Troubled Choppies Supermarket struggles to pay suppliers

NAIROBI, KENYA: First it was Uchumi, Nakumatt and then came Deacons. Now Choppies is struggling to pay suppliers even as the new supermarket management is thrown in disarray after CEO Ramachandran Ottapathu was fired on Monday.

Ottapathu’s exit follows a tumultuous year that saw the suspension of the firm’s trading in Botswana and Johannesburg stock exchanges.

“The suspension of Ottapathu takes effect from May 22, 2019 and will subsist until such a date that the board will determine the action if any to be taken in implementation of the recommendations made in the investigations report that will follow completion of legal and forensic investigations,” said the retailer’s board in a statement.

The supermarket appointed Farouk Ismail as interim CEO and Redford Capital as the turnaround managers.

The retailer’s delays in paying suppliers in Kenya has got the industry anxious, with some business people claiming that the store may be victim of unplanned expansion just like its peers.

“Initially they were fine until they moved into the Airport North road unit, which I speculate could have affected cash flows. Now they stay forever without paying; sometimes you have to hold supplies before they pay,” a supplier told Weekend Business in confidence.

An manager at the retailer, who also requested not to be named as he is not authorised to speak on behalf of Choppies, confirmed the cases of stock-out, adding that it was affecting operations.

“It is not auguring well with customers because they want to get everything when they enter the supermarket. It’s something we are struggling with,” he said.

The source added that the retailer is at a disadvantage against its competitors who have more stock variety including clothes and that loss of goods, including theft and pilferage, was a universal problem for retailers.

“We would like to get deeper to find out why they are in this sort of situation and what is the fate of our suppliers,” said Association of Kenya Suppliers Chairman Kimani Rugendo.

“In fact, we are extremely concerned and that is why we are trying to ensure that they give us some kind of insurance. We are supplying in good faith but they return the good faith with bad faith.”

Expansion binge

Trade Principal Secretary Chris Kiptoo did not answer our questions on whether the ministry, which has been working to ensure prompt payments to suppliers, is aware of the situation at Choppies.

The Botswana retailer started as a single store in 1986 and has expanded to South Africa, Zimbabwe, Zambia, Mozambique, Namibia, Tanzania and Kenya where it has 12 stores after acquiring Ukwala. It had plans to set up two new outlets this year.

But the expansion binge and a loss of Sh126.8 million from six insolvent outlets in Kisumu and Nakuru hit Choppies hard.