Dubai: UAE grocers and retailers face a challenge: how to keep food prices under control? And if they have to raise the prices of their products, how do they make sure it doesn’t come at the expense of consumers?
Food prices are rising around the world, with the United Nations Food and Agriculture Organization food price index nearing the all-time high of 2011. Inflationary pressures are once again showing up in the prices of key food commodities, be it rice or milk or any other food product that ends up on supermarket shelves and dinner tables. Another major concern is the ever-increasing tensions on the Russian-Ukrainian border, which could push oil prices further higher.
These undercurrents in the global food sector will be a talking point when Gulfood 2022 opens in Dubai, creating a platform for F&B companies to explore new opportunities in the UAE and the wider region.
“The recent surge in the UN Food Index is putting a strain on household budgets,” said Sudhakar Tomar, President of the India – Middle India East Agro Trade Industry & Investment Forum, which is involved in funding agritech startups. “The goods tracked by the meter can be found in most grocery stores.
For now, global food production needs to keep up with demand as post-Covid demand recovers.
– Sudhakar Tomar
This is already evident at the local level, in consumer costs and in the performance of F&B businesses. Agthia, the Abu Dhabi-based food company, found that higher fuel and utility costs had some impact on 2021 results.
At Al Adil Group, a retailer specializing in Indian spices and other foods, Dr. Dhananjay Datar, Chairman and CEO, busy.
“As a company, we can’t always absorb cost increases,” Datar said. “But we have various measures that enable us to optimize the additional food raw material costs without having to pass them on to our buyers in full.”
“There are two key aspects that help us control the cost increase. Our growing scale of operations helps us to buy in larger quantities. And our cash reserves give us the added leverage of supplier rebates on a cash advance or on-the-spot payments we make. These help us negotiate better – and mitigate the higher cost of grocery deliveries.”
During the worst global trade and shipping troubles following the COVID-19 outbreak in 2020, food prices didn’t immediately shoot up this year. However, the situation at the beginning of last year was different. Delays were evident in getting essential commodities from factories to ports and on to global markets – and it showed in their prices.
In the last six months, higher fuel costs have started to impact consumer spending on their daily necessities. Amid higher inflation across all categories, those related to food also played a role.
“A drought has damaged South American soybean fields, while labor shortages and export restrictions have pushed cooking oil prices to new highs,” Tomar said. “The market is also alarmed by the prospect of a war on Ukraine’s border over grain shipments from the Black Sea.”