Dubai: Producers are reducing the sizes of their offerings in the face of rising food prices and increased competition.
Analysts say that products such as chocolate, cocoa and sugar are being affected by the trend, and have urged consumers to double check that they are not being served smaller quantities for the same price.
"They don't increase the prices of food products; instead they reduce the size of the products," said Sana Toukan, research manager at Euromonitor International in Dubai, on the sidelines of SIAL Middle East in Abu Dhabi.
Although the prices of commodities such as wheat, sugar and cocoa have been increasing in recent years due to drought in many parts of the world and soaring demand in some emerging markets, retail prices of major food products have yet to reflect the impact, she said.
Apart from reducing the size of products, producers have absorbed the rising costs of ingredients, thus shrinking profit margins, Sana said.
"Producers have checked retail prices by employing these two [strategies] and it has been easier for big businesses such as multinational companies. They are unable to raise prices because of the competition in the market," she said.
Lower quality
Small local companies were utilising a different strategy — compromising on quality instead of reducing the sizes of their products, she said.
"Their products are price-sensitive so some of them even reduce the prices a little bit by compromising on the quality of the food products," Sana said.
Some small businesses which could not employ such strategies have closed shop in recent years in the region, she said. Big businesses, including multinational food producers and hypermarket chains, have coped with the increasing food prices by offering promotions and special discounts to boost sales.
"That's why the global economic meltdown did not affect the hypermarkets in the region. They were able to attract customers by offering discounts on essential food items and necessities," Sana said.
Such developments and regulations also support hypermarkets in the region. In the UAE, major retail chains such as Carrefour Express and Al Maya supermarkets have started home deliveries to match the competitiveness of neighbourhood groceries, she said.
"They are banking on the term ‘convenience to customers' to be competitive in the market."
