Ramadan is a busy time for the food and drink industry
Ramadan is a busy time for the food and drink industry. It is reported regionally by analysts that prices will have increased 10-15% during The Holy Month. Different governments adopt different approaches to the situation of the effect of Ramadan on MENA Retail each year. This article shows retailers in the UAE have cut prices, this one shows an overall increase; albeit a small one. In contrast, Al Ahram in Egypt suggests bureaucracy has forced a surge in prices. Whilst the question of exactly how much prices will go up or down in each MENA country remains unanswered, we can look at some of the impact Ramadan has on the economy generally.
Most Arab countries lack the resources to meet the demand for staples such as fresh meat, milk and cereals and thus need to rely on imports. This pushes commodity prices up, with rising costs passed on to the consumer. This situation can be seen with palm oil, used for cooking, which is in high demand before Ramadan. Governments across the region, in particular in the United Arab Emirates and Saudi Arabia, are increasingly implementing measures to prevent inflation, with some encouraging results.
These efforts include working with retailers and manufacturers to offer discounts during the holy month. In these two countries, the grocery channel is mostly in the hands of modern retail, which is easier to regulate. In just 40 years those countries have seen an unprecedented pace of modernisation which has transformed most of the traditional retailers of the past into chained businesses.
However, in countries like Algeria, Egypt and Morocco the retail channel is so fragmented with independent operators that price control is much more difficult to achieve. Even price control policies do not prevent bubbles from forming. This is why price hikes are expected to be the steepest in countries where people buy mostly from traditional retailers (independent grocers and open markets)- Euromonitor
Ramadan is a month of two retail cycles however. As food sales increase, other retail sales may decrease in the first half of Ramadan, as people adjust to the fast. As people adjust to a change of shopping hours, late night mall visits will see a leveling of sales of non-perishable items as Ramadan deals and promotions attract those wishing to give, prepare for Eid, or those who are just looking for a good deal.
Make or Break
Ramadan can be boom or bust for a retailer depending on the skill with which they market their offering.
– Getting the supply chain right: Retailers should anticipate a rise in traffic, which means recruiting extra staff when needed during the right working hours, placing fast-turnover products where they can be reached easily and making sure the shelves are spotless. This will improve the shopping experience and convince customers to return to the same store rather than revert to a competitor.
– Promoting a value for money image: Some chains have come up with a Ramadan box or kit which has proved a successful concept on previous years: this is a pre-packed assortment of basic staples sold at a discount, The pack includes nine basic items such as rice, oil, sugar, pasta and tea.
– Riding on the convenience trend especially when people are fasting: consumers are becoming more discerning and placing increasing value on their time. Therefore, offering more convenient ways of shopping, such as online or via home delivery, will make a retailer stand out. Many chains have opened online shops, the habit of ordering groceries online in urban areas is slowly gaining momentum and retailers can more easily justify a price premium for delivery and the added convenience.
Andrew is Head of the Retail division at JLL in MENA and has been involved in numerous retail development advisory and leasing assignments for major retail environments in the UAE, KSA, Qatar, Egypt and Oman totalling in excess of USD $2.5 billion. For the past 10 years that Andrew has been in the Gulf region he has advised on mall design, leasing, creation and implementation of merchandising mixes and has analysed project viability. Having also spent 2.5 years in Tenant Coordination, he understands the technical requirements of a retail environment and what it takes to successfully deliver a project to the market.
Andrew holds a Bachelor of Economics degree from the University of Western Ontario, completed the British Columbia Real Estate Licensing Course, held the Certified Financial Planners designation, is a registered member of RERA in Dubai and a member of the Middle East Council of Shopping Centres.(MECSC)