UAE supermarkets to fix costs on hundreds of food items

Major retailers Carrefour, Spinneys sign on to price-fixing scheme for 400 food, household items
UAE supermarkets to fix costs on hundreds of food items
Retailers in the UAE have agreed to slash costs of hundreds of items
By Elizabeth Broomhall
Thu 26 May 2011 05:49 PM

The UAE will fix the prices of 400 basic food and household items across 70 retail outlets in the Gulf state in a bid to combat rising commodity prices, the ministry of economy said Thursday.

The initiative, which is effective from June 1, has been backed by retailers Carrefour, Lulu Hypermarket, Spinneys and a number of cooperative societies that together hold 75 percent of the UAE’s retail market.

Mohammed Al Shihhi, undersecretary at the economy ministry, said the voluntary scheme had been announced in a meeting with the country’s major retailers in March.

“We left it up to the different retailers [to decide which commodities to reduce]. They each have their strengths, good contracts with certain suppliers and their own strategies,” he told reporters at a press event in Dubai.

“This is a continuous process. The consumer is very important.”

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

In March, a government scheme saw major shops agree to cut the price of essential items by up to 40 percent to combat a spike in commodity prices. The UAE has also pledged to spend $1.6bn to overhaul key infrastructure in the less developed northern emirates.

In neighbouring Saudi Arabia, the most populous Gulf state, King Abdullah has unveiled more than $100bn in social handouts since March.

According to the World Bank, staple foodstuffs have seen the largest price increases this year since the 2007 food crisis. Key increases this year compared to 2010 include maize (up 74 percent), wheat (up 69 percent), soybeans (36 percent) and sugar (21 percent).

In many countries, the cost of vegetables, meats, fruits and cooking oil have also jumped.

Asked whether the government will provide any subsidies to UAE retailers to help them absorb the costs of price fixing, the undersecretary said: “There are no incentives coming from the government. [Retailers] have been our partners for the past four years. We have been working together to tackle any price hikes and we have been very effective.

The government has not approached smaller supermarkets and grocers to participate with the scheme but Al Shehhi said they would automatically drop their prices in a bid to compete with their larger rivals once the cost fixing came into effect.

 “Other big retailers cannot continue trading at their current prices. We didn’t go for 100 percent [agreement], because we know from our experience... that they will automatically react to the price decrease of the major retailers.

“If Carre Four, Spinneys and Lulu all decrease their prices, the next day, the other ones will too.”

Referring to smaller, family-run firms which could struggle to survive such price wars, Al Shehhi said: “They have their own market share, their own people, and they can take advantage of this offer themselves. If they can’t take the heat, then get out of the kitchen.” 

 

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