Abu Dhabi, UAE, 20 November 2011: Turret Media – organiser of SIAL Middle East – today published a report titled ‘Food Price Stability in the GCC’ that examines the fluctuation of food prices in a region heavily reliant on imported commodities.
The white paper stems from a round table discussion that was addressed by Alaa El-Din Hassa Moussa, Senior Economic Researcher at the Department of Economic Development Abu Dhabi, Georges Mojica, General Manager of the Abu Dhabi Co-operative Society, Hisham Al Jamil, Managing Director of Horeca Trade and Fethi Khiari, Director of Seville Products, IFFCO Group and was moderated by Hani B. Safi, General Manager of The TV Bank.
According to the panel of industry experts improved supply chain efficiency, investment in countries rich in arable land, reducing wastage and end consumer education on local brands, consumption and waste can help stabilise food prices in the GCC countries.
Increasing food supply and identifying more sources of food
Alaa El-Din Hassan Moussa, Senior Economic Researcher at the Department of Economic Development, Abu Dhabi says: “Supply and demand interaction dictates the price. In this region, it is difficult to significantly increase agricultural production because of weather conditions, water, irrigation and so on. So we have to build co-operation with different countries.”
“Although African countries are warm and have abundant agricultural land and water resources, they lack finance to utilize such resources and apply technology to increase agricultural productivity. Recent research found that one third of food is wasted,” Moussa said.
The round table was convened in the week when the global population reached seven billion people, with forecasts that by 2100 it will reach 25 billion. Georges Mojica, General Manager of the Abu Dhabi Co-operative Society said, “When you look at seven billion people who want to eat, and the United Nations Food Programme states that one in seven people go to bed hungry every night, you can imagine the situation we’re facing is dramatic.”
“The farmlands are doing better by selling land to real estate to build houses rather than toiling soil and growing cereals. We need land for animals to graze. People are building their daily diets on richer foods such as chicken and beef, and are turning away from the cereal foods of rice, noodles and grains,” Mojica said.
Mojica suggested producing more food with smaller pieces of land through research and investment into developing genetically modified products. “Consumers need to understand that genetically modified products are for their benefit and not to make them sick,” added Mojica.
The panelists agreed on the need of educating the consumers to shop ‘smartly’ to ensure that they're getting good-quality products at reasonable prices. “We have to educate the consumer and make them understand that if they buy local products, they will save money. Private labels are the same as international brands but we make less profit,” Mojica continued.
Operational costs and wastage reduction
Mojica believes the rules governing expiry dates need to be reviewed in order to reduce the vast amount of food retailers are forced to throw away every week. And Hisham Al Jamil, Managing Director of Horeca Trade added: “The promotions the end consumer sees on the supermarket shelves in order to quickly shift products before they expire can often damage the brand and are a result of incorrect forecasting.”
The White Paper says a due diligence study to identify genuine cost savings for each part in the value food chain would help to significantly reduce operational costs and stabilise food prices. According to some panelists, the cost of doing business today in the UAE is going through the roof.
Addressing his peers at the round table Al Jamil said: “From my perspective, if I buy a product for AED100 it reaches the shelf at AED200. We have shipping, food control, operating expenses, handling and the list goes on. For every truck we have, we pay to drive through all those territories and emirates. I have to add those costs somewhere so eventually the consumer is paying for it”.
Mojica agreed: “We’re not talking about importing costs; we’re talking about creating costs for the retail market. “Shareholders are running a business; they want to make a reasonable profit.”
Fethi Khiari, Director of Seville Products, IFFCO Group states they have seen huge inflation increases in the cost of ingredients as well.
Despite consumer perception that food prices in the GCC are high and suffer from vast fluctuations, Khiari believes they are in fact relatively shielded by price increases. Khiari says, “Inflation last year was around 2.2 per cent officially, and probably 10 or 11 per cent in the food industry. So why is it over 28 per cent when it comes to ingredients? IFFCO genuine policy is to do our utmost in protecting the consumer's purchase power. We thrive to make the best quality products and have them available at the most economic price.”
“It is extremely difficult for us though, when costs go up sharply, to pass on the cost increase or part of it to the end consumer. Sometimes it is because of the authorities, other times because the trade oppose it. Last year we increased our volumes and revenues by double digits, but our profits did not follow and this implies a lot of management difficulties."
The panel agreed that the food industry worldwide was one of the last to be affected by the global economic crisis and was, in turn, one of the first to pick up and in its nature, is relatively recession-proof.
SIAL Middle East 2011 is part of SIAL Group, the world’s largest network of professional B2B food exhibitions which include SIAL Paris, SIAL China, SIAL Canada, and SIAL Brazil.
Caption: From left, Hisham Al Jamil, Georges Mojica, Fethi Khiari and Alaa El-Din Hassan Moussa during the SIAL Middle East round table discussion.