x Abu Dhabi, UAEMonday 24 July 2017

UAE price freeze unsustainable says Unilever boss

Unilever, one of the world's biggest consumer goods companies, says the UAE's Government's price controls are not sustainable.

Dubai - JuLY 4, 2011 - Boxes of Lipton tea bags roll along the conveyor line inside the Unilever/Lipton tea factory in the Jebel Ali Free Zone in Dubai, July 4, 2011. The factory produces 1.1 million tea bags per hour, 365 days a year and is the second largest tea producing plant in the world for Unilever. (Photo by Jeff Topping/The National)
Dubai - JuLY 4, 2011 - Boxes of Lipton tea bags roll along the conveyor line inside the Unilever/Lipton tea factory in the Jebel Ali Free Zone in Dubai, July 4, 2011. The factory produces 1.1 million tea bags per hour, 365 days a year and is the second largest tea producing plant in the world for Unilever. (Photo by Jeff Topping/The National)

The UAE Government's price controls on retailers, manufacturers and restaurants are not sustainable in a free market economy.

That is the view of Sanjiv Mehta, the chairman for North Africa and the Middle East of Unilever, one of the world's biggest consumer goods companies.

He says the combination of rising commodity prices and Government price caps have damaged Unilever's margins so far this year.

"In a free economy, these price controls have limited application for a limited amount of time," said Mr Mehta. "This is not a sustainable basis."

The UAE Government has introduced a number of price controls in the economy this year, which include price fixes on basic food and consumer goods, as well as caps on price increases for manufacturers and restaurant outlets.

Unilever sells a vast range of consumer brands in the region, including Lipton tea, which is the the market leader, and personal care products such as Dove, Vaseline and Lux.

The company recorded total sales across North Africa and the Middle East of US$1.5 billion last year.

"There is no question that the costs are going to go up," said Mr Mehta. "When the fuel oil price goes up, there is a cascading effect on the economy, distribution costs go up, the wages go up and food commodity cost pressure is also coming up, there is very clearly pressure on the economy from an inflation perspective," he said.

Unilever is not the first international company trading in the UAE to question the Government's policy on price controls.

Kraft, the world's second food biggest company, recently asked the Government to start an open dialogue with manufacturers to discuss ways to manage the rise in global commodity prices.

The world's largest food chain, Subway, has also questioned the Government's policy on price increases.