UAE | General
Prices of essential items poised to increase further
Supermarkets, notified by suppliers, await ministry's approval
- By Rayeesa Absal, Staff Reporter
- Published: 00:00 January 11, 2011
- Image Credit: Bloomberg News
- For now, price hikes are on hold pending approval by the Ministry of Economy.
Dubai: Although the prices of essentials cooled off in the month of December, popular hypermarket and supermarket chains across the UAE anticipate prices of at least few of them to go up from this month.
"The prices of a few vital items such as cooking oil, sugar and chicken are expected to go up significantly from the month of January," a spokesman for retail giant Lulu told Gulf News.
For now, prices are on hold pending approval by the Ministry of Economy, he said, adding that suppliers have already notified them about a possible hike.
Lulu hypermarkets are estimated to account for nearly a third of the Gulf's retail market, accounting for nearly 350,000 footfalls daily.
Explaining the reason behind the anticipated hike, he said that the price variation is mainly due to factors affecting the global market and changes in demand and supply.
"Poultry from Brazil is the biggest seller here. Earlier last year, a shortage of beef led to more people choosing chicken and thus increasing the demand."
There has been a big difference in the price of sugar since 2010 worldwide. A 50kg bag was priced at Dh100 in the first half of 2010, but it cost Dh167 in December.
Export ban
"Sugar prices may go up further due to the shortfall worldwide and it would trigger the prices of related items to go up."
For instance, Pepsi, for which sugar is the main ingredient, has hiked the price by 50 per cent from January 1 to Dh 1.50 per can.
Prices of ginger and garlic from China shot up due to production shortfalls while India's export ban on onions led to increased demand for the Pakistani variety and a subsequent price rise.
Suppliers of frozen chicken brands Sadia and Coop Islami, oils such as Afia and Al Arabi, Reckitt Benckiser products such as Dettol and Pif Paf, and GFK's products including Horlicks have all intimated retailers about proposed price hikes, market sources disclosed.
Catch-22
"Retailers are truly in a Catch-22 situation. The ministry prevents us from increasing prices of basic items but the suppliers are threatening us to stop supply if we do not increase prices on certain items," a purchasing manager at another popular chain said, asking not to be named.
"If we do not increase the price, they stop supply and do not honour our LPOs [Lower Payment Option]. To be able to meet the demands of our customers, we have had to give in to the price hikes at our own risk," he said.
"More often than not, raising the issue with the Ministry of Economy has not helped resolve pressure from suppliers," he added.
According to Shelly Francis, marketing manager at KM Trading, the Ministry of Economy plays a vital role in stabilising the prices of basic food items.
"Prices of milk and chicken, for example, are set by the ministry and cannot be changed unless approval is granted. Such controls help keep unnecessary price hikes at bay."
Jaimy Jose, FMCG procurement manager, also at KM Trading, said that they demand the ministry's consent from the suppliers prior to a hike.
The decrease in prices at the end of 2010 compared to the beginning of the year was due to the increased availability of those products, he added.
Dh167 - price of 50kg bag of sugar in December
Dh100 - was price of a bag of sugar in first half of last year
Dh1.50 - price of a can of Pepsi after recent increase
50% - hike in price of Pepsi caused by sugar price rise
350,000 - footfalls daily for LuLu retail chain
Survey: Sugar, onion and garlic up
The prices of sugar, onion and garlic climbed up in the second half of 2010 as compared to the first half of the year, a price survey conducted by among retailers found.
On average, the cost of sugar went up by more than 40 to 50 per cent in various retail outlets across the country. A two kilogram packet of sugar was priced about Dh2 to Dh3 more than what it was at the beginning of the year.
Onion prices reached a record high in December as the supply of the highest in demand Indian variety came to a halt. The cost of one kilogram of onion upped from Dh 1.65 in July to Dh 4.95 in December following an export ban by the Indian government in a bid to overcome domestic shortfall due to poor harvest during monsoon season.
The prices of the highest in demand Chinese variety of garlic also hit a record high after the harvest in China was affected due to bad weather. The shortfall in supply led to steep increase in its price.
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