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Eveready terminates Energizer products distribution contract

Eveready East Africa has acrimoniously terminated its near half-century distribution agreement with Energizer Holdings, with the Kenyan firm saying the contract was tilted in favour of the American multinational.

The troubled battery firm says its long-standing pact with Energizer restricted it from pricing products, picking those that best fit the Kenyan market or even from independently diversifying its portfolio.

Eveready’s managing director Jackson Mutua Thursday said that Energizer, without notice, changed the company’s purchase terms last year from an open to a cash-based account— affecting its ability to supply the local market.

READ: Eveready discloses Energizer deal accounts for 80pc of sales

The NSE-listed firm, which is 10.5 per cent owned by Energizer, has opted to go it alone, partnering with global manufacturers to supply a range of dry batteries, flashlights and shavers.

“We had zero ownership and control of the Energizer brands. That posed a risk of how sustainable the business was and compromised our ability to grow,” said Mr Mutua.

“We opted not to renew the contract and signed partnership deals with global manufactures working out of Asia. Our flagship products, including batteries and flashlights, are already retailing under the brand name Turbo.”

Eveready has for about 49-years been distributing products locally through Energizer Holdings’ subsidiary Energizer Middle East and Africa Limited — which accounted for 80 per cent of the Kenyan firm’s business.

Prior to closure of the Nakuru factory in October 2014, Eveready was paying Energizer a commission (six per cent of revenues) irrespective of profitability. This was for a manufacturing licence as well as technical and marketing support.

Eveready now says that the contract terms curtailed the company’s growth, especially its ability to diversify in the face of stiff competition from cheap Chinese alternatives.

Mr Mutua further claimed that Energizer based its supply of products in the Kenyan market on their performance in Europe and America. This, he said, caused some well performing products to be discontinued and price fluctuations that the company could not control.

“Early this year, it was felt that there was a need to renegotiate this agreement since we were not happy. We discussed the contract terms and Energizer offered us a new one,” said Mr Mutua.

“The terms under the new contact were extremely onerous and unpalatable to us as a business. It went against our 2013 – 2017 strategic plan as well as the country’s competition laws. The board therefore opted not to sign it.”

READ: Cheap imports, high costs: Why many businesses are closing shop

Mr Mutua added that Energizer’s representative in Eveready stepped down in April this year and was not replaced. He however declined to comment on whether Energizer had indicated that it would divest from Eveready East Africa.
Eveready reported a Sh58.9 million loss for the half-year to March 2016 compared to the Sh12.4 million it made during a similar period the previous year.
The loss-making company has in recent years diversified its business by taking on the distributorship of other products including Clorox bleach and Turbo car batteries.
Eveready recently launched a detergent, Everclean, into the market with plans to expand this brand to include dishwashing and soap.
“There are no plans to rebrand the company despite the divorce. We shall maintain the name Eveready since the corporate identity and the brand are separate,” said Mr Mutua.

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