Pepsi vs. Coke

silent invasion

Pepsi were expected to re-enter the Kenya market via a full blast push, like Airtel’s onslaught on Safaricom.

But with Kenya being an long time entrenched Coke market - bottling plant partnerships around the country with the quasi-government (ICDC) and politicos, a different mode has been adopted, with production/bottling in Mauritius as opposed to having a plant in Kenya.

For many years Pepsi used to be hard to find in neglected corner shelves of the main supermarkets, but over the last few weeks that barrier has been closed with plenty of Pepsi (and Mountain Dew) now priced the same as coke (both 45/= $0.55 for 1 500ML plastic bottle) and prominently placed, sometimes occupying the same shelf space. Previously Pepsi was priced at almost double the price of coke (60/= when Coke was 40/=).

Local Content, Conversation & Branding in Africa

Late in 2010, TNS released a Kenya digital study as part of a three month study of the habits of online Africans; In Kenya it involved 800 interviews - 400 online, 400 face-to-face and tried to answer various questions like - Who is online? What are people doing online? How can brands connect? What messaging/digital communication channels are best?

Some findings included:
- Internet penetration: Kenya & Uganda is 10%, Tanzania is 1.6%, Nigeria is 29%, Egypt 22%, South Africa 11%. In local capitals - 49% of Nairobi residents have tried the internet, 53% in Kampala, 31% in Dar es Salaam (and 42% & 49% in Mombasa & Arusha respectively) for an average of 45% of EA urban nationals
- Cyber café are the primary mode (67%) of access Internet in Sub-Saharan Africa, but in Kenya its the mobile phone (60%)
- Many people started using Internet in last two years and are on a learning curve; Companies need to make sure they educate the users on how to use their sites more effectively. This is compared to countries like Japan which has high internet penetration but low interest (its a part of life, no longer exciting)
- In terms of daily media access, digital is still lower than conventional media – so companies/brands have to continue with old media; Also radio is very important, compared to global where radio trails TV
- Top e-mail sites: Gmail Yahoo, Facebook, MSN
- Top social networks: Facebook Google Yahoo Youtube
- Top knowledge sites: Google Wikipedia Yahoo DailyNation
- Top news sites: Google BBC Standard DailyNation
- Top multimedia sites: Youtube Google CapitalFM Facebook
- Very few people (7%) say they are shopping online
- Kenyans (and Africans) want to do more activities online - like internet banking, pay utility bills, watch TV, make travel bookings, submit taxes, advertise online. This will become an annual study by TNS to monitor trends in the online space.

One of their partners, VML (Kansas, US) also did a complementary study on digital monitoring of some Kenyan and African brands over several months this year using SEER ecosystem to find a link between bloggers and brands. They looked at mobile companies (Orange,Safaricom,Yu), countries as brands (Kenya,Nigeria,South Africa) and banks (Stanbic,Ecobank)

Some findings:

Mobile: Orange is way ahead of everybody else (846,000 mentions with 92% positive) but may have little to do with Kenya (more the international Orange brand)
- Safaricom had 11,000 conversations online, with people talking about the business, Michael Joseph (outgoing CEO), but not about products & prices. 66% was positive, and this varied from month to month, with some negative on their customer service and competition/regulation.
- Most intriguing - the bulk of conversation abut Safaricom does not happen in Africa - it's highest in US, UK, Germany. In Africa, there is some conversation in Kenya, Uganda, and South Africa - and in Kenya its associated with 4 blogs (Kenyanjobs, siku-moja, bankelele, kenyaprincessproject)

Banking: Ecobank has 5000 mentions, and Stanbic 900 mentions – but Ecobank spiked as a result of an unrelated Ecobank twitter account in Japan (not Africa) while for Stanbic it was due to coverage of a cricket tournament in Zimbabwe
- The highest conversation about Stanbic is in UK, while for Ecobank its in the US,
- These are very few conversations about banks or their business, and these are happening mainly outside Kenya and Africa (Ecobank is associated with this blog on the strength of a couple of blog posts about the bank’s 2010 AGM in Nairobi)
- There is an opportunity for banks, to engage, and not just about Internet banking products.

Tourism: Kenya tourism conversation is 81% positive, 16% negative – (jambo ad annoyed people on the net) - and again a lot of conversation in UK and US.
- While Kenya gets good conversation given the budget they spend, Kenyan tourism only get as much positive conversation as Nigeria – showing a need for more positive content creation and engagement online.
- Concern that despite the natural beauty of Kenya (wildlife, beaches, scenery), 0% is taking place on photo or image sites - a missed opportunity to create visual content.

Summary
- Very little conversation about African brands is originating in Africa, and there are opportunities for links to be created either with influential blogs, or social media etc.
- Complaints cause large spikes in conversation
- Companies need to monitor online conversation, beyond press clippings
- Companies need to incorporate digital plans in their branding exercise

Reading the Tea Leaves at KPLC

The on going rights issue closes on today (22/12/10) after a month and a half of the balance sheet restructuring program.

Background: CEO Joseph Njoroge said its necessity began with the 1999-2002 power-rationing period when the company incurred heavy trading losses of Kshs 15.9 billion. The debt was converted into equity for the government (GoK) and preference shares for the government and what became Kengen – and which Kengen transferred back to GoK prior to their IPO.

Preference share burden: There was a five-year moratorium on dividend, but the preference shares have continued to be perceived by lenders and investors as debt - with fixed annual payout. This distorted the value of ordinary shares, creditworthiness of KPLC, and would be a burden on cash flow to meet as seen when the moratorium ended with a payment of Kshs 1.25 billion ($15.6 million) to holders of 7.85% preference shares in 2010

New balance sheet will have a level playing field and enable the company to access more funds after the redemption of preference shares in three steps by (i) issue of 76 million new ordinary shares (ii) ordinary share split 1 to 8 (iii) a (December 2010) rights issue to shareholders entitled to buy 20 new shares, for every 51 they own, at a ~20 per share with GoK renouncing its rights – to raise a net amount of ~Kshs 9.1 billion ($114 million)

Underwriter: KPLC sought an underwriter and got Centum and Equity Bank to underwrite the issue by 50%.

Retain GoK control: from a current 40% ordinary shareholding, GoK stake will 69% for short period, but as they are renouncing their rights, on conclusion it will be 50.1% and still remain a parastatal. GoK can also ‘count on’ no.3 shareholders – the National Social Security Fund who own 8%

Entrepreneurship Moment: Apprentices, Intellectual Property, Mentors, Partners

Over the last few week, I have been exposed to various events and lessons that touched on entrepreneurship. We had the Legatum business awards winners feted in Nairobi, talks by some young US technology start up executives, and got to watch the movie 'social network', and final episodes of the Apprentice beamed live from the US.

Talk 1: Russell Simmons co-founder of Yelp.com and Jawed Karim co-founder of Youtube were here for i/o Ventures which aims to incubate start up entrepreneurs and formalize angel investing – this is because giving back is a big deal in Silicon Valley.

They talked at the Nairobi iHub and some of the business advice they imparted to local entrepreneurs included
- What you are working on, will be different in 3 to 4 years, but keep going & don’t give up
- If you have bad chemistry with an employee/co-worker, fire them as soon as possible – as dealing with them takes up so much productive energy
- It’s hard to find good team members. But it may be better to recruit from universities, as enthusiasm trumps experience
- Get your product out immediately, don’t over tweak - perfect it as you go along. Also, instead of juggling many projects, focus and do one project really well - hit home run and people will line up for more
- On Intellectual Property: In Kenya, theft of ideas is a big worry with young companies seeking partners & financiers, but their advice was that in Silicon Valley, theft of ideas not an empirical problem
- If you have idea, someone else has same idea – and having idea does not give you advantage, it’s about being better to execute better than anyone else,
- Don’t be afraid to share your ideas, because once you launch, everyone will see it anyway

Talk 2: Paul English co-founder of Kayak.com who’s working on Join Africa a last mile (wifi) connectivity project with University of Nairobi, University of Kigali and MIT also gave a talk on entrepreneurship.

- Most important elements for him were the team, customers and profit incentive
- Don’t make customers happy – blow them away – kayak.com is the best for getting cheap flights (actually make more money from hotels than airlines)
- Take risks, but pick partners carefully.
- He has no customer service, everyone in the company does that
- Be the best; He said even if an employee took their code to a rival, he believes he’d’ still build a better travel site

At the talk, Communications PS Bitange Ndemo also talked about push to have a sub-patent law and creative commons in Kenya, as opposed to unwieldy patents - these are suitable for local development of incremental innovations as many creations will not qualify pass IP test. He also believes it’s best country for have flexible laws until we develop further

Apprentice: Got to watch the final few episode of Donald Trump's Apprentice - which this year featured Kenyan born Liza Mucheru-Wisner. She was one the 16 contents, picked from several thousand applicants and made it to the final three. She would have gone further but for the sudden decision by Trump to fire her even when her team had won a challenge.

Earlier, in defending her decision on that project, she got into a debate with Trump about race as a factor in marketing of products, and Trump said he fired her be she did not get along with her fellow contestants – and she was shocked because they were all in a competition to win, not be popular.

The apprentice is a TV show with plot, structure, bad guys, and a defined ending. But it’s a microcosm for business & entrepreneurs who face different challenges, have to play multiple tasks, who's plans don’t always go right, may not have the resources they need or you don’t get to work with the right people - and there’s always a bit of improvisation to get a win.

Liza Mucheru-Wisner, Apprentice Contestant
It’s all cut and edited into a dramatic hour package for TV, which means that you don’t see a lot of the hard work that contestants put in. Liza said she actually got a long with all the contestants and the harsh comments were never repeated in front of contestant during tasks, but only came out in boardroom, when everyone was fighting for to stay in the show.

Despite not being the Apprentice, she does not feel like she lost. She represented herself well, put a spotlight on herself and her passion (education, kids, technology) and as a result she’s got lots of offers to consider, one of which may may involve becoming a goodwill ambassador.

Social Network: This is a well received movie about the origins of Facebook - and which leads Roger Ebert’s list of top movies of 2010> I got a 50/= ($0.6) bootleg copy in Nairobi and it’s a must see for any entrepreneurs - with lessons on maintaining focus amid changing business concepts & expectations, management, and picking/rejecting partners

Urban Inflation Index December 2010

tracking changes to three months ago and two years back

Quarterly Review: The talks are again about price controls. While earlier in the year the president rejected a parliamentary bill that controlled food prices and courts have stalled the controversial health care bill. But now there is now . There is an alcohol bill, which some the Star eluded was crafted by the national drug abuse agency with strict hours of drinking and this week the minister for energy gazetted rules for petrol prices

On to the index

Gotten cheaper

Beer/Entertainment: A bottle of Tusker beer is Kshs 140 ($1.75) compared to 170 three month ago. It was 140 a year ago, and 120 two years ago. It is widely believed that bar owners are struggling with the reduced hours of alcohol sale of 5 – 11 PM on weeknights and 2 – 11 PM, and there is room for shady arrangements to extend the hours.

about the same

Fuel: A litre of petrol fuel (at local petrol station) is now Kshs 94.3 ($5.28 gallon) about this same as 94.5 three months ago, It was 83.5 last December and 92.7 two years ago. The price was 97 until Tuesday when the new rules came into effect, and as the business daily noted, the drop in petrol prices was offset by increase in diesel and kerosene prices. Price controls have been resented across the board but the populist wave won and it will be interesting to watch how the government will respond to oil prices, and the join import tender system, to appease the refinery, pipeline and oil marketers in addition to the public

Staple Food: Maize flour, which is used to make Ugali that is eaten by a majority of Kenyans daily. A 2 kg. Unga pack at Uchumi today costs Kshs 69 ($0.85) compared to 65 three months ago, 83 a year ago and 97 two years ago. There have been good rains this year and good harvests, but which lead to farmers wanting the government to buy at higher prices. And there was a strange story of the government importing maize form Japan

Other food item: Sugar : A 2 kg. Mumias pack is Kshs 195. It had been two hundred for over a year, but two years ago it was 160. The tug of war about the licensing of as sugar company in western Kenya has highlighted some challenges of the sugar sector regulation.

Communications All Kenya’s mobile phone companies have call rates of about Kshs 3 shillings per minute to call across networks. What has changed is the offering of more value at the same price and significantly blurring of the lien between pre-paid and post-paid services - through offers for subscribers to sign up for ‘unlimited’ or enhanced call, SMS, or internet services by sending in text messages and these in turn entail daily deduction of money. By offering these packages, mobile companies are assured of steady revenue from a subscriber even if he does not use the service on a given day and continues until a customer deactivates the promotion

Utilities: Latest electricity bill is Kshs 1,800 ($22.5 for a month), slightly up from Kshs 1,700 three months ago, but less than 2,100 of a year ago, but about the same as 1,700 two years ago. Though the droughts of 2009 has now been forgotten , fuel surcharges are still a feature on electricity bills

Foreign Exchange: 1 US$ equals Kshs 80.5 compared to 80.8 three. A year ago it was 75.6 a year ago and 79.0 two years ago. Presently Kenyans are riveted by the Wikileaks Kenya cables that are slowly being disseminated

more expensive
N/A