown Islamist militants. Some of the documented cases are the 2013 Westgate Mall attack and the 2015 Garissa University College attack. Terrorist incidences have negatively impacted Kenya’s economy and instilled fear among Kenyans. The net effect of terrorism may inhibit the growth of the middle-income class, and lower the consumer confidence; this may in turn hamper the growth of the FMCG sector.
Compounding the terrorism threat, political instability is a real threat facing Kenya. After the announcements of the 2007 presidential election results, the country plunged into violent protests that transformed into ethnic clashes and led to a virtual shutdown of roads and markets. The two months conflict had a negative impact on distribution channels, restricted movements, encouraged mass looting of retail outlets and led to a large decline in expenditure and in consumption of necessary items like food. With a looming 2017 presidential election, political uncertainty is an investor’s worst nightmare.