Dubai: For any UAE consumer starting to get worried about rising food prices, Alan Smith has a solid response – look at what was happening just 12 months ago.
“Everything was at its peak,” says Smith, CEO of the Abu Dhabi headquartered food group Agthia. “We talk in the industry about cycles - and what we saw last year was everything, including fuel, went up. What’s happening now is a bit more focussed on grain (prices) and not any of the other costs.”
Smith’s got a point – 2022 was kind of rough for consumers everywhere, with their cost of living going through some rapid movements – all headed up. Food prices too had their part to play, with geopolitics, weak crops, and steep shipping rates all adding up to what shoppers had to pay more. And then there were the interest rate increases.
All of these have sort of prepared food businesses such as Agthia – which has a basket for food brands in its portfolio along with ‘Al Ain’ bottled water - to take on uncertainty. “I think we demonstrated last year that we know how to manage through the volatility,” said Smith.
Food commodity costs had been higher during this period, which meant a Dh46 million ‘headwind’ for Agthia. This had much to do with renewed concerns about whether shipping carrying food staples such as wheat would be able to operate through the Black Sea ports.
“We learn every time you have a challenge, and make sure that our supply chain is as robust as possible,” said the CEO. “I think we do need to be cautious about the potential impact on (food) prices, as we have seen some spiking over the last few weeks.
“We’re keeping an eye on it and, obviously, our number one priority is to make sure we have the materials available to be able to make products.”
For consumers and food businesses, one cost element is still in their favour – of shipping. No major changes have been seen in shipping tariffs across major trade routes in the last few weeks. If this remains the case, that sharp escalation in food prices seen last year will be much more muted this time.
Agthia’s been nimble
Where possible, the Abu Dhabi company has moved around its sourcing arrangements to keep its material inflows steady. Ban on wheat exports from India? Then look to Australia and elsewhere for alternate arrangements.
“We’ve had some volumes coming out of Australia and South America, perhaps some hard wheat from Canada,” said Smith. “We do have some from this region as well. Overall, our supply network is quite balanced and we’re in reasonably good shape.”
Change the product mix
Whether organically or through the many acquisitions it did, Agthia has been focussed on getting more from the snacks and proteins category.
“It’s the area that in terms of investments is probably our biggest priority. But on beverages or on the agri side, we look at anything that can help us cement our position in the market, protect profitability, and strengthen the long-term platform for that business.”
Not getting into farming
The CEO also played down prospects of investing in farms or agri-land so that Agthia would have a lock on the produce from there. Smith prefers to keep the company doing what it does best.
“We are focused on being a leading food and beverage manufacturer and brand builder across the region - that for us is the core. The focus of our investment is businesses that are complementary to that objective.
“Do we want to go upstream (into farming)? Probably not. It’s not really our area of expertise. What we do look to build is our supply relationships and make sure we protect the long-term viability of the business.”
And keep a tight lid on costs…