Carrefour to cap basic food prices

Vivian Salama

• Last Updated: April 16. 2008 9:46PM UAE / April 16. 2008 5:46PM GMT

Carrefour, a subsidiary of Majid Al Futtaim (MAF) Hypermarkets, is the latest UAE retailer to cap food prices in response to growing inflation fears.

Officials with the region’s largest retailer are due to sign a memorandum of understanding (MoU) this morning with the Emirates Society for Consumer Protection, a division of the Economy Ministry, to maintain 2007 prices on various basic commodities.

A similar agreement was signed last month between the Government and the Union Cooperative Society, placing ceilings on more than 16 staple items, including cooking oil, flour, sugar and eggs, in an effort to ease the burden of skyrocketing food prices.

The country’s largest domestic retailer also announced that it would import goods directly from source, whenever possible, bypassing intermediaries when stocking its shelves and thus eliminating another layer of cost.

Lulu, the supermarket chain operated by Emke Group, signed a memorandum of understanding with the Economy Ministry earlier this month, agreeing to price caps on 32 products.

“These agreements are basically a goodwill gesture between our supermarkets and the Government of the UAE,” said V Nandakumar, a spokesman for Lulu, who said that the motivation for capping prices was very different from competitive price-cutting. “We are trying to play a part in curbing the inflation of prices, which is really hurting the people.”

Last week, officials with the Economy Ministry announced that 15 items — including dry and condensed milk, frozen and canned vegetables, baby food, chicken, edible oil, rice, flour, fish, meat and tea — were to be placed on a free import list. The Government is also conducting a study on the benefits of stockpiling at least 15 essential food items.

Time will tell whether smaller, domestically-based supermarkets will follow the lead of Carrefour, Union Cooperative and Lulu.

“It’s very difficult for me to say we’ll do the same because [the big groups] purchase tons of containers of rice and other products directly from the countries of origin,” said David Berrick, general manager of retail at Abela Supermarkets. “We buy from the local market so we are governed by [importers’] prices.”

Abu Dhabi’s Department for Planning and Economy reported a 10.7 per cent jump in inflation last year, driven by higher rents, transport and food costs. Food, beverage and tobacco accounted for 11 per cent of that rise. Food retail in the UAE was worth an estimated Dh12.8 billion (US$3.5 billion) in sales last year.

Soaring food and fuel prices have been at the heart of recent riots in countries including Egypt, Indonesia, Cameroon and Peru, with the head of the International Monetary Fund recently warning that the surge in food prices could push 100 million people into deeper poverty.

However, some industry analysts warn that price caps may exacerbate this growing crisis, as farmers turn to more profitable commodities, such as biofuel crops.

“When you create a price ceiling, you will have shortages at some point,” said Andy Barnett, a professor of economics at the American University of Sharjah. “These devices will only make the impact of inflation worse, not better.”


vsalama@thenational.ae