Sugar millers losing ground to new brands
File | NATION
A supermarket employee arranges sugar packets on a shelf. Many supermarkets are creating their own house brands for sugar.
What you need to know:
- Many consumers opting for lesser known but cheaper brands, study shows
Kenya’s large sugar millers are losing ground in the retail market as consumers opt for lesser known but more pocket-friendly brands.
A report by Consumer Insight indicates that Kenya’s largest miller, Mumias Sugar Company, in 2012 lost seven per cent of its market share to control 65 per cent of the sector.
The South Nyanza (Sony) Sugar Company’s market share fell to 5 per cent in comparison with the 11 per cent reported in 2011.
According to Consumer Insight, had it not been for an aggressive advertising campaign, Sony Sugar would have been hard-pressed to retain even this five per cent market share.
At the same time, unbranded sugar nearly doubled its market share.
Unbranded sugar is usually imported or bought from millers in bulk. Retailers then package it in smaller quantities and sell it to price-conscious consumers who cannot afford to buy large packages.
“Profiting from Mumias’ slight fall is unbranded sugar. Its sales surged from seven per cent to 18 per cent in the same period, no doubt boosted by inflation. This price-sensitivity of demand reflects the commodity’s nature,” noted Consumer Insight.
A recent report by our sister publication, Business Daily, noted that sugar prices in the country had shot up 18 per cent between November and December 2012.
Ukwala Sugar, one of a growing number of brands established by retail chains in Kenya, lost its two per cent hold of the sugar industry.
Game changer
Despite this, Consumer Insight reckons that the retail networks of these supermarkets could be a game changer in the future of the sugar industry. These supermarkets, however, still rely on millers for their products.
“Many supermarkets are creating their own house brands for sugar. This might be part of the reason why we are losing market share at the retail end of the market,” noted Mumias Sugar chief executive Peter Kebati.
He added that his company had already diversified its sugar packaging and products and would do more of the same in 2013.
Further, millers in Kenya have been producing below capacity due to a weak cane crop, giving way for importers to gain market dominance.
In the 11 months to November 2012, sugar imports to Kenya rose by 87 per cent.
The Kenya Sugar Board (KSB) is currently investigating reports of tax evasion in some imports from Uganda and Tanzania.
