Gulfood 2025: Food prices drop for UAE consumers – but just not to pre-Covid levels

Dubai: UAE shoppers are paying much less on their food bills – except on coffee and cocoa - than they did a year ago as commodity prices ease from their highs and shipping costs into the UAE also turn favorable. In fact, even compared to what they were paying in 2022, UAE shoppers are getting a good price break.

But shoppers expecting to soon start paying what they forked out in pre-Covid days on food will be disappointed.

“Two years or 18 months ago, we were talking about record inflation for food prices,” said Alan Smith, CEO at Agthia, the Abu Dhabi headquartered F&B focused holding company. “Yes, today’s prices have certainly come down – but to levels that are the ‘new normal’.

“But compared to pre-2020 prices, it’s still inflated.”

Shoppers in the UAE, Saudi Arabia and elsewhere in the GCC will, for the most part, be OK with that. With Ramadan starting next month, softer food retail prices will be easy on their spending needs. (In the UAE, the authorities continue to maintain strict oversight of retail prices on key food and non-food retail prices, which too will help with shopping during the month of Ramadan.)  

For Agthia, the three big imports are wheat, corn and soya required to run its multiple business units. “If anything prices of these are moving sideways rather than going up or down,” said Smith. “This seems to be a new kind of baseline for these commodity costs.”

Thankfully, for UAE food companies and shoppers, the Red Sea crisis of late 2023 and all of last year – brought on by Houthi attacks on commercial shipping – has eased up. So, less of shipping companies taking longer routes to get to ports in the UAE and the GCC.

According to Philip Werle, President and founder of the Intercontinental Commodity Exchange (ICE) Dubai, “The consumer often ignores the fact that the price of the raw material - i.e., the price of wheat in your granola - only represents a relatively small part of the price you are paying.

"There are many costs, like transportation, who depend on the oil price, storage, financing, packaging, store rent and margin for the supermarket, which have an influence on the product price.

“On many occasions the oil price has a bigger effect on the consumer prices, than a price increase for the raw material (coffee, cocoa, flour, etc.) itself.”

But companies like Agthia have also benefited from going as wide as possible to source its food commodity requirements. For instance, it had to look to other suppliers when India put a stop to wheat exports from the country.

“We have never been out of stock on any of our key ingredients,” said Smith. “That comes from having quite a diversified supply network for the grains we import. It’s that ability to react to supply changes or whatever’s going on in the market that’s helped us.”

The Abu Dhabi company saw 7% plus gains on revenue and net profit during 2024, with the bottom-line totaling Dh321.8 million. This came from revenues of Dh4.9 billion, with the snacking, agri-business and water and food divisions contributing the most. (Excluding Egypt’s currency devaluation, Agthia’s top-line would have seen a 16.7% growth.)

Another trend that’s defined Agthia’s activity in the last 4 years has been its acquisition spree, which has helped it widen its network across the region. There have also been new capacity expansions outside of the UAE.

But, in the recent past, Agthia has slowed down on that level of M&A action. “We consolidated all the acquisitions from 2021-22 into our business, quite successfully,” said Smith. “And from 2023 onwards, there’s the increase on the inflationary environment, which went with interest rates going up. The cost of financing increased, and we were careful about new deals.

“We will continue to look at M&A deals, but ones that’s a right fit for the business and for our shareholders.”