BY GORDON MUTUGI
What happens when Government, whose core function in business is development of broader social-political climate that enables businesses to thrive, becomes an active business entity? With the high demand of resources needed to run a profit making businesses, Commercial Government agencies usually grapple under the weight of inefficiencies, lack of innovative policies and risk of broader political climate influence. As the country’s core economic force, the private sector is therefore a key ally in Government for business partnerships.
Since the introduction of the Kenya privatization programme in 2005 Government has been in search of successful partnerships especially for commercial entities looking to penetrate the Kenyan and African market space. One such privilege came in the year 2015 when the Government, through Industrial and Commercial Development Corporation, (ICDC) signed a share purchase agreement with South African Wine giant, Distell Ltd to transform Kenya Wine Agencies Ltd (KWAL) from a parastatal to a private entity.
Now a subsidiary of Distell, KWAL has provided valuable, albeit positive learnings for the 15-year-old government privatization program. From the onset of the KWAL and Distell partnership, KWAL has experienced tremendous growth in form of its market share, product offering and recently, the number of Depots located countrywide. KWAL recently opened a Depot in Eldoret and Meru and are looking forward to expanding their depot in Nakuru. This growth can be attributed to the partnership with Distell.
For those who don’t know, the story of the KWAL partnership with Distell goes back all the way to 1997 when Distell was looking for a strategic partner to distribute its products in Kenya. Fast-forward to five years ago, the government approved the privatization of nine state corporations among them, KWAL.
In December 2014 Distell became a KWAL shareholder with 26% ownership. In April 2016 Distell bought 26.43% from Centum Investment Company Limited that combined with a 26% stake purchased from Industrial and Commercial Development Corporation (ICDC) in 2014 to raise the global liquor firm to majority shareholding of 52.43% in KWAL. This means that Distell has the controlling stake of KWAL, managing its local and regional operations. Distell is a South African owned company with a global footprint in the alcoholic and beverages industry.
What the KWAL Distell partnership has brought to the table is the generation of additional revenue for the government, first through the monetary compensation made through ICDC to the government. Secondly through the growth of KWAL’s market share that has grown over five fold since the privatisation took place. This can be attributed to the increase in efficiency and competitiveness brought about by having Distell on board. The partnership with Distell has brought about an array of brands that are able to compete with other international players in the industry hence growing the market share.
The other advantage of the KWAL privatisation is that the company has been able to now act effectively as the Chairperson of the Alcoholic Beverage Association of Kenya (ABAK). Previously, KWAL was caught between a rock and a hard place because KWAL was not in a position to pursue the agenda set by the private sector members, as it was still a part of government.
The partnership between KWAL and Distell has also contributed greatly to the improvement of the brands that KWAL previously brought to the table. One such brand is Kingfisher that has been in the market for a very long time. Through the partnership, KWAL was able to keep up with global trends and introduce a Kingfisher Apple variant that has had a good uptake in the market.
The partnership with Distell has exposed KWAL to global standards of doing business and operations, it has also enabled KWAL to tap into a shared pool of resources that allows the KWAL staff to receive training from all corners of the globe thus enabling them to compete with other global brands operating in the Kenyan market. The KWAL and Distell partnership has also seen KWAL benefit a team of globally trained human resources with the topcoat being the MD Mr. Carlos Gomes who has a wealth of experience in the alcohol and beverage market.
One of the things that have made the KWAL Distell partnership successful is that both parties identified and utilised the strengths of each partner. KWAL had the Kenyan presence while Distell had the global expertise and the internationally recognised products. The identification of these strengths has propelled KWAL to be one of the top alcohol and beverage companies in Kenya, it has also given KWAL a competitive edge in the market.
The KWAL and Distell partnership continues to be one of the most successful partnerships in Kenya and can be a case study that companies looking to go into partnerships can refer to.
Writer is KWAL Corporate Affairs Manager and Alcoholic Beverage Association of Kenya (ABAK) chairperson.