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Sun 8 Jan 2006 04:00 AM

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Managers slam co-op criticism

SENIOR managers of co-op supermarkets in the UAE have criticised government suggestions that they should stop investing in the stock market and curtail their profits.

SENIOR managers of co-op supermarkets in the UAE have criticised government suggestions that they should stop investing in the stock market and curtail their profits.

Senior UAE government officials said co-operative stores should cut their prices and stop investing in the stock market, according to some local press reports, which also claimed that some 60% of the co-ops’ 2004 profits came from stock market investments, despite laws forbidding this.

But in exclusive interviews with RNME, senior co-op managers have lambasted the government’s calls, which they say are out of touch with current market conditions. For example, the manager of one UAE co-op, who asked to remain anonymous, described the criticisms as “an orchestrated type of aggression” that showed a lack of understanding of what co-ops are trying achieve in an open market.

“Today we are in an open market economy,” he said. “If we were overcharging, do you think we would still have people coming into our shops? Consumers are not idiots.”

He also refuted claims that co-ops are overcharging, citing own-label products and special offers as examples of the co-ops’ attempts to offer customers good value. “We are giving an alternative to any type of international brands that have decided to overcharge for the products on the market. We have about 150 products under our own label brands, so it is an alternative. They are probably 20% to 30% cheaper than any international brands,” he said.

The spokesman found the criticisms particularly annoying given that the co-ops froze their prices for six months in 2005 following a pay increase for public servants. “All the co-ops had a meeting and we decided to block our prices for six months,” he said. “We are playing ball with the government and consumers because it is in our interests. We would be shooting ourselves in the leg if we were to put the price up the way everybody is pretending.”

Furthermore, co-ops need to invest in the stock market in order to survive, the spokesman added. “This is the only way we can make money,” he said. “How do you think Carrefour, Tesco’s and Wal-Mart are making money; just by buying and selling products? We are using the cash flow and managing it correctly like we’re supposed to do.”

He added that for managers of successful co-ops, stock market investments are a legitimate business practice essential to the efficient running of the supermarkets. “If we are making a profit it’s because management is doing well, otherwise we would be making losses. And probably if we were making losses, people would be saying ‘they are managed properly and they are not overcharging.’”

Another general manager of a Dubai-based co-op, who also preferred to remain anonymous, was equally annoyed by the government’s criticisms. He said that out of the UAE’s 24 or 25 co-ops, only about four are successful. “Nobody asks about the 20, but people ask why the four are successful. That this is wrong,” he said. “We have to see why about 20 co-ops are failing.”

He added that most co-ops are failing their shareholders by making losses, and that stock market investments are needed to turn the situation around. “There are high levels of competition in the market and these investments are a normal practice, which any commercial business does.”

The co-ops’ most important legal obligation is to benefit their members, and this is something only successful co-ops can do, the spokesman added. “Until now, they [failing co-ops] are not giving [their members] anything, but nobody talks about them or mentions them,” he said.

“We need to review the co-ops that are failing in the market, ask why are they failing and bring them up, because a lot of members in the failing co-ops have lost their money, and that is a big issue.”

The UAE government’s Ministry of Labour & Social Affairs was unavailable for comment.

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