Dubai: Food and commodity price increases have a great impact on consumers who spend a huge portion of their income on daily essentials. When costs go up, households are forced to adjust their budgets, and in homes where financial resources are limited, managing the cash flow month to month becomes even more difficult.
Since the arrival of her twins, Lynessa Serrao's family has expanded and so has the household's shopping basket. The Serraos used to spend Dh200 to Dh400 a week to replenish the stocks in their fridge, pantry and cupboards. This year, the weekly grocery bill climbed to Dh350 to Dh700, or up to Dh2,800 each month.
Although she's not paying through the nose for the basics yet, the Indian expatriate thinks it's about time she pays attention to her shopping cart. The household's daily essentials, from food to toiletries, are now getting dearer.
"The rising bill is mainly because of the quantities we buy, plus the increasing prices," she says. "There used to be only two of us. Now, we've [increased] by four since my mother and mother-in-law are now with us, plus the two babies."
According to electronic payments provider, Visa, 94 per cent of homemakers surveyed in the UAE have seen a huge jump in their grocery budget over the past 12 months. As a result, many residents are tightening their shopping habits to counter the impact of rising costs.
Global food prices have been rising significantly since late last year due to tight food supply, rising oil prices and increasing demand from a rapidly growing population in emerging markets.
In January 2011, the prices of wheat and sugar went up by 62.1 per cent and 46.5 per cent year-on-year respectively, according to a Euromonitor International report. Staple rice became costlier, reaching a new record high in several Asian countries including China, India and Indonesia by end of last year.
"It is a fact that food prices have been increasing for a number of years here in the UAE. This has been driven by a several factors, some global, some more regional," said James Thomas, director of Acuma Wealth Management.
"Prices have increased as speculators have moved into commodity markets and started to use soft commodities as another asset rather than simply a basic necessity. There have been natural events that have affected crops, and so driven up prices."
Besides, the UAE also imports the vast majority of its food supply, putting consumers at the mercy of market forces. With prices rising, many consumers are prolonging recessionary sentiments and are feeling cash strapped. Nielsen's latest Global Online Consumer Confidence Survey showed that more than half (58 per cent) of global online consumers feel they are still in a recession.
Only 12 months ago, 35 per cent of consumers said the present was a good time to buy the things they wanted and needed, but the figure declined to 27 per cent in the second quarter. In the Middle East, 25 per cent of consumers admitted they have no spare cash for discretionary spending, along with 31 per cent of Americans and 22 per cent of Europeans.
"Consumers have retreated back into a recessionary mindset and they are tightening their belts again after the past 12 months of slowly improving but cautious spending," said Dr. Venkatesh Bala, chief economist at The Cambridge Group, a part of Nielsen.
Clare Ebbs, a wedding planner from the UK, has a 10-month-old son and is expecting a second baby in December. Every month, the household spends about Dh4,000 to Dh5,000 on groceries. Not too long ago, the monthly bill used to hover around Dh3,000.
"Yes, we have [noticed the rising grocery bill], especially since we're trying to give our son fresh fruits and vegetables. I buy these most days as they seem to go off quickly," she said. Gobbling away at the family budget are baby items such as formula, nappies, shower gels, as well as certain fruits like raspberries and strawberries.
The rising costs are affecting the family's budget, Ebbs said, especially since she shops for quality perishable items. "[The rising costs] do affect a lot as I'm trying to give my son his five fresh fruits and vegetables a day. To include variety and good quality equals expense."
To cushion the impact of rising costs, Elaine Stannard from the UK says they're starting to eat out less. Stannard used to spend Dh2,000 a month on groceries. This year, the bill ballooned to Dh3,500.
"All prices seems to have gone up," added Abbi Thirion from the UK, who has a 16-week-old son. To counter the impact, she said they have decided to give up the more luxurious items.
Elaine Stannard
Nationality: British
Number of children: 2
Current monthly grocery bill: Dh3,500
Previous monthly grocery bill: Dh2,000
% of total household income spent on groceries: 15%
Lynessa Serrao
Nationality: Indian
Number of children: 2
Current monthly grocery bill: Dh1,400 to Dh2,800
Previous monthly grocery bill: Dh800 to Dh1,600
% of total household income spent on groceries: 8 to 10%
Clare Ebbs
Nationality: British
Number of children: One
Current monthly grocery bill: Dh4,000 to Dh5,000
Previous monthly grocery bill: Dh3,000
% of total household income spent on groceries: Varies a lot
Abbi Thirion
Nationality: British
Number of children: One
Current monthly grocery bill: Dh2,100 to 2,400
Previous monthly grocery bill: Dh3,000
% of total household income spent on groceries: 15%
Rising commodity prices hurt businesses
The rising costs of commodities can hurt profits at businesses and economic growth as well. Since higher prices mean consumers spend more of their income on the necessities, they will have less cash to pay for discretionary goods. "This will therefore have knock-on effects on non-essential goods markets, putting downward pressures on consumption businesses' profits," according to Euromonitor International. Higher prices will also affect importing countries' trade balance as they will spend more on import bills. The economies that will be hit hardest would likely be food-importing countries such as Bangladesh, Nigeria and Egypt, which registered a sharp increase trade deficits in 2009. A negative trade balance will in turn affect the strength of a country's currency and its macroeconomic environment.
