Lulu, Spinneys to keep price lid on hundreds of food items

UAE supermarkets Lulu and Spinneys will continue to fix the prices of basic food and household items this year after the Ministry Of Economy called on stores to keep commodity costs down.  

The two retailers told Arabian Business they planned to extend a state-led freeze on essential items rolled out in 2011, as the Gulf state battled to combat a spike in global food prices.

“The government called us to a meeting in Abu Dhabi which we attended, and they asked us to do the same list [as last year],” said Martinus Hendrikse, UAE manager for Spinneys.

“We will do something similar to what we did last year and a bit more. We usually do it on the items which we import directly and which we can control, which tends to be more basic items.

"We had 26 products last year and we have increased this to 66 for 2012.”

Lulu, which operates a string of hypermarkets across the GCC, said it was also drawing up a list of essential items and planned to extend the cost cap to new products.

“We are coming up with list of products now that will be frozen for the year,” said V. Nandakumar, head of corporate communications. “It won’t be luxury products, but basic commodities. We will be changing the list slightly; there will be 44 products in total.”

Soaring food prices played a key role in the political unrest that toppled leaders in Egypt and Tunisia. Though the UAE has largely sidestepped the Arab Spring revolts, it made a series of attempts last year to cut living costs and subsidise basic items.

In March, a government scheme saw 70 stores agree to cut the price of essential items by up to 40 percent to combat a spike in commodity prices.

Data from the World Bank said staple foodstuffs saw their largest price increases since the 2007 food crisis during the period, maize rising 74 percent, wheat increasing 69 percent, soybeans jumping 36 percent and sugar going up 21 percent.

The UAE, which pegs its dirham to the US dollar, is desert-covered and depends on imports for much of its food needs. That makes it vulnerable to swings in global food prices and the greenback's moves against other currencies.

Retailers in the Gulf state said the cost of staples such as oil and sugar had jumped in the last year, a move that caused brands such as Pepsi and Coca-Cola to raise their prices.

French hypermarket chain Carrefour, who participated in the price freeze last year, declined to clarify whether it would continue to cap the cost of essential food items.

“During 2011, we set prices of a number of items in our stores based on an initiative by the UAE ministry of economy,” said Henry Changeux, the head of Carrefour in the GCC.

“This year, as in any other, we will work constantly with our suppliers to ensure that prices at Carrefour are kept as low as possible.”

Competitor Geant said it also had no plans to fix costs, but would consider participating if all retailers were involved and if requested by the ministry.

“We are not yet planning any price fixing for 2012, however we want to remain very price competitive. In the last one year every single player has made an announcement in terms of expansion, and the price competition is high," said Arif Shaikh, Middle East managing director for Geant at Retail Arabia. "We’re all looking at each other, and nobody wants to be seen as expensive."