In depth: Price rises eating into the budget

The World Food Programme (WFP) warned last week that the global price of food could continue to rise until 2010, attributing the soaring costs to high energy and grain prices, the demand for biofuels and the effects of climate change.

The WFP has warned that the phenomenon could most affect the poor, who could stop buying food and be forced to rely on aid. Josette Sheeran, head of the WFP, recently said that no quick solution could be seen for high food costs, noting that world food reserves were at a 30-year-low.

Climate change

The increase in desertification in some areas and the flooding of others are ways in which the climate puts a strain on the world food supply. Meanwhile, a demand for biofuels has led the global agriculture industry to concentrate on producing crops for fuel instead of food in some places. Aside from that, world food price rises have also been attributed to the growing wealth in developing countries, where a rapidly increasing demand for food is being witnessed.

Dhopping basket: Checkout crisis

The data below shows the total bill in UAE supermarkets for seven essential food items: a 30-egg tray, 2 litres of milk, 5kg of Pakistani basmati rice, 1kg of Australian lamb, a whole chicken and 2kg of sugar. The findings, based on Gulf News price basket surveys over two years, show a 56 per cent rise in the bill for the essential items between April 2006 and March 2008.

• April 2006 - 70.55
• October 2006 - 85.60
• February 2007 - 84.82
• September 2007 - 96.12
• March 2008 - 110.05

 Ravi Restaurant, Dubai

Chaudry Hamid, manager of the Pakistani Ravi Restaurant, thinks the hype about inflation is exaggerated.

He says that his business has boomed since the hype began. Although he slightly increased prices last year, he maintains that his restaurant remains an affordable option for those trying to escape the rising prices in other restaurants around the UAE.

"Sure, costs have gone up, but not enough for us, or anyone else, to drive up their prices that much," said Hamid. "Our business has actually been doing better in the past two years with only a minor increase in the prices on the menu."

Costs on Ravi's menu were raised by Dh1-Dh2 for dishes that were priced over Dh10 and about Dh0.25 for items like naan bread and tea. Keeping prices low allows Hamid to remain competitive, maximising the number of visitors to the restaurant, as well as profits. Some of Ravi's competitors have however increased their prices more significantly.

Desert Rose Cafeteria, Abu Dhabi

Kunchi Mohammad, partner of Desert Rose Cafeteria off Electra Street in Abu Dhabi says that inflation has affected profits heavily.

Costs of some items used for the products have gone up by 50 per cent, said Mohammad. "Buns and breads used for burgers and sandwiches costs fifty per cent more than last year. The price of fruit and milk powder has also gone up by more than 50 per cent recently," he said.

He said that the cafeteria has not increased the prices accordingly because of tough competition in the market. "We increased the price of burgers and sandwiches by 20 to 30 per cent but not the price of juices because the competitors in the area did not do so," he said.

A compromise on quality was out of the question because it would affect the business, he said. The only choice the cafeteria had was to increase the prices "or we would have to shut down," he said, pointing to a slump in business in the past four months.

Al Reef Lebanese Bakery, Dubai

Increase in basic commodities coupled with a decision by the Ministry of Economy forbidding the bakery from increasing prices left Al Reef Lebanese Bakery without any profit for almost all of last year.

Hassan Daher, Manager at Al Reef, which has six branches in Dubai and Sharjah said that in the last year their revenues have only covered costs.

"We submitted an application to the ministry asking for permission to increase our prices three months ago as we had not made profit for a year, but the ministry rejected it saying we need to provide them with a comprehensive survey of our business situation before they can approve the raise," said Daher.

 The latest price increase they had was six months ago, with an approximate 20 per cent increase only on bread, but they were not allowed to increase other items such as pastries.

Al Safadi Restaurant, Dubai

The skyrocketing prices of food items forced Al Safadi Restaurant, with five branches across Dubai, to increase their menu prices by some 15 per cent last September.

Ebrahim Al Dana, Purchasing Manager at Al Safadi Restaurant, said he had to increase prices as costs had risen dramatically in the past year.

"Global food prices are on the increase and as a consequence everything is getting more expensive in the UAE as the country relies heavily on imported items. For example, sunflower oil, of which we consume some 6,000 litres monthly, has increased by some 65 per cent," he said adding that the food price hike coupled with increasing rent is putting a lot of pressure on business and leaving him with no choice but to increase prices. Since opening eight years ago, the restaurant has not experienced such a sweeping wave of food price hikes as this recent one, according to Al Dana.

PEOPLE SAY

Mohammad Abdul Khaleq, Egyptian accountant
"My food bill has almost doubled in less than a year as basic food items increase on a weekly basis. Somehow I feel that the hike in this country is exaggerated and is not in-line with global price increases. The constant hikes are altering the quality of life as we can no longer afford to eat out since restaurants are also raising their prices," he said.

Narayanan Namboodiri, Indian national
"The food budget for my family of three has gone up by 30 to 50 per cent. We used to restrict our monthly food budget so that it would come to an amount between Dh800 and Dh1,000 one year ago, but nowadays the food bill is between about Dh1,000 to Dh1,300. Everything has gone up from bread to rice. Eating out costs us more too. It now costs 20 to 25 per cent more to eat at restaurants."

Mohammaddat Karim, UAE national employee
"Two years ago I used to pay around Dh1,700 for my monthly food bill, but today I pay Dh6,000 and it is barely enough for the whole month. Everything is getting more expensive and my salary of Dh10,000 is not enough. I hope the government will take the necessary action to stop this unjustifiable price hike in everything," he said.

Mohammad Khalil, Indian transport coordinator
"Day by day things are getting more expensive, but whatever the price is we still have to pay for our food. Food price increases occur everywhere in the world but the problem here is that there is no control of prices. A mechanism needs to be in place to monitor prices," he said.

Abdullah Kamyas, Iranian Businessman in Abu Dhabi
"The price of food items has almost doubled in one year. It is a catch-22 situation. You cannot avoid buying essential food items, but the price rise is unbearable. We should avoid unnecessary food items to control the budget. I rarely eat out with family and do so only when some guests come home. Prices at restaurants have also gone up."

Email this article

Printer-Friendly version

Email the Editor

Bookmark this article