Bickering over basics

Sensationalist reports across the globe in recent weeks have stressed the plight of 'ordinary' people in the Middle East being pushed towards the poverty line by rising food prices.

Although readers in affluent markets may scoff at predictions that staples are becoming luxuries, influenced by skyrocketing commodity costs, the reactions to the situation among retailers, manufacturers, suppliers and shoppers have been quite telling.

Food inflation jumped into the spotlight in Egypt after high bread prices put immense pressure on a publicly funded subsidy system, on which many of the country's urban, population depend to survive, sparking violence , deaths and long bread queues.

The price of wheat has more than tripled on international markets since last summer, and Egypt's president Hosni Mubarak has now urged the government to use some foreign reserves to buy additional wheat from the global market.

This month Retail News investigates how the FMCG industry intends to bounce back from inflation and reports on the debates that have erupted over what will be the most effective way out.

The UAE's Ministry of Economy signed MoUs with Carrefour and Lulu Hypermarkets in recent weeks to keep 2007 prices on certain food items, however despite the magnitude of discounts the deals will offer shoppers, possible setbacks were soon tipped for and cynicism expressed about such initiatives.

Lulu Hypermarket's managing director Yusuffali M.A. admitted the chain was "fully aware of the huge financial burden this decision will have on our bottom line," while Georges M.J. Mojica, general manager, Abu Dhabi Co-Operative Society blasted the "Band Aid solutions," warning that "some of the retailers will close down" if the industry turned to a cost price approach.

The World Bank has estimated that food prices have risen 83% on average in the past three years and warns that at least 100 million people could be tipped into poverty as a result.

Inflation is certainly a global problem with a massive regional impact, and one that could spell a disastrous fate for independents.

As the director of T. Choithram & Sons, Manoj Thanwani told me recently: "the multiples are able to secure themselves for the forthcoming months, but this will not be the case for independent grocers. They are going to have to absorb the price increases."

Times of pressure, as our report in this issue proves, accelerate innovation and cooperation in the industry, and a positive outlook is crucial.

While gloomy reports are indicating that poor people in Yemen are spending more than a quarter of their incomes on bread and Afghans are protesting over wheat and flour prices, the region's FMCG professionals are turning more attention to boosting private labels and local sourcing.

Lynne Nolan is the editor of Retail News Middle East.

RELATED LINKS: Multiple choice: the price hike debate

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