The tale of Kenya’s three biggest chain of supermarkets - Daily Nation

The tale of Kenya’s three biggest chain of supermarkets

Friday May 11 2012

PHOTO  | NATION Tuskys Supermarket has grown from a small town shop to a leading supermarket chain.

PHOTO | NATION Tuskys Supermarket has grown from a small town shop to a leading supermarket chain. 

By MWAURA KIMANI

Thirty years ago, the three families whose interaction and competition would shape the face of Kenya’s retail business were hardly noticeable.

That was the period when foreign-owned businesses, left behind by the British colonialists, were fading and indigenous businesses, which had sprouted in the wake of independence, were becoming household names.

In the Rift Valley town of Nakuru, two families — the Shahs and the Kamaus — were busy flexing their muscles and just beginning to extend their business empire.

They were not exactly well known families in the town then, but today they control almost 85 per cent of Kenya’s retail business.

The two families own Nakumatt, Tuskys and Naivas chains of supermarkets.Their close-knight family friendship runs deeper than business rivalry, or so it seems.

Fast forward to the main historical events of last week. The five brothers who inherited Tuskys from their father, the late Joram Kamau, are at war with each other over the control of the giant 37-branch retail chain.

No one likes to see a fight ruin their party. And it seems it is usually worse when it involves family members. That, however, is what has happened to Tuskys lately in what has given Kenyans a glimpse of the relationship between the three retail giants.

For years, speculation has been rife that Nakumatt, Tuskys and Naivas have cross-ownership relations.

But that is not the case; the relation ends at friendship, period. Even as Tuskys hurtles deeper into a crisis, most observers and customers alike are hoping that, in the end, shareholders will do whatever it takes to save the retail giant.

Dare contemplate

That is because, the consequences of a Tuskys collapse are so catastrophic that no shareholder would dare contemplate such a scenario.

Trouble at Tuskys would cause a crisis in the retail market, leaving the chain’s two-million-plus customers per month in limbo.

The five brothers who own Tuskys — Stephen Mukuha, Yusuf Mugweru, Samuel Gatei, John Kago and George Gachwe — are tussling over the management of the supermarket, which raked in more than Sh31 billion in revenues last year. The fight seems to have exposed for the first time the ownership of the company. (READ: Another director joins Tuskys suit)

Mr Atul Shah, the managing director of Nakumatt Holdings, whose father is said to have been very close to the elder Kamau, is now one of the arbitrators in the dispute among the five brothers.

Mr Mangalal Shah, Mr Atul’s father, founded Nakumatt supermarkets in 1947 as a small retail shop in Embakasi before he moved it to Kisumu in 1965. Upon his death, the reins were taken over by Atul Shah, his younger son.

On his part, Mr Joram Kamau set up a shop named Magic (above left) in the dusty town of Rongai in Nakuru that he would later grow into Tusker Mattresses, and is today simply known as Tuskys.

Later, as Mr Kamau’s empire grew, he gave his first shop in Nakuru to his brother.

The brother would also later transform his small shop into the giant Naivas chain of supermarkets, the fourth largest chain in Kenya today.

Tuskys and Nakumatt chains have been major rivals both locally and in Uganda, where both have five branches.

In the local market Nakumatt has 30 branches, Tuskys has 32, Uchumi has 18 and Naivas 19 branches.

The Kamau brothers grew up together in the small town of Rongai near Nakuru, where they saw their father run the small retail shop which was later to grow into Tuskys.

But 10 years after they took over the business from their father, they have fallen out and the dispute promises to degenerate into one expensive legal battle.

The other shareholders of this business are their two sisters Mary Njoki and Monica Njeri, now deceased.

Back to the history of the 37-branch empire — the biggest in Kenya by branch network. The senior Kamau had cultivated a unique relationship with the founder of Nakuru Mattresses (today’s Nakumatt), who was doing brisk business across the street.

They made an arrangement where the latter would supply Mr Kamau certain goods that were nearing expiry on generous credit terms, which he would then sell at very low prices.

Years later, as his business grew even larger, Mr Kamau would leave his first shop to his brother.

When the sons joined their father in the business, they threw their energies into the expansion of the business to Nairobi through their first subsidiary in the city, Tusker Mattresses, then located near the OTC bus terminus in the 1990s.

Tusker Mattresses hit on a unique formula of locating their supermarkets near bus stations and offering low prices.

The fall-out

The brothers, however, have now differed sharply over the affairs of the business. All the five brothers are directors of the company, with Mr Kago serving as chairman, Mr Mukuha as managing director and Mr Mugweru as director of sales and marketing.

The five took over Tuskys in 2002 after the death of their father.

Apart from Mr Kago, the other brothers each own a 17.5 per cent stake in Orakam, the holding company of Tusker Mattresses Ltd (Tuskys Supermarkets).

Mr Kago and his two sisters hold the remaining 30 per cent stake, shared equally among them.

So what exactly led to the fall-out?

Accusations and counter accusations over the alleged misuse of billions of shillings belonging to the company triggered the feud after a section of the directors moved to court last week over the alleged transfer of Sh1.6 billion. They want detectives to be allowed to investigate the company financial affairs.

Other board members want the court to stop the police from investigating the company’s bank accounts and have filed an application seeking orders to block the execution of warrants investigators had obtained from a magistrate’s court.

The police obtained the warrants to investigate the retail store’s bank accounts after one of the directors, Mr Yusuf Mugweru Kamau and his niece, Ms Anne Gatei, made a complaint against the co-directors.

Police obtained the warrants on April 12 following an application by officers from the Criminal Investigation Department.

Managing director Mukuha Kamau, purchasing director George Gachwe Kamau and financial director Frank Kamau, who are accused of impropriety, also want the court to quash the warrant authorising the police to search the supermarket’s head office on Mombasa Road, Nairobi.

They alleged in court papers that their brother, Mugweru, a non-executive director, had been engaged in unlawful activities since February, which have interfered with the management of the business.

But Mr Mugweru has denied the accusations in a sworn affidavit he filed in court in response to the suit.

A trail of correspondence filed with Murgor & Murgor, the law firm hired by Mr Mugweru and Mr Kago, and a series of meetings between the five directors, their lawyers and family friends serving as arbitrators detail how relations at the business have been getting rocky.

The tussle is said to have degenerated into a fist-fight. On February 28 this year, Mr Mukuha appeared before chief magistrate Esther Maina to answer charges of beating Mr Mugweru, his younger brother at the headquarters of their family business in Embakasi.

Mr Mukuha denied the charges.

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