COