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Carrefour under fire for exploiting suppliers

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The competition watchdog has fined Carrefour and ordered the French retail giant to review all its supply agreements within 60 days after the supermarket chain was found to be exploiting traders who supply it with goods.

The Competition Authority of Kenya (CAK) also ordered Carrefour, through its franchise holder, Majid al Futtaim’s (MAF), to expunge six items from its supplier contracts that are said to give the store the power to offer ultra-competitive pricing to boost sales and increase market share. The clauses include forcing suppliers to pay a non-refundable fee to do business with it and forcing merchants offering the retail chain goods to provide extra rebates or discounts.

Carrefour was found to be in breach of the law for forcing suppliers to post their own staff at its outlets at the expense of the suppliers. It was also accused of rejecting goods already delivered.

The regulator said that the retail chain has been abusing its buyer power and now risks a financial penalty equivalent to 10 percent of its gross sales, which stood at Sh14 billion in 2018, if it fails to review the “offending provisions”.

The French retail giant has already been fined Sh124,767 for exploiting yoghurt supplier, Orchards Limited, and the fine is equivalent to 10 percent of the sales generated from the dairy products supplied by the firm in 2018.

“All current supply agreements of Majid Al Futtaim Limited relating to its Carrefour Hypermarkets in Kenya be amended forthwith and in any event within 60 days of service of this order to expunge all offending provisions,” CAK Director-General Wang’ombe Kariuki ordered in a ruling seen by the Business Daily.

The retail giant has also been barred from delisting suppliers unilaterally without notice for failure to meet its stringent supply contract, according to the ruling shared by suppliers.

Buyer Power is the ability of a buyer to obtain terms of supply more favourable than a supplier’s ordinary contractual terms.

Suppliers say Carrefour has used the supplier contract to depress their earnings and gain market advantage through competitive pricing.

Since launching its Kenya operations in 2016, the franchise has grown far faster than expected, attracting a strong client base among the country’s expanding middle class even as locally grown competitors like Nakumatt and Uchumi faced strong headwinds, leading to their collapse.

Carrefour often offers shoppers refunds if they can find cheaper equivalent items in stores run by Tuskys and Naivas, its local competitors who are respectively first and second in the retail rankings.

The chain has denied abuse of buyer power accusations, saying the contents in its supplier contracts were normal practices in the retail sector.

Supermarket chains in the West normally ask suppliers to make upfront payments, commonly referred to as the pay-to-stay or listing fees. The money is charged upfront to, apparently, gauge a supplier’s seriousness and confidence in their product and also as a form of security in case their product fails to sell.

Local merchants say the rules are potentially detrimental to the retail industry as it could lock out new and small firms that cannot raise the required fee.

CAK investigations were prompted by complaints from Orchards Limited, which claimed its contract had been severed because it had failed to meet the tough supply terms. The authority found Carrefour had wronged Orchards and ordered the retail chain to compensate the supplier of jams, sauces, canned products and spices for unilateral contract termination.

When setting up shop in Kenya, Carrefour imposed extra rebates on sales made and which begin at 12 percent for whatever amount of sales with a maximum of 13 percent for turnovers of Sh26 million. Locally, suppliers set a recommended retail price for their products and approach retailers. Retailers then calculate how much profit they would want per item and in the end come up with a shelf price that meets the needs of both parties.

Carrefour’s proposal meant that over and above such gains, suppliers were to be paid their dues less this incremental extra rebate with negotiations happening only if sales targets were not met.

The Paris-based retailer was also demanding that suppliers pay at least Sh10,000 for every new item they launch in the market.

This amount was payable for every store where the goods were stocked, a rule that is a potential cash cow for the firm, given the number of new products being produced in the market.

Carrefour had also asked suppliers to commit to employing one merchandising attendant for each of their stores to man particular goods for two hours every day for six days.

Suppliers currently employ attendants to visit normal-sized outlets at least once per week while the bigger outlets get attended to about three times a week.

Besides, Carrefour demanded that suppliers exchange any item that had remained unsold for 45 days with another item of the same value that the retailer would choose.

In addition, suppliers of water, juices and carbonated soft drinks were required to part with Sh50,000 every month to have their products refrigerated in each of the upcoming stores.

By Business Daily


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Navigating through the Covid-19 Terrain and a Story of Exceptional Transformation at Optiven

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Navigating through the Covid-19 Terrain and a Story of Exceptional Transformation at Optiven

Optiven Group has continuously had all its eyes trained on its vision of economically and socially empowering and transforming the society.

This vision was however momentarily shaken by Covid-19, especially on the month of March 2020, when the first case was reported. Soon, all was not business as usual. The pandemic scared our staff and customers alike. With huge loans to pay, massive salary bills and many office rentals to cope with, everything seemed daunting. The worst was when we closed our offices and temporarily sent hundreds of staff home. That was extremely agonizing to bear.

As an entrepreneur, this was one of my worst periods ever. The headaches were not ceding ground and the only thing that was consoling was the power of prayers. It is during such times when the test of leadership comes to play.

Our most affected area of business was our sister venture entities in the name of restaurants. Indeed, we sent hundreds of staff home. We are now however thanking God that 85% of these staff are back and with a projection of bringing back the rest soon, as business starts coming back.

Importantly, soon after Covid-19 pandemic hit, Optiven Group was swift in adopting new strategies and quickly embracing appropriate technology to counter the new terrain. This is perhaps one of the reasons why the firm is still expanding, especially on the area of job creation and mentorship front.

It is largely courtesy of these strategies that despite the current pandemic, we have managed to launch enormous mentorship programs such as the George Wachiuri School of Mentorship and also engaged in encouraging SMEs that have really been struggling to stay afloat through our business mentorship sessions. Through the latter, we have continued to inspire over 7,000 active participants through George Wachiuri’s Facebook LIVE shows that are also available on my You Tube channel, this has continued to give hope to many.

Still, during this period, we have managed to create over 100 permanent jobs for both senior and middle level employees, plus over 200 casuals that daily work in our projects. This job increase is in line with our goal of creating over 30, 000 jobs by the year 2030.

On the real estate front, we really had to think away from the box and undertake a massive 360 degree transformation that was educated by thinking differently and changing how we used to do things before Covid-19.

Thanks to this, we have continued to provide our customers with even more offerings in terms of value additions to our projects. It is during this period of Covid-19 when we decided to put our efforts towards GoingGreen in most of our projects. Matter of fact, we have surprised our customers by further transforming our projects through installation of green energy, massive tree planting, and installation of water recycling systems, encouraging plot owners engage in farming of organic foods and subsequently feed their families from their previously idle plots. Significantly, we also changed from use of Kenya Power electricity in our projects to the use of solar energy on almost all amenities and by so doing, we have now managed to save millions of shillings in terms of KPLC bills. Most importantly, we are glad that we are now fully plugged on the green energy agenda.

All along, the company has continued to flourish through innovation, partnerships, massive philanthropy activities and even more importantly, a commitment to always entrust all our undertakings to God.

We are glad that we are consistently realizing our vision of being pacesetters in social economic transformation through opportunities such as job creation that have a positive multiplier effect on the society.

Guided by the same vision, we always dedicate 5% of what we make in business and channel it to the less fortunate through a registered foundation viz Optiven Foundation. We have hundreds of orphans whom we support to go through school. We also support the physically challenged to get free wheelchairs and support girls to access schools. The Foundation also cares for over 300 families and helps them to get food daily.

Indeed, we at Optiven exist to economically and socially empower and transform the society.

#ChangingLives
#EyesOnTheCommunity
#CreatingJobs
#GoingGreen
#HousingKenyans

Contact Optiven Group:0790 300 300
Email: admin@optiven.co.ke Website: www.optiven.co.ke George Wachiuri Blog: www.georgewachiuri.com
YouTube: https://bit.ly/2VdSuFJ


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How I made my first million

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At what age did you make your first million? 

I was 19.

How did you make it? 

I was running a creative design and printing agency. I bid for and won an order to design and print marketing materials for a global NGO which has offices in Kenya.

How did you spend or invest it? 

I re-invested most of it into the business by buying more machinery to reduce costs associated with outsourcing. I also set up a new business with a friend – a movie shop in Nairobi CBD.

The biggest money mistake you have ever made? 

Setting up the movie shop was the greatest money mistake – but I picked up two of the greatest business lessons. One, to never divest too early, and only invest in a business you understand well.

What is the best investment you have ever made?

 I would say investing in myself and in my exposure through travel. Travel has made me see endless possibilities for innovating new products, business models and solutions in the African market. A combination of the international exposure and strong local market understanding is priceless.

What is the worst purchase you have ever made? 

The movie shop. I bought a ready business that I did not understand and it went crumbling down. We eventually closed it a few months later.

If you had a spare million or two, where would you invest it right now?

I would invest it in my current business – a software technology company. This is because I believe the business has potential to become a great success.

What is the biggest money lesson you have learnt about growing it and making it work for you? 

Initially, we all have to work for money. However, I have learnt that the wealthy person has learnt how to make money work for them, through consistently investing what one earns.

Where do you learn about finances? 

I read a lot of books about real success stories from entrepreneurs because I believe entrepreneurship is a great way to create wealth, while creating value in the society. I also stay curious to learn about different investment vehicles because I know I shouldn’t put all my eggs in one basket.

Any financial myths you think should be busted? 

Money is not the root of all evil; greed may be. Money is a good thing because it can create freedom and prosperity, if well spent.

What two personal finance rules do you follow? 

Live within your means; and work to make money as a tool to accomplish real goals. Real goals are not just about making “enough” money, because it is almost impossible to define “enough.”

Investing or saving…Which one carries more weight?

Investing. However, they go hand to hand as saving to invest is acceptable.

One can get rich easily… but how does one stay rich? 

By constantly making calculated investment risks, and always striving to be wealthy, not rich.


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LET’S HOLD HANDS WITH OPTIVEN FOUNDATION

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By helping someone achieve their dream,
You are well on your way to achieving your own dream!

Together with partners like you, the Optiven Foundation is changing one life at a time, by reaching the most vulnerable and meeting their needs. Because the needs are growing daily, we are open to hold hands with you and make our world a better place. Make your donation to Optiven Foundation via Paybill 898 630, Account name: Mobility

For more info, call us on +254 718 77 60 33 or info@optivenfoundation.org
www.optivenfoundation.org
#TransformingLives
#RestoringDignityof Senior citizens
#SharingHopewithOptiven


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Special Offer: Own one starting at Ksh 3.7M


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