Baskin-Robbins, the UAE's biggest ice-cream company, says margins are being hit this year by a combination of rising commodity costs and government restrictions on the price of its scoops.
The company's cost base has increased by 8 per cent this year, with its priciest ingredients, cream and sugar, rising 65 per cent over the past year.
The franchise wants to increase its price by Dh1, only the third increase in 32 years of operating in the UAE, but this has been rejected by the Government.
At the start of the year, the Ministry of Economy introduced restrictions on price increases at restaurants and food outlets to ensure customers did not fall victim to unscrupulous jumps in prices as the cost of commodities around the world rose.
"We have been hurt big-time," said Manoj Loya, the general manager for Galadari Ice Cream, the licensee for Baskin-Robbins in the GCC. "You have to appreciate the fact that everything that we have in our store comes from different parts of the world, and the cost of raw materials has gone up everywhere."
Despite the restrictions on its business, Baskin-Robbins is enjoying strong growth this year across its stores in the UAE and wider Middle East.
Same-store growth is up 6 to 7 per cent in the first seven months of the year compared with the same period last year.
Overall revenue growth is up 15 per cent as the company continues to expand across the region.
Baskin-Robbins has more than 500 stores in the Middle East, including 135 in the UAE, and aims to open another 70 this year in the region.
Each store costs US$100,000 (Dh367,290) to $150,000 to set up, and the company is spending about $5 million in expanding the infrastructure and logistics required to service its stores.
"We are growing very, very aggressively this year," Mr Loya said.
"We are talking about spending a good few million dollars."
Baskin-Robbins has benefited from the number of tourists visiting the UAE this year. Outlets in Dubai Mall and Mall of the Emirates have been performing strongly, as well as stores in Abu Dhabi, Mr Loya said.
"As for the segment we are in, the size of the piece is growing," he added. Baskin-Robbins plans to launch four flavours next year that will be permanent fixtures on its menu.
They will all be low in fat and have no added sugar.
"If you talk about fat content, our products have anything from 8 to 11 per cent fat in them," Mr Loya said.
The new Bright Flavours will be about 3 per cent fat.
"We are trying to be as responsible as possible," Mr Loya said.
"People come to Baskin-Robbins to treat themselves, it is not being eaten every day."
