KENYA – South Africa’s fast-moving consumer goods maker Bounty Brands has put on ice plans to acquire a Kenyan firm as a springboard to the East African market, instead opting to ship in supplies.
The Cape Town-based firm has dropped its bid to acquire an unnamed Kenyan foods maker arguing that local companies are overpriced.
The Johannesburg bourse-bound firm now says it has opted to make acquisitions in Europe; and has resorted to directly supplying its goods to Kenya through a distributor.
“Our business model normally includes the acquisition of successful businesses in our target countries to serve as a platform for expansion, but we have found the pricing of such businesses to be prohibitive in Kenya and have found better value in central and eastern Europe,” Stefan Rabe, Bounty’s chief executive said in an interview.
Bounty has in the past year made a string of acquisitions valued at more than 1.2 billion South African rands ($89.38m) including Liberty Foods, food supplier Rieses Food Imports, trash bag maker Tuffy, household cleaning accessories firm Goldenmarc, and fashion retailer Footwear Trading which owns franchises for brands such as Diesel, Levis, Jeep and Fila.
The World Bank’s private sector lending unit International Finance Corporation (IFC) is set to lend the company €20 million ($21.5m) to be used in acquisitions and geographical expansion over the medium term, including the Kenya entry.
Mr Rabe said the firm was in discussions with distributors and retailers to stock and sell Bounty Brands products and is expected to make a decision mid this year.
“We have not finalized our brand mix — this will depend to some extent on our choice of local partner and the results of ongoing market research,” he said.
Their brands span a number of consumer sectors, including food, personal and home care as well as apparel.
Its food business consists of the Sonko rice brand, Liberty (canned food), and Rieses (dried groceries, confectionery and oils).
Bounty Brands, founded in 2014, is wholly-owned by private equity group Coast2Coast and sells its products in more than 40 markets globally.
The local packed food, personal and home care markets are recording significant growth driven by rapid urbanization, population growth, expansion of formal retailing and higher consumer spending by the middle class, according to market research firm Euromonitor International.
Mr Rabe said despite the scale back in acquisitions, Bounty sees Kenya as a promising market and will use Nairobi as a hub to expand to the region.
“Kenya is a relatively mature market, but is still likely to experience above-average growth for the region. In addition, we see it as the gateway to East Africa,” he told the Business Daily.
Bounty Brands failed Kenyan acquisition now joins a list of other South African firms which have encountered similar challenges in Nairobi or withdrawn altogether.