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Java to enhance domestic market before spreading Africa footprint

By Reuters | May 5th 2018
Java House, Kimathi Street outlet

Casual dining and coffee chain Java House Africa, bought last year by private equity firm Abraaj, plans to more than triple outlet numbers in the Kenyan market over the next two years before expanding in East Africa and beyond.

The company plans to open 25 new restaurants in Uganda and a dozen in Rwanda over the next five years, Chief Executive Paul Smith said in an interview with Reuters on Thursday.

Java is also considering entering Nigeria, either as a wholly foreign-owned enterprise or in a joint venture, and is looking at franchise opportunities in South Africa, said the CEO.

The firm, which was opened by an American as a single Nairobi coffee shop in 1999, has grown into a 65-outlet chain employing 2,200 people, including in Rwanda and Uganda.

Drew attention

Its sale in July last year by Emerging Capital Partners (ECP) drew attention to strong private equity interest in East Africa’s consumer sector.

ECP reportedly received more than 10 bids. Abraaj declined to say how much it paid.

In February 2017, two other US private equity firms, TPG and Carlyle, were said to be among investors who bid as much as $100 million (Sh10 billion) for the coffee shop chain.

With more than four million people, Nairobi is home to a growing middle class and large expatriate population. It is the Africa headquarters of US multinationals from Coca-Cola to General Electric.

Java competes with global brands including KFC and Subway, as well as smaller foreign-owned local chains such as Artcaffe. Nine months since the takeover, Java is performing beyond expectations and the aim to grow by several multiples within five years is on track, said Abraaj’s East Africa managing director Ashish Patel.

“For us Java House is not an East African story. It is an international story. I’m pretty certain we’ll get there in the next couple of years,” he said.

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