Plan your shopping
As with all aspects of personal finance, it is important that you plan your grocery shopping to ensure you don’t blow your monthly budget. Check what’s missing in the fridge or pantry and make a list of the things you need before you head out to the grocery store. This way, you’re leaving no room for impulsive purchases — you will buy what you actually need than what you think you need, advises James Thomas of Acuma.
Shop around
If time permits, visit different supermarkets and find out what special offers are in store for you. You will be amazed to see just how much savings you will make if you look really hard. To make your bargain hunting easier, huge supermarkets usually run a newsletter that serves as a catalogue of discounted items, make sure you secure a copy before you grab the cart. Knowing which stores offer the best deals can make your monthly salary go a long way. Edith Rollan, a Filipino expat, buys her grapes from a Lebanese store for Dh14 to Dh16 per kilo, compared to Dh20 to Dh22 per kilo in other supermarkets. For fish, vegetables, oil, shampoo and other essentials, she saves 50 fils to Dh3 on each item buy shopping at Al Nahda supermarket in Sharjah.
Go traditional
It’s very convenient to shop at the nearby grocery or supermarket next door, but if you feel like you need to stock up on the perishables, it doesn’t hurt to go out of your way to visit the traditional markets. Thomas recommends the fruit and vegetable market or the fish market where you are not only guaranteed to find fresh produce, but cheaper prices as well. “And you get to experience a side of the UAE that you rarely see,” Thomas says.
Buy in bulk
Lynessa Serrao from India says you can actually save Dh15 if you buy two packs of diapers together rather than pick a single pack. “I started to buy in bulk when my babies arrived. The other things that I also take home in big packages or containers are rice, oil, baby wipes and other consumables,” she says.
Go local
When buying fresh fruits and vegetables, locally grown products will save you loads. Take cabbage, for instance. The locally produced ones, depending on the size, can cost anywhere between Dh4 an Dh8. “But if you choose the ones from Europe, you’ll get a small piece for Dh20 to Dh28. That’s a huge difference,” Serrao observes.
Trim down the choices
Abbi Thirion from the UK has managed to lower their grocery bill from Dh3,000 a month to between Dh2,100 and 2,400, thanks to tighter shopping habits. A tried and tested trick is minimising the choices or reducing the amount of treats such as biscuits, chocolate and puddings. The Thirions also alternate the meats they take each week.
For pasta and tinned goods, she finds it wise to switch to cheaper brands.
Freeze meals
Since her second son was born in April last year, Elaine Stannard from the UK started freezing meals to reduce food costs. For over a year now, she’s been cooking big batches and freezing individual meals. “It does cut down on costs and my boys get to eat healthy home-cooked food most of the time, even if it’s frozen,” she says.
Switch supermarkets
Stannard used to buy her staples from a high-end grocery store. When prices became heavier on the wallet, she migrated her shopping to Carrefour. She’s been reaping savings since then. She now pays Dh6.95 on Kerrygold butter, compared to Dh26.95 at the previous store. Stannard says she’s astonished by the huge price difference.
Return to the kitchen and start saving money
Cooking at home is definitely one of the most effective ways to reduce monthly expenses. Homemade meals cost a lot less than the food at restaurants, plus you don’t need to worry about giving a tip to the waiter.
You can even bring down your grocery bill further by becoming “kitchen smart.” Preparing economical meals, stocking up on ingredients and condiments with long shelf life, and investing in the right kitchenware can save you loads in the long term.
More Café in Dubai suggests some cost-saving tips to help households keep food spending to a minimum:
- Stock up on dried thyme, mixed herbs, rosemary and parsley. They will last for quite a while. This doesn’t mean you should use all of them in one dish.
- Planning family meals on a weekly basis will support your ability to budget and develop trends of how to use the same foods in different meals.
- When buying cheese, it is more economical to buy a block of cheese. You then also have the choice to grate or slice as needed.
- To save money on bread in the long term, invest in a bread maker. It is also nutritionally beneficial as you don’t need all the additives and stabilizers that many bakeries use.
- Another food expert suggests cooking simple meals that require less time to prepare and fewer ingredients. “Simplicity is the key. Don’t complicate your food. Besides, if you use too much ingredients, you’re going to confuse your palate,” says Gert Bredenhann, More Café’s corporate chef.
