June 2013
7
REGIONAL UPDATES
Flexing regional tentacles
The East African Community market is
opening up rapidly. With an estimated
population of 140 million people, EAC
presents a large, attractive market for
companies seeking to grow their footprint
across borders.
A number of Kenyan companies have
spotted this huge opportunity and spread
their wings into the region. They include
financial institutions like Equity Bank and
Kenya Commercial Bank and retailers
like Nakumatt and Uchumi. Crown Paints
belongs to this league of regional players
having already established a presence in
Kenya, Uganda and Tanzania. The company
also sells its products in Rwanda, South
Sudan and Burundi.
Regional expansion, however, does not
come cheap. The cost of putting up a large
factory runs into millions of dollars.
To surmount this challenge, Crown Paints,
has adopted a cost-effective model that
entails setting up mini-plants across the
region to meet the growing demand for its
products. “We are working on an economic
factory model that involves setting up
satellite plants rather than large factories,”
said Crown Paints CEO, Rakesh Rao, in an
interview in his office.
The model will see the company invest $3
million in setting up three mini-plants in
Tanzania, Uganda and Rwanda.
Demand for paint products in the region has
been growing. For instance, Crown Paints
Tanzania sales grew 10 per cent month-on-
month last year. In March this year alone,
the company sold over 200,000 litres of
paint in Tanzania where it has a depot. The
process of putting up a plant in Arusha has
already commenced.
Sales are also growing in Uganda where
Crown Paints operates as Regal Paints. It is
targeting sales growth of 40 per cent there.
Setting up mini-factories will not only
strengthen Crown Paints’ capacity to meet
this growing regional demand but also
expand fast at an affordable cost. Last
year, the company announced a 46 per
cent increase in pre-tax profits buoyed by
improved cash flow from operations.
Mr. Rao attributed the company’s improved
performance to product innovations and
expansion into the East African region. With
the firm expected to beef up its production
capacity in the region, its business
prospects are promising.
