Djibouti’s foodstuff retail sector has traditionally been characterised by the presence of myriad small-scale, neighbourhood grocery stores, called mercato, which are frequented by the vast majority of Djibouti’s citizens. However, modern trade has started to become more significant over the past decade, with the development of several distribution groups – both international and local – which have slowly changed consumers’ habits.

The Market

After an average annual growth rate of 5-10% over the past decade, driven by an increasing number of expatriates and the emergence of a local middle class, large-scale formal retailers currently represent between 30-40% of Djibouti’s overall foodstuff retail sector. The largest player is domestic firm Coubèche Distribution, the commercial arm of the beverage manufacturer Coubèche. The domestic firm has operated a franchise of the French supermarket chain Casino since 2007 and has an estimated 60% market share, according to Laurent Mouchet, the company’s logistics platform manager. Coubèche is followed by Supérette La 5, which has a 20% share and is also a local firm, and the rest is split equally between Al Gamil Nougaprix and the local company Napoleon supermarkets.

Import Strategy 

Retailers import the majority of their needs from Europe, the Middle East, Asia, Latin America, neighbouring Ethiopia or Kenya, as agriculture and food-processing activities are still at an embryonic stage in Djibouti. However, in order to offset the elevated costs of imports – by air or sea – retailers have strived to diversify their sourcing strategies to offer better prices. “The competition in the foodstuff sector is strong in the condensed market of Djibouti. In order to maintain sustainable profit margins, goods are increasingly imported from around the region. Countries such as Egypt and Saudi Arabia offer competitive prices, and the transportation to Djibouti is often less expensive from there,” Nabil Wassel, general manager of Wassel, a furniture, electronics and food imports firm, told OBG. Djibouti’s foodstuff retail market is also influenced by the presence of European, American and Japanese military bases in the country, as well as of a fleet of warships. Together, these forces represent an estimated 15% of the foodstuff market.

Expand & Compete

Yet, growth in the modern foodstuff retail sector could decelerate during the next five years, from 5-10% to 2-5%, according to Mouchet, as the market approaches maturity and expatriate numbers decrease. Therefore, operators are now looking to enter neighbouring markets such as Somaliland, where Coubèche Distribution is set to launch a supermarket in partnership with a local company.

Competition in the 850,000-person country is also increasing as consumer brand awareness rises. “While the purchasing power of Djibouti citizens has increased due to an emerging middle class, the market is increasingly dominated by competition between price and quality,” Wassal told OBG. “Established companies that deliver know-how are facing new market entrants that compete purely on price, without providing the quality and after-purchase service required.”

Price versus Quality

Indeed, concerns about the rampant development of the informal sector are growing, necessitating improved control of quality standards. This is most prominent in the durable goods and electronics segment, where established firms are forced to compete in a market flooded with cheaper, imitation products. “The patent system should be reinforced and more strictly controlled in order to reduce the informal sector’s activities and ensure fair competition between players on the market,” Wassel told OBG.