Dubai: Are UAE shoppers starting to see a drop on their food purchases? They have, but it also depends on the category of food they are buying.
The impression among food commodity traders and F&B businesses is that the peak of the inflation in food prices seen during 2022 has been reached. Even if there are still higher prices paid in some categories, the rate of those increases are slowing. That counts as a big positive for shoppers.
According to survey by the ecommerce ‘accelerator’ platform Pattern, tea had the single biggest price rise through the last 12 months, by 26 per cent. That would certainly have pinched shoppers, with the UAE being one of the heavy per capita consumers of the beverage.
That other favourite, coffee, was pricier by a much lower margin of 4 per cent, according to Pattern.
That’s not all, flour retail prices might have risen by 16 per cent through these 12 months.
But during Q1-23 and into the current quarter, there are clear signs of a slowing down. Shoppers would at best have seen a 3 per cent rise on what they are paying on flour, while that of rice hasn’t had any increases during the period.
“The UAE authorities have been constantly monitoring retail prices on consumer essentials, and that too helped in keeping price rises within check,” said a CEO at a leading food commodity wholesaler.
This could also affect the cost of processed foods, as they rely heavily on raw materials such as spices and pulses for their production."
- Dr. Dhananjay Datar of Al Adil Trading
Post-Ramadan, prices are stable
He is on point with that, because right through the Ramadan phase from late March, consumer staples across food and non-food items were mostly stable. The only exception was on poultry products, but even there retailers could raise prices up to levels suggested by the authorities.
Post-Eid, market sources say that prices have remained more or less stable, with some categories even recording minor drops.
A check on inflation
The biggest takeaway from all this? Inflationary rises might be levelling off – for now.
“Inflation is slowing at a macro level, which is a good sign,” said David Quaife, General Manager for MENA territory at Pattern. “But) we’d hesitate to say that it’s peaked.
Inflation is slowing at a macro level, which is a good sign, but we’d hesitate to say that it’s peaked. We’ll know more by next quarter if there’s been an overall peak in inflation in any category.
“It’s a bit of a mixed bag for food prices. In our analysis, we saw prices increase year-on-year from 2 per cent to 26 per cent. The average increase was about 11 per cent.
“That being said, there are a few products that have actually gotten a touch cheaper over the last year, like bottled water.”
Why did inflation pressures ease?
According to Quaife, there are two main factors at work here:
- During the recent supply chain crisis, shipping rates saw a peak between July 2021 to May 2022, and since then rates have continued to decline. This year a lot of shipping routes are at pre-pandemic levels.
- The large increases in the cost of raw materials were absorbed into brands’ pricing during 2022 itself. This has since down in the year-to-date.
Keep close tabs on the dollar
Food traders had since the start of the year been insisting that food prices will drop or stabilise before summer. The main reason they put out at the time was the steep decline in their shipping costs, by 20-40 per cent in cases. And when supply costs are down, it would soon reflect on the food prices too.
To an extent, this is what’s been happening now. The other reason is that the strong dollar during much of 2022 had shielded food import prices from gaining more than they did.
Will that shield remain? The dollar’s been trending weaker in recent times, with the dollar index – which tracks the currency’s relative strength against other major ones – down 7 per cent from its September 2022 peak.
“For us, our food purchase costs have at best stabilised,” said the owner of an F&B joint in Dubai. “If the dollar were to slide further, food import bills could be in for another increase. That remains a concern.”
The average price of personal care products in the UAE have risen further, with the cost of body lotion, deodorants, and soap increasing by 22%, 19%, and 10%, according to Pattern’s Ecommerce Consumer Price Index.
“Still, the price increases of some products, such as lotion and deodorant, have slowed over the past quarter,” the report says. “In fact, the price of soap is beginning to drop, down by -7 per cent over the past three months.”
As for household consumables such as detergents, tissues, and dish soap, retail prices are up 18%, 11%, and 12%, respectively, over the past year.