By Robbie Greenfield
Union Co-operative has told suppliers that were axed for pushing up prices that there is still room for negotiation
Union Co-Operative has offered an olive branch to suppliers that were dropped for pushing up prices. Altercations with several big name manufacturers have led to a host of well-known brands being pulled from the supermarket’s shelves, but now the ball is in their court, Co-op general manager Marwan Ahmad Essa Althani tells RNME.
“Around 80 of our suppliers have reviewed their prices and from those, we decided that we could not justify the increase from about four to five companies,” he says. “This does not mean however that we will stop using them completely, and the decision does not apply to all their products either. For example we have had detailed discussions with Nestle and they understand our position. The situation is constantly under review,” he adds.
Althani confirmed that Union Co-op’s suppliers had bumped up prices between 10-15%, warning that there is a fine line between justifiable inflation and price increases that do not add sufficient product value.
“At Co-op we are consumer focused and consumer driven, so all decisions we take must be based on this philosophy. If we feel that a supplier is raising prices without due justification, we know the consumer will react by switching brands, and it is vital that our priorities lie with the consumer. I know that suppliers have their own targets, but they must understand this,” he insists.
Co-op’s rigid stance with suppliers is perhaps driven by the wider vision to grab market share off the UAE’s international hypermarket chains, in what constitutes an ambitious five year plan to build new mega-stores, revitalise existing outlets and revamp the company’s infrastructure.
While confessing that Co-op cannot match the likes of Geant and Carrefour for price, Althani believes a strategy that promotes customer loyalty in a welcoming environment could be the USP that gives the supermarket its edge.
“There are other ways in which we can compete besides price and purchasing power. When you ask people why they are coming to Co-op, they say it is because they feel comfortable. It has taken a long time to build trust with our consumers, but because we are a shareholder company there is a tangible link between our clientele and us,” he comments.
The next few years will be very active as Co-op seeks to build on an expansion strategy that began with a management upheaval in 2002. This year will see the addition of two more supermarkets to the chain’s portfolio, 2006 will see the arrival of Co-op’s first hypermarket, with a further one added in 2007. Co-op plans to invest US $55 million in these developments.