x Abu Dhabi, UAESunday 23 July 2017

Prices in the UAE still cheaper than abroad

Shopping may be becoming more expensive in the UAE but the country remains cheaper than many other markets.

Consumers in the UAE are likely to be protected from the worst effects of prices surge, according to analysts, as it is manufacturers that have largely been absorbing the increases. Sarah Dea/The National
Consumers in the UAE are likely to be protected from the worst effects of prices surge, according to analysts, as it is manufacturers that have largely been absorbing the increases. Sarah Dea/The National

Shopping may be becoming more expensive in the UAE but the country remains cheaper than many other markets.

Every quarter The National analyses the price of branded goods and staples at supermarkets here and abroad to see how a basket of shopping compares.

Comparing the price of items such as a 250g packet of Lurpak butter reveals that consumers here pay half as much as those shopping at Tesco, Britain's biggest supermarket chain, while the product is more than three times the price at Coles in Australia.

At Tesco, a basket of branded goods is about 40 per cent more expensive than in the UAE, with some items, such as 2kg of Uncle Ben's rice, costing almost 175 per cent more. But other products, such as Heinz Baked Beans, are cheaper in the UK. A basket of the same branded goods at Coles in Australia costs about double that of Carrefour in the UAE, while products are often cheaper by comparison at Panda in Saudi Arabia.

A trolley of staples including pasta and potatoes is more expensive in the United Kingdom, Australia and the United States, but cheaper in Saudi Arabia.

However, supermarket shopping everywhere is more expensive as a result of rising prices of commodities such as wheat, corn and soybean. The cost of wheat has risen 25 per cent in the past four months.

Kazakhstan was forced to cut its wheat production estimate for this year and next by 43 per cent because of drought, while Russia and Ukraine have also been forced to cut forecasts for the same reason.

However, in the UK, abnormally high rainfall has caused wheat yields to be the lowest since the late 1980s.

The declines have aided the sharp rise in the cost of wheat, from about US$600 a bushel in June to $860 now. Last week, the United Nations warned that prices are likely to remain volatile and possibly even increase. Consumers in the UAE are likely to be protected from the worst effects of the surges, according to analysts as it is manufacturers that have largely been absorbing the increases. "Manufacturers are in a weak position… because of the strong position of supermarkets," says Francisco Redruello, a Euromonitor food analyst.

Euromonitor predicts that the cost of bread will rise by just 3 per cent in the UAE this year, despite the rises elsewhere.

"When we compare with this 25 per cent increase in [the price of] wheat it's not that big a deal. But again we are seeing here the large influence of supermarkets and hypermarkets," adds Mr Redruello.

"In the case of the United Arab Emirates, hypermarkets and supermarkets account for almost 85 per cent of prices."

Many products are also subsidised in the Middle East, further cushioning UAE consumers from the worst effects.

Wheat is not the only crop subjected to recent price rises. Drought has also affected supplies of the corn and soybean crop in the US, driving up prices of all three commodities.

"Wheat competes with corn, for land and for uses, for baking products as well for cattle feed and soybeans as well. Basically when corn prices go up, wheat prices goes up as well," says Mr Redruello. Manufacturers are doing two things to get around the increases, producing more for supermarket own labels, he says, especially in bread, and also making more premium products, such as artisan bread.

"It is the middle that is suffering," Mr Redruello says. "Small bread manufacturers are merging or disappearing." Falling costs of retail space have helped to moderate the rise in local food prices.

gduncan@thenational.ae