Supermarkets are bracing for the effects of rising UAE fuel prices, but a 70 per cent increase in the cost of diesel is unlikely to be passed on to customers, business leaders have said.
Better route planning, efficiencies and a greater reliance on products closer to suppliers and markets were combining to keep affordable prices at the checkout.
Big-name supermarkets have come under pressure since the start of the Middle East war, with major supply routes over air and sea severely hampered as Iran continues to attack the UAE and other countries.
More than a month of disruption has forced retailers to rethink plans made before the conflict, to improve efficiencies across supply chains and maintain existing prices for essential food and supplies.
While a 70 per cent rise in diesel prices, up from Dh2.72 in March to Dh4.69 from April 1, is likely to pose challenges, Choithrams chief executive Mark Mortimer-Davies said supermarkets should be able to absorb extra costs, for at least the near future.
“There is no point pretending this has no impact, as logistics is a meaningful part of the overall cost of our business,” he said.
“We were already looking into delivery efficiency this year, and had already removed all return to suppliers allowing us to remove thousands of wasted journeys.
“That said, events like this tend to sharpen your mind.
“Choithrams' focus is firmly on controlling what we can, innovating wherever possible, and being very disciplined in how we operate.”
Innovation and efficiencies
That innovation includes new route planning software, which allows organisers to schedule deliveries far more efficiently.
It enables fuller lorries, reducing unnecessary journeys, and making better use of each trip.
The supermarket is also adjusting how it moves its stock, by increasing the volumes of goods from central warehouse into stores.
With fewer, more frequent smaller deliveries there is less reliance on fuel, softening the blow of high diesel costs, while reducing pressure on suppliers and cutting overall transport miles across the network.
“Customers will continue to see full shelves, but behind the scenes the process is more efficient,” said Mr Mortimer-Davies.
“All of these actions are about absorbing as much of the cost increase as possible before it reaches the customer.
“However, to be realistic, if these cost levels continue for a sustained period, some impact on prices is unavoidable.”
Government inspection teams monitor prices of essential items, including eggs, dairy, rice, and cooking oil.
Although major retailers aim for price stability, some shoppers have reported temporary, sharp increases in prices of some fresh fruit and vegetables in recent weeks.
In the first two weeks of March, fines of more than Dh200,000 were handed out to traders who increased prices after a surge in demand for everyday items.
In more than 7,000 inspections carried out by the Ministry of Economy and Tourism, officers found 567 breaches, mostly for price gouging.
Stable pricing
One of the region’s largest supermarkets, Spinneys, said diesel price fluctuations were unlikely to affect costs on the shelf.
“Diesel is the main fuel source for us moving our lorries around the country, but really it's not something that we are significantly concerned about at the moment,” said Tom Harvey, general commercial manager at Spinneys.
“We've seen over the last few years, prices of fuel, diesel go up, then come down.
“It really isn't something that has an immediate or direct impact into what happens to the price of food on the shelves, and we don't expect that to be happening anytime.”
Despite the increased cost of diesel announced for April, it remains below the peak of 2022.
Sparked by the outbreak of the Russia-Ukraine war, global oil markets suffered severe turmoil that saw prices surge up to a record high of Dh4.76 in July.
Diesel prices peaked during the summer of 2022, largely driven by global oil market volatility following the Russia-Ukraine war, with prices first breaking the Dh4 per litre mark, then progressing to a record high of Dh4.76 in July 2022, seven fils above the current price.
Mr Harvey said fuel was unlikely to make a dent in the cost of current Spinneys prices.
“We benefit from direct relationships with the amount of food we're producing very close to our stores and in our factories,” he said.
“So the cost of trucking food around the country is really very insignificant.
“It's a small part of the overall cost, and not something we see as being a significant issue in the near term future.”
