Pesa Nane wrote:These guys were conned off by cummins BV in that lopsided JV agreement or was it a deliberate oversight?
My thoughts thenPesa Nane wrote:VituVingiSana wrote:C&G is a conglomerate in multiple lines of businesses mostly related to engineering and property.
This is good for C&G as it can expand its reach into "greater" EAC with a well-known brand with a wide range of products.
@Vitu, I don't see the positive side of this partnership. It's a parasitic relationship host being C&G
1. C&G is already present in the 11 countries mentioned. Further, only those 11 countries make up the JV territories in the agreement.
So, C&G gets zero new territory; Cummins gains 11 new territories.2. C&G is already the sole distributor of Cummins brand in territory. First distributor agreement done in 2006. So, from 100% of the pie to 50% of the same size pie.
3. Now C&G will be tied to Cummins, so bye bye to any potential trade deals with cummins competitors (Caterpillar etc), sale of parts, servicing, installations
4. C&G is mature in the territory markets grossing over USD 30 Million in revenues in 2015, with a genset market share north of 15% in Kenya, Uganda and Tanzania. Only cummins is set to reap from the partnership
5. In the wording of the announcement "The joint venture will take over the full-line distributor business from C&G"
C&G are (sole) distributors / dealers of other (super) brands outside of generators; TVS motorbikes, Piaggio 3-wheelers, Briggs & Stratton machines, Mariner Outboard Engines, Doosan heacy equipment, Garmin devices, Kubota tractors, MRF tyres, Toyota Forklifts, etc
but I could be wrong.
For those able to wade through figures, what has been the effects of the JV??
I think the JV will be good for C&G. I do not think the JV was operational as of Sep 2016. Let's wait to read the Annual Report and more details at the AGM.
My thoughts:
1) Yes, Cummins get "direct access" to 11 territories BUT except for Kenya, the others are not that "big" for C&G. In other words, Kenya remains #1 for C&G by a huge margin. Cummins with more heft could expand the "direct" market for their products in the other 10 by curbing grey market sales.
2) Yes, 50% of the pie BUT I believe the pie will become bigger. It would be interesting to see the breakout of Cummins [Kenya + 10] pre-JV then compare to post-JV in 2018-19. I doubt the JV will be operational until after elections.
3) True but CAT has a huge distributor in Kenya. Mantrac? There is/was a huge sign somewhere along Mombasa Road.
Doesn't giving up control of Cummins to the JV free C&G from acquiring other brands? In other words, why would CAT [or a powerful competing brand] want to use C&G which also sells Cummins?
4) I think both will benefit i.e. C&G gives up 50% but perhaps Cummins is motivated by a potentially larger market share? [I want Cummins to provide larger gensets and equipment via the JV instead of supplying directly or using Dubai/India/SA]. Nevertheless, you have an excellent point.
5) I think the JV is restricted to Cummins. [Why would Cummins want the rest of the biz?]. The JV may help with financing of products. Deacons had that arrangement with Woolworths after WW bought 51%.
As @ElephantMan said, C&G needs to become the place to go. I would not even have thought of C&G for tyres for cars. How many do they even sell?
I don't like/trust Merali or his firms BUT he opened up Yana shops all over to push Yana products. C&G shouldn't just open shops ovyo ovyo but it has been overtaken by Auto Express [Nyanza Petroleum], Kwit Fit [one which is based in their premises on Lusaka Rd], etc.
Garmin - C&G needs to liaise with Garmin [& some savvy operator] to install units in all lorries as "monitoring" devices as part of a GoK project. Look at what Michuki did with speed governors when only a "selected" few could import these!
Anyway, for now, I will take a wait & see approach. There are many other sweeter deals in the market!
Greedy when others are fearful. Very fearful when others are greedy - to paraphrase Warren Buffett