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As food budget rises, brand loyalty falls

As food budget rises, brand loyalty falls

With inflation taking a sizeable chunk out of family budgets in the UAE, people have started looking out for discounts and no-name brands.

September 18, 2008 8:06 by

Kareena Khanchandani

Mashook Ali Khan spends 200 dirhams a week on groceries to feed his family of four. A year ago, it cost him 150 dirhams.

Like him, most of the people across the Emirates have felt the bite of inflation in the past year, thanks to increases in the price of such commodities as grain and oil. Even with its strongly growing economies, the Gulf has not proved immune to the sharp rise in the cost of basic foodstuffs.

Commodity forecasts by the FAO, OECD, USDA and World Bank suggest that crop prices will remain high. According to the World Bank, prices are likely to remain above the 2004 level through 2015. Global agricultural prices rose sharply in 2006 and 2007 and have increased by around 30 percent in 2008.

During his weekly grocery shopping, Khan now consciously looks for bargains, whether in the form of discounts offered by supermarkets on some days of the week, or the more reasonably priced no-name brands that stores carry.

As inflation bites, consumers have become more interested in discounts, promotions and marketing schemes offered by supermarkets. Special coupons, for example, are increasingly valued. Ahmed Roushy, senior director of operations for Consolidated Restaurant Management, says “Most consumers have become more attentive to discount promotions due to market competition and are receptive to ads.”

“Inflation is a world phenomenon and has a ripple effect. It is certainly changing brand preferences,” says Nasir Iqbal of Al Islami Foods. “Consumers tend to go for cheaper brands in times of soaring costs. Loyalty has been waning due to the crippling price hike, which has squeezed shopping frequency as (consumers) do budget planning, and buy in bulk and wholesale to save.”

The budget-conscious shopper doesn’t think twice about switching to inferior brands. Those consumers more concerned about maintaining the quality of their purchases, generally choose to buy in bulk and tend to opt for frozen instead of fresh produce. In either case, brand loyalty is under threat.

According to the IMF, food prices have risen by 45 percent since the end of 2006 on the back of record high prices for grains such as corn, wheat and, more recently, rice, which has doubled in price in the past few months. Countries such as India, Indonesia and Vietnam have sought to curb rice exports to ensure domestic supplies are met.

Taking a tip from other Asian governments, the UAE Ministry of Economy (MoE) has frozen the prices of basic foodstuffs in supermarkets across the region. Price stickers will be affixed to selected foodstuffs for the duration of the year at various food cooperatives and select supermarket chains such as Carrefour and Lulu. Mohammed Ahmed bin Abdulaziz Alshihhi, undersecretary of the MoE, says this initiative “aims to ensure consumer access to hundreds of basic commodities”.

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