By Moses Kaketo
One of the few sectors in Uganda that is still mostly controlled by “foreigners” is distribution. Indians dominate the highly profitable but capital-intensive business. According to the information that is currently available, Indians own and run the top 10 distribution businesses in Uganda.
Kiboko enterprises: they are the exclusive distributor for Philips Lighting, Consumer Electronics, and Domestic Appliances in Uganda. The company grew from a local distributor in 1992 to become one of the largest FMCG distributors in Uganda today, with a strong sales force and coverage of over 30,000 outlets.
Charms Uganda, another Indian firm led by Vinay Dawda, is part of the Dawda Group of Companies. They are the distributors for international companies like Kimberly-Clark, the makers of Huggies Pampers, Red Bull, and Mondelex international brands like Cadbury chocolate, Cadbury Cocoa, Nivea Products, Heinz tomato Ketchup, and Colgate. They are also owners of Britania Industries Limited.
Dembe Trading Enterprises Limited was founded in 1997 in Kampala, by Mr Anil Damani, a 3rd Generation Ugandan. Dembe, are official distributors for Portel and Gamble, JIK, Dettol, Doom Energizer, Indomie, Kellgg, Persil, Miadi, Odorex, Fa, etc. Dembe manufactures several top-quality brands in Uganda, including “Ubisco” Biscuits, Uganda’s No. 1 Biscuit brand; “Snack Attack” Crisps and Corn Snacks; “Odorex” Hand Sanitizers, and “Wakisha”.
Keshwala : The original founder, the late Viram Giga Keshwala, officially established the company in 1980. At a later stage, Ranmal Viram Keshwala came from India in 1983 to join the family business. In 1997, he stepped in to manage the company. They distribute products for premium brands such as Airtel, Bidco, Kakira Sugar, Kenafric Industries, Kenafric, Krystaline Salt, Nile Breweries, Pepsi, Varta, Weetabix, etc.
To effectively operate in this highly profitable industry, you need billions of shillings. For example, some manufacturers require their distributors to place their orders six months in advance. Add transport from overseas, insurance, and taxes (WHT, VAT, and import duty). This is not business for jokers.
Sophy Nantongo’s African Queen
Founded in 1993, Ms. Sophy Nantongo, with the help of a Kenyan friend, joined the trade to change the status quo. From the humble beginning of a cosmetics shop in Kikuubo, AQ grew to reach eight depots around the country (that is, in Central Business District (02), Namanve, Gulu, Mbarara, Masaka, Hoima & Mbale) and stocking points across the country.
African Queen, grew to become a distributor for international companies like Kimberly-Clark, the makers of Huggies Pampers, and Glaxo Smith Kline, the makers of Sensodyne, Aqua Fresh, Panadol, Eno etc. They also secured rights for Lo’ Real beauty products, Protor & Allan cornflakes, Trufoods the makers of Zesta, Kevian the makers of Afia and Peek N Peel juice, among other products. Back then, they contributed about 25% of the stock in most supermarkets and retail shops. That was no mean achievement.
However, the company grew to become too big for the founder(s). Around the same time, an offshore investor, Ascent Capital, came knocking. They were excited when they looked at the company’s books of accounts and projections.
The investors pumped in $4 million in the early 2016. Visibility of the company improved greatly; new vehicles, tricycles, etc. were visible in the market.
‘’ AQ started operating as a robust commercial enterprise with the oversight of a board of directors and Managing Director. Who redefined AQ’s operations and procedures, AQ improved management and governance, which allowed them to better engage fast-growing consumer and conglomerates that insist on professional distributors for their global and regional brands.’’
From 198 employees pre-investment in late 2015, AQ grew to 219 employees. Similarly, its fleet grew from 48 vehicles to 70 vehicles. The company also expanded its consumer base in Uganda.
The new management team drove a strong customer-centric mentality, which enabled the company to offer improved service to her clients. The strategic shift resulted in AQ becoming the market leader in distribution, hence the tagline, ‘‘the No. 1. Distributor’’
However, a few years into managing the business, the investors noticed it was not as healthy-looking as they had seen on paper [A story for another day]- they had been presented with. It is said that the investors started looking for exit doors. They reportedly started talks with the original owners of AQ a year ago or thereabouts about for a buyout.
Today, AQ is not living by her slogan; the ’’ No1 distributor’’ competition has since taken over, and some key staff who were instrumental in shaping the company including Innocent Tabayeita quit. Meanwhile, young and aggressive tucks/ entrants like Falkan Investments have joined the trade. Falkan are now official distributors of blue band, Peanut Butter, Vaseline, Geisha, Royco among others.
Will AQ shine again?
Yes and no!
A lot has happened over the years. For example, some AQ cash-cow products have since attracted strong competition that has eaten into her market share.
BIC pen: BIC is no longer big in Uganda. The once-market leader is no longer enjoying monopoly. Nataraj surfer is giving it a tough time. Market intelligence reports reveal BIC pen used to sell up to UGX. 7bn during back-to-school period. Not anymore.
Nataraj is here for good. The Bic pen is now regarded as the old curriculum, and the stylish Nataraj is ‘for the new curriculum.’’
BIC is a French family-owned company listed on the Paris stock Exchange and a world leader in stationery, lighters, and shavers.
Pick & Peel now faces off in the market with Orchid Valley Juice, distributed by the aggressive Falkan distributors. Orchid has cut PICK N’ PEEL market share by almost half.
Other brands distributed by AQ, like Lucozade and Ribena, Pampers are also no longer enjoying the market as they used to a few years ago.
It is worth noting that AQ also lost distribution rights to some products, including KILL.
That aside, the business environment has also changed. The tax man, URA, is on the rage. Distributors are now required to issue Electronic Receipting and Invoicing Solution Introduction (EFRIS) receipts to all traders.
Here is the challenge: many traders, when engaged about EFRIS receipts, say, please don’t supply me.’’ That is the common response.
When you don’t issue IFRIS receipts and URA finds out, they will charge you UGX 5 million for each receipt issued outside EFRIS receipt. The worst part is that, when sales drop, you risk losing distributorship rights. That is the new environment AQ is facing.
The resourceful Sophy Nantongo
Those close to the founder and board member of AQ, Hajjati Sophy Nantongo, describe her as ‘’ a woman of moderate education, a resilient businesswoman with passion for distribution., and the capacity to rejuvenate the business.’’
‘’All she needs is to create processes and systems, which have been lacking. She will also have to adopt new trends, technologies in the industry’’ said an expert in the industry.
The board chairman, Wibrod Owor, Managing Director Musundi Etyang, Head of Sales Ivan Mugyema, Marketing Manager Immaculate Akiror and team must come up with a winning strategy to revive the once vibrant company.
For now, Lucas Franck, founder of Ascent Capital Africa & board member of African Queen, will also need to use his experience and an MBA from INSEAD to ensure effective business strategies are utilized in order to revive the company and increase the company’s market share.
Govt support lacking.
Just like other sectors, locals in the distribution industry allege that the government gives more support to foreigners in the sector.
‘’ Government offers more support to foreigners. Now and then, you hear stories of foreign distributors having held meetings with the highest office in the land to negotiate debt, tax exceptions, etc.; You hardly hear Ugandans in the sector getting such offers’’ said one of the local players in the industry.
About the author: The writer is a marketing and distribution expert. He can be reached via WhatsApp at +256782507579