Kenyan businesses are increasingly absorbing rising production and operational costs as they seek to retain customers amid growing price sensitivity and weakening purchasing power.
The strategy is intended to protect sales volumes and prevent customers from switching to cheaper alternatives, but it is putting pressure on firms’ profit margins as fuel, transport, energy and raw material costs remain elevated.
The trend was highlighted in the Central Bank of Kenya’s July 2026 CEOs Survey, which found that business managers expect purchase prices to remain high in the coming months.
According to the survey, the expected increase in input costs is being driven largely by fuel, energy and raw material prices, as well as geopolitical developments associated with unresolved conflicts in the Middle East.
Despite the rising costs, businesses remain reluctant to increase the prices of their goods and services, fearing that consumers may respond by reducing purchases or moving to competitors offering lower prices.
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“Sales prices are expected to remain largely unchanged, owing to limited ability to pass higher costs to consumers due to price-sensitive demand,” CBK said in its survey.
The situation presents businesses with a difficult trade-off between protecting market share and maintaining profitability. While keeping prices stable could help firms retain customers in the short term, continued increases in operating expenses could gradually weaken their financial performance.
The CBK warned that the inability to transfer higher costs to customers is expected to continue squeezing firms’ profit margins, signaling growing pressure on corporate earnings.
For many businesses, the approach could therefore provide temporary relief in maintaining customer loyalty, but prolonged cost pressures may force firms to reconsider pricing, efficiency and cost-management strategies if input prices remain elevated.
By Bernard Magada
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