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Rise in coffee and other commodity prices are burning a hole for cafes. Passing these on to the consumer needs to be filtered gently. Image Credit: Supplied

Dubai: UAE consumers could find that they will have to shell out more for their morning cup of cheer or a trip to the café, with global coffee and tea prices feeling the same upward pull that other commodities are facing.

Since December, coffee prices have hit their highest prices since 2011, when the commodity broke past the $3 a pound level. So, how soon will it be before this feeds into retail prices at the local level?

“An increase in prices for the consumer is imminent - it has to happen,” said Mohammad Merhi, founder of Cypher Urban Roastery. “It doesn’t mean the consumer will feel the pinch quickly - it may just be around 50 cents. But that will make a difference to the retailer.

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Mohammad Merhi of Cypher Urban Roastery said: The price of coffee has significantly increased, and have been hovering at these prices since. They are showing no signs of decreasing, so eventually, retailers will have to increase their prices as there’s only so long that they can absorb.

Some of the bigger global coffee chains have already passed on those higher prices, partially, according to market feedback. Even if it is a partial increase being passed on to the consumer, along with the add-on purchases, it does pinch quite a bit.

How soon will consumers adjust to a price rise on their favourite beverage? Will it mean cutting down on the frequency of trips to the café and watching the barista go through the elaborate process of serving up the perfect cup?

Some care operators reckon that consumers will make those adjustments, and at some speed too. “Any changes in consumer behaviour on the F&B habits will have to wait until after Ramadan,” said a café operator. “The only change we foresee is on the frequency of orders – there is no getting away from the fact that they cannot do with their coffee.”

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Tea prices too have not been immune to the pressure on foodstuffs.

No respite on tea too

“Tea is seeing a steep increase in input costs, similar to most other categories,” said Abhiroop Chuckarbutty, President of Africa, Middle East and Turkey territory at Ekaterra, which owns the Lipton, Red Label and Pucca tea brands.

To combat the rise in cost, our commitment is to remove waste that the consumer does not benefit from through the value chain and drive efficiencies across the board. (And) permitting price increases that fulfil our commitment to a quality cup to the consumer.

- Abhiroop Chuckarbutty of Ekaterra
Muralee M. of Barth Trading

"The tea crop harvest has been normal to good," said Muralee M., Director of Barth Trading. "A slight upward price movement is expected due to less production in Sri Lanka and bigger demand for Indian tea for all leafy and CTC (Cut, Turn and Curled) varieties."
"Depending on the quality, the in-demand tea prices ranges from $1.75 to $3.25 per kilogram for good quality Middle East varieties"

Food inflation

The global rise in foodstuff prices has escalated since the conflict between Russia and Ukraine erupted on February 24. Any delays in shipping out essentials have meant supply and price disruptions.

The UAE authorities this week confirmed that weekly checks are on at local supermarkets to ensure that price stability on multiple consumer categories – including non-food items – is maintained. The price checks also track what the same commodity is retailing for in other Gulf markets. Retailers and traders have been given specific criteria on how and when they can raise prices because of higher import costs.

Hold back for now

Food processing companies here are more of less holding back on passing on prices during the month of Ramadan. A senior manager at one of the biggest names in the dairy business said: “Through recent weeks we have been comparing what the competition is doing on prices. A decision on whether and when to raise our local prices will be taken shortly – our raw material costs are already up 10-25 per cent.”

As for coffee, Merhi of Cypher Urban Roastery said: “With the intense inflation pressure and the rise in prices for everything else - such as the milk that you are adding to your coffee (and anything else you add on or have with) - will make the price increase more noticeable to the end customer.

“A price increase will have an impact on all businesses – small or large, and yes, that can be a challenge. For us, we have refocused our strategy and used this challenging time to put more focus and energy into the supply chain and cashflow management.

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Merhi of Cypher Urban Roastery said: "We knew it would be tricky in sourcing the right coffee, and we needed to look inwards and manage the things that we could control – like the relationships with suppliers."

“So, we took the risk of focusing on only shipping in the best quality, even if we paid higher fees and waited longer for shipments. This really paid off for us, as we knew that everyone was having problems with shipment delays.”

Other food and beverage businesses and retailers will soon have to come up with their own solutions to resolve an issue that will not be receding any time soon.

Price changes on basic consumer goods
The UAE Ministry of Economy has also approved a new policy on the pricing mechanism for basic consumer goods.

These goods are divided into two main groups: the first is subject to the condition of prior approval in the event the supplier desires to raise its price as a result of the high import costs.

In this case, they are required to apply for an approval via the Ministry of Economy website, through a system that is specifically designated for this service.

The applicants must submit all evidence and data related to the increase in cost and their cause. The Ministry will then do a review of the justifications and then decide on the approval and the percentage of the approved price hikes.

This group includes 11,000 commodities including fresh and dry milk, fresh chicken and eggs, bread, flour, sugar, salt, rice and legumes, cooking oil, mineral water and others.