Innscor in dock for bullying

Bus1Business Desk
Although the tussle for market space began as covert, it has since spilled into the public domain, including into the halls of Government.
THE recent move by industrial behemoth Innscor Africa to establish its fast food chain Chicken Inn, Pizza Inn, Creamy Inn at the doorstep of Packers International’s pioneering outlets – Chicken Slice, Pizza Slice and Creamy Slice – in Mvuma, continues to reinforce market speculation that the firm is behaving like a corporate bully bent on stepping on the small toes of fledgling enterprises.

Holding sway in businesses ranging from confectionery, meat processing, fast consumer moving goods and fast food outlets, Innscor stands accused of using unfair business practices to suffocate its competitors, particularly in the confectionery and fast food sector.

The corporate giant has a controlling stake in brands such as National Foods, Colcom, Irvine’s Chickens, Baker’s Inn, Chicken Inn, Nando’s, Spar Supermarkets, Savemor Supermarkets, Freshpro, Iris Biscuits, Capri and TV Sales & Home.

But it is the company’s reactionary behaviour of stalking Packers International fast food outlets, especially at strategic sites, which has cast renewed spotlight on the perceived tiff between the two entities.

Packers International founder and chief executive officer Mr Tawanda Mutyebere first complained of Innscor’s stalking in 2012 when he accused his competitor of opening a Nando’s shop near their premises at the corner of Seventh Street and Samora Machel Avenue in Harare and a Chicken Inn and Pizza Inn at Pennywise.

He also noted that Innscor opened a branch about 100 metres away from its well-established food court at the corner of Mbuya Nehanda and Kwame Nkrumah in Harare’s Central Business District.

Interestingly, both parties also have outlets at Construction House and Kwame Nkrumah/Park Street.

Market watchers believe that Innscor’s decision to set up in Mvuma undoubtedly adds to the already existing unease between the rivals.

“If someone comes into your field doing better you feel threatened and try by all means to safeguard your interests. It is normal to react that way.

“They have been busy opening everywhere and close to us . . .

“They have rushed into setting up outlets some of which do not meet the basic food court requirements,” Mr Mutyebere was quoted as saying at the time.

Although the tussle for market space began as covert, it has since spilled into the public domain, including into the halls of Government.
Initially, it was felt that Innscor was forced to take the game to Chicken Slice’s doorstep as they risked losing a significant share of the market.
However, last week Innscor said that it is natural for the two businesses, which are driven by “location and demographic trends”, to establish branches near to each other.

“The fast food business is driven by location and demographic trends. This is a universal axiom and is not peculiar to Zimbabwe. Consequently Innscor will always seek to position its businesses in strategic and easily accessible locations so as to give the customer a complete destination.

“The latest Chicken Slice was opened recently in Mbare next to our Baker’s Inn complex which has been operational for 18 months and we never complained. Nor have we cried foul when Chicken Slice opened its outlets in close proximity to our food courts because we believe that any fast food player will choose sites where people congregate. This remains the mutual democratic and business right of Innscor, Chicken Slice and any other player in that business,” explained Innscor.

For the six months ending December 31, 2013, customer counts for Innscor’s local fast food operations remained flat compared to a year earlier as profitability was affected by the twin forces of lower margins and increased overhead costs.

The business had to review its prices in order to improve margins.

Bread Wars

Whilst Innscor and Packers International continue to slug it out in the fast food industry, the giant’s confectionery unit, Baker’s Inn, is also involved in another nasty brawl with Lobel’s after it allegedly adopted the latter’s corporate packaging colours.

Many believe that Innscor has replicated Lobels’ bread packaging.

But the latest controversy serves to stoke tensions to already souring relations and simmering tensions between the two.

Sources in the baking industry say Lobel’s is presently being denied space in some supermarket franchises that are affiliated to Innscor.
It has been difficult for Lobel’s to retail its bread through Spar Joina City, Spar Groombridge, Spar Braeside, Letombo Spar and Montagu Spar. Industry players claim that the latest resurgence of Lobel’s is eating into Baker’s Inn profits.

In particular, Baker’s Inn enjoyed a period of bliss in the period after 2009 as its competitor struggled to stay afloat in the wake of a huge debt burden.

As Lobel’s creditworthiness continued deteriorating, with its obligations soaring to over $16 million, some creditors such as Gamster Petroleum sought to auction off the company’s equipment.

