In the last six months, there have been steep increases in the prices of imported food items.
The price of pigtails, according to importers, skyrocketed by 74 per cent, canned corned beef went up by 36 per cent, yellow split peas and lentils rose by 34 per cent, brown sugar climbed by 25 per cent, and canned tuna increased by 15 per cent.
Other food items are set to increase by up to 50 per cent in some cases when compared to last year’s prices. The consensus among industry stakeholders is that prices will not stop rising anytime soon. Consumers will now have to dig deeper into their pockets to purchase even the basic food items from wholesalers and retailers.
A shortage of shipping containers internationally and a steep increase in freight cost to ship these items locally since the COVID-19 pandemic started are the key factors in rising food prices, importers said. This is compounded by the perennial problem of a lack of foreign exchange.
A former president of the Supermarket Association of T&T (SATT) and CEO of Arima Discount Mart Balliram Maharaj in a letter to Minister of Trade Paula Gopee-Scoon dated July 21 listed the percentage hike in food items and warned about a looming crisis in T&T if nothing is done to fix the problem.
He told the Sunday Guardian that T&T is in “deep trouble” and could face a “frightening situation” like Haiti and Venezuela in terms of food insecurity if urgent measures are not taken.
On critical issues involving shipping, Maharaj said, “Within recent times shipping agents have requested payment for freight and Terminal Handling Charges at the destination to be paid in US currency. Some agents were accepting TT dollars at an inflated exchange rate. However, within the last week, they are all requesting that payments be made in US currency. Any failure to comply with this mandate results in shipments not being released and incurring demurrage charges.”
This, he said, has resulted in an almost 300 per cent increase in freight rates since last year and it is continuously rising. They have also been informed by suppliers that to get the full containers onto the ships on time, a priority fee must be paid.
Maharaj said empty containers are also increasingly difficult to locate, “causing further delays in getting supplies shipped around the world.”
More than 60 per cent of the world’s white sugar is shipped in containers and it has become increasingly difficult to source containers for sugar shipments, Maharaj said.
“Sugar is not a priority product for shipping lines as it is heavy but low value, which means it can only be shipped in 20ft containers, not 40ft. Shippers prefer larger containers as they offer more capacity for the same handling cost,” he added.
Sugar, however, he said was an essential item for our local manufacturers producing ketchup, soft drinks, juices, etc. “There is no white sugar available locally and suppliers cannot guarantee order arrivals as it highly depends on the availability of vessels and empty containers.”
Should this trend continue, the small cottage industry manufacturers will be jeopardised, he said in the letter. This could cripple local SMEs.
World production levels on food supplies have declined due to the pandemic as countries went into shutdown. Factories and production plants are either closed or operated with minimum staff. The ripple effect: further increases in prices.
“There is also a shortage of dairy products in Australia and New Zealand. Milk producers are selling milk powder higher than the added value products such as cheese, butter and ghee for the months of August to October. Supplies have been reduced by over 75 per cent,” Maharaj added.
From Belize, where Maharaj gets supplies of red beans and black eye peas, the Government has instructed its people to hold all exports on peas and beans as stocks are required for domestic use due to the pandemic.
Maharaj believes it is critical for the Government and food importers to hold meaningful discussions on the impact of the pandemic on food that is now hanging overhead.
In the letter to the Trade Minister, Maharaj proposed an increase in local food production as the only solution to high food prices and limited supplies.
“We must devise a system for Trinbagonians to start to get a taste in our pallets for the food we grow. Maybe, if permitted by the Caricom Trade Agreement, we can start with a surcharge on all fancy items and the funds can then be filtered into the Ministry of Agriculture for subsidies on food production through our farmers,” he said in the letter.
‘Distributors cut margins, may have to discontinue some brands’
Arima businessman Kumar Maharaj, whose company imports food items, expects food prices to continue “rising rapidly” as international trade is hampered by the COVID-19 pandemic.
“We used to pay US $2,500 for a 20 ft container from Australia, but it has now gone to US$12,000 and it is expected to go up again. It’s all about supply and demand. There is a serious demand and there is no supply globally. The cargo ships are more moving to North America and Canada,” he said over a week ago.
Maharaj (Kumar), the agent for cheddar cheese and ghee, and co-owner of the Rainbow brand of food products such as tuna, peas and pasta, said once international trade continues to be affected by the pandemic, the cost of all the products that his company and others import would increase.
President of the Association of Food Distributors of T&T Michael Seheult, meanwhile, agrees that price increases are not simply restricted to T&T, but is a global phenomenon and he does not expect prices to fall anytime soon.
“Rising prices are now a worldwide phenomenon caused by several factors related to COVID, first is a sharp increase in freight rates on all shipments originating in China and the Far East, in some cases as much as 400 per cent. Interestingly a severe shortage of containers is causing this,” Seheult.
“Containers are stuck at factories where they cannot be offloaded because of lockdowns at the destination. The same is happening at the ports worldwide for the same reasons. As a result, shippers are forced to ‘bid’ for containers, forcing up the price. This, in turn, is leading to delays and shortages of many inputs to manufacturing.”
Speaking specifically about T&T, he said because of the shortage of US dollars in T&T’s banking system, many distributors are forced to purchase currency at higher than bank rates or go out of business. This puts further upward pressure on prices.
