The price hike debate

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The UAE’s Ministry of Economy has signed MoUs with Carrefour, Lulu Hypermarket Group and Union Coop to keep 2007 prices for some commodities.

Retail News investigates how FMCG retailers, manufacturers and suppliers are battling inflation across the Middle East.

The retail industry has demonstrated an incredibly tough front in the face of escalating food costs, however the situation has also raised concern about the plight of independents and small players in the Middle East.

In recent weeks, retail giants Carrefour, Union Coop and Lulu Hypermarket Group have signed MoUs with the UAE's Ministry of Economy to maintain 2007 prices on a plethora of basic commodities.

Carrefour revealed its intention to fix the prices of 52 basic food items including rice, eggs, milk, tomato paste, sugar, salt, vegetable oil and flour at its hypermarkets in the UAE.

The Government rushed swiftly to the aid of Lulu Hypermarket Group, to kickstart the first phase of a program to fix prices of 32 goods at 2007 levels - as the UAE's Minister of Economy H.E. Sultan bin Saeed Al Mansouri praised the "vital role that the private sector can play in contributing to price stability - after yet another agreement with the Union Cooperative Society in Dubai to hold prices of 16 basic goods at 2007 levels throughout this year.

Meanwhile, H.E. Mohammed Bin Abdul Aziz Al Shihhi, undersecretary of the UAE's Ministry of Economy gallantly called for the development of "competitive markets that are free of monopolies and illegal practices, and where quality, safety and competitive prices prevail.

When questioned on how he will reconcile freezing prices with business objectives, Yusuffali MA, managing director of Lulu Hypermarkets says the chain is "fully aware of the huge financial burden this decision will have on our bottom line, but at the same time we are also fully aware of our commitment towards Government policies and residents of the UAE in times of need.

Aside from its "small gesture," products will also be sold at cost price and even below cost, he reveals. "The only hitch we are facing is the non-availability of some products, especially rice.

Though we have enough stock, we are in the process of discussing this issue with officials from the Indian Government to ease the ban imposed on the export of rice.

Such positive moves would be enough to make one weep with joy at the seemingly effortless survival for an industry purportedly in the grip of a crisis, however as the director of T. Choithram & Sons Manoj Thanwani observes, the battle for independents has just started.

"The multiples are able to secure themselves for the forthcoming months, but this will not be the case for the independent grocers. They are going to have to absorb the price increases, without a doubt.

"The Government not involved in securing commodities. They should be pre-booking products and sustaining prices of commodities, yet that is not happening," he argues.

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