Innscor obligingly bought some of the equipment such as trucks, a development that was perceived by Lobel’s officials as an attempt to cannibalise it to ensure that it does not rise from its ashes.

However, the conversion of the debt into equity by banks has breathed a new lease of life for the bread maker.

As Lobel’s continue to recover, Baker’s Inn is now feeling the pressure.

In its interim financials, Innscor reported that its bakery operations produced a disappointing set of results, with volumes declining by 10 percent. Production in Harare is now consolidated at the Graniteside facility that houses four of the most recent lines. The remaining site will be mothballed until such a time as demand improves.

Innscor, however, strenuously denies the conspiracy.

“Baker’s Inn tendered its bid at an open auction and bought the trucks in order to boost our fleet. Any of the bidders that day could have bought those delivery vans. Baker’s Inn is focused on growing its business through its provision of world class products and services rather than fighting or muscling out its competition,” said the industrial concern, adding:

“Baker’s Inn packaging is different and it was designed by an independent agency. Baker’s Inn has a consistent design for its four loaf varieties, the only difference being that we changed the colour so customers can distinguish between the white, brown, whole meal and seed loaves. Each bakery has its own branded bread racks where it displays its bread. We do not believe discerning Zimbabweans can be confused because of similar colours.

“There are no exclusive agreements with any of the Spars, except for Letombo Spar where we opened a Bakers Inn shop inside the store, at considerable investment. All others are free to buy from any supplier they choose, as is evident in the overwhelming majority of Spars which stock Lobels bread. There are certain shops that do not stock Bakers Inn bread, but it is up to us to penetrate these shops and build appropriate relationships.”

Though the public glare has mainly been on the fiasco in the confectionery and fast food businesses, various other small players are complaining as well.

However, the Competition and Tariff Commission (CTC), a body that is supposed to superintend over maintenance of fair competition and trade in the market, said while there has not been complaints related to anti-competitive agreements, it was ready to probe Innscor.

Said the Commission in responses to questions sent last week: “To date, we have not yet handled cases of monopoly situations pertaining Innscor. All complaints received by the Commission concerning anti-competitive agreements and restrictive business practices are investigated.

“The first step is to identify the provisions of the Competition Act under which the allegations falls. Once it has been established that the allegation falls under the purview of the Act, and then preliminary investigations commence in order to establish whether there is a prima facie case. If there is no prima facie case, the case will be closed for lack of competition concerns.

“However, if there is a prima facie case, the investigation proceeds to a full-scale hearing, for purposes of observing rule of-natural justice, before the Board comes up with a determination,” explained the Commission.

But reports indicate that CTC began investigating the conglomerate in October 2012 after it started compiling reports from various companies against restrictive practices.

In fact, CTC’s assistant director Mr Benjamin Chinhengo reportedly indicated that a hearing was expected in March 2012.
It could not be ascertained by last week whether the hearing actually took place.

Whilst the hearing for the bread-making industry was set for March 26, 2012, the case between Innscor and abattoirs was scheduled to follow thereafter.

Abattoirs were bitter that Innscor was opening up retail outlets and selling meat directly to consumers at the same prices that it was also selling to bulk buyers and butcheries.

In addition, the CTC found Innscor guilty of failing to notify the authorities of its acquisition of a stake in National Foods, an offence that reportedly attracts are fine of no less than US$60 million.

The company has since appealed.

Other players, including those in the pie-making business, are also complaining quietly and fear openly criticising the giant for fear of victimisation.
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  • kwambusonaye

    yaa that indeed is a relevant observation, Innscor is simply enjoying the economies of scale that arise from ts corporate side.

  • kwambusonaye

    yaa that indeed is a relevant observation, Innscor is simply enjoying the economies of scale that arise from ts corporate side.

  • Twimbo!

    So you can copy a rival’s name, logo, colors and branding just changing 1 word and it’s okay, but if they establish an outlet close to you yatova cardinal sin and bullying?

  • Twimbo!

    So you can copy a rival’s name, logo, colors and branding just changing 1 word and it’s okay, but if they establish an outlet close to you yatova cardinal sin and bullying?

  • Dopori

    It is quite evident that the reporter is writing from a biased standpoint. One gets the feeling that he has been paid by the party in whose favour he is writing this article. It’s like comparing the rivalry between Coca Cola and Pepsi, or better still Econet and Telecel. It’s a question of survival of the fittest – those who can offer value for money should prosper and let the competition wars continue unhindered! The consumer and I mean you the writer and me should be the final arbiters in the whole ball game.