“Distributors have had to cut margins, but as prices continue to increase they now have to decide whether to increase prices or if in their opinion the market cannot bear an increase, discontinue those brands.”
While he expects the situation to improve at some point, he does not see prices falling to pre-COVID levels in T&T.
Will things improve?
Seheult said, As countries open up and people begin to work again, the situation should begin to stabilise as far as freight is concerned. Competition between manufacturers worldwide will have the effect of slowing the rate of increase in prices and prices will again stabilise. Unfortunately, in my experience, prices may stop rising at the present rate but I doubt they will drop to pre-COVID levels for some time to come.
“In the short term, prices will continue to rise although at a slower rate, with the consumer benefiting from specials and discounts as they (the consumers) signal to the distributors and supermarkets owners how much they are prepared to spend and on what.
“In the medium-to-long term prices should hold but the variety now available will be reduced. Unfortunately, I do not see prices on imported products being reduced to pre-COVID levels unless the consumer is prepared to accept lower quality.”
People’s savings and disposable incomes shrinking
Locally, the COVID-19 pandemic has forced thousands of businesses to close their doors leaving thousands of people unemployed, with others working reduced hours and taking home less pay. Rising food prices are now adding to the explosive cocktail.
Complicating the situation, President of SATT Rajiv Diptee said, is the fact that consumers are “out of savings” after a year of the pandemic which means they have little disposable income to spend on basic food items. He said this has resulted in growing theft in supermarkets as some are forced to turn to crime to survive.
Diptee told the Sunday Guardian that because consumers’ savings have evaporated and they are spending less, it has impacted supermarkets’ bottom line.
He said because consumers do not have much disposable income, supermarket owners are being “cautious” in how they purchase stock for the reopening of schools, religious holidays, and other calendar events.
“We noticed that on the Monday when restaurants reopened there was no rush. That greatly concerns us. From the operational point of view for business owners including supermarket owners the concern is that you have to plan. Year on year, we have seen a 20 per cent to 25 per cent decrease in revenue in supermarkets.”
Diptee also said the decline in living standards and less money in consumers’ pockets was creating a new culture among shoppers where brand loyalty is a thing of the past and most people now generally purchase what they can afford.
“In some cases, people do not have the disposable income, others are not earning at all, in some cases earning less and trading down where brand loyalty is concerned. That’s a thing of the past as people are now looking for deals. So for higher-end soap powder, coffee, for example, they are going to trade down to access the cheaper price points. I know a lot of supermarkets have loyalty programmes and deals for dedicated customers.”
Another symptom of a population with dwindling incomes is theft in supermarkets which he said has exploded over the last year as there is growing poverty in the country.
“They target coffee, oil, baby milk, cheese, and other high-value items.”
While he could not say what exactly middle-income earners were purchasing, he added that the trend among supermarkets now is “pandemic relief packs” which offer bargains to shoppers who have less to spend.
He said “pandemic relief packs” come in different price ranges such as $150, $250 and $500 and these include items such as macaroni which can cost up to $10 depending on the size, two-litre soft drinks which cost between $8 to $10, Chicken Vienna Sausages which cost $5 and more, peas and beans which costs less than $10, tomato ketchup which can cost up to $10, 2 kg four which can cost between $11 to $14 and sugar which cost between $15 to $20. The most expensive item is the oil and it is a two-litre keg which costs $38.
He said many of the items that middle and lower-income people buy tend to be similar, but what separates this are the “luxury items” which people with more money tend to buy no matter what is going on in the economy. He gave the example of jams, beef, and foreign beer as some examples of products that people with money are continuing to buy.
“For the more expensive meat cuts, this can go from $50 to $100 easily. The foreign beer can cost a few dollars more than the local. The items with the biggest price increases are oil, cheese, and dairy products. The cheese we buy, the cost to buy them are ridiculously expensive and the reasons for that may be freight, shipping, and of course the COVID pandemic which has driven global food inflation. Food inflation is not just a local issue but a global one.”
SATT, he said, is aware of the growing poverty and hunger in the country and they have distributed almost 500 food hampers to the needy in the last month and they will continue to play their part in feeding the poor.
Price loyalty, not brand loyalty
Maharaj (Kumar) told the Sunday Guardian that as a supermarket owner he was able to observe how shopping trends have changed.
“People are only buying selected items. They are not buying wholesale. If they used to buy four, they will now buy two. Brand loyalty no longer exists, only price loyalty exists now. People with fixed incomes are looking for the best deals. It also depends on the marketing strategy of the supplier.”
He concluded that the pandemic is creating “a new breed of consumers.”
“These new consumers are very selective about what they buy. They are controlling their spending. They are making sure that they at least have food in their houses.”
Comparison of some retail prices—January 2021 compared to July 2021
Payless Supermarket, Port-of-Spain
2kg pack of rice $19 $21 (based on brand)
9kg soap powder $60 $70
900 grammes bottle of oil $15 $18
Small tin of peas and beans $6 $8
Maharaj Westside, Arima
Naisa Foil 75ft $25.25 $29.95
Maggi Coconut Milk Powder 50g $5.50 $5.95
Miss Anna Arrowroot Flour 115g $10.65 $11.25
Gullon Cereale Fruit Fiber 300g $12.30 $13
Always Ultra Thin Reg Wings 18s $23.75 $26.95
Swiss Mayo 375ml $14.30 $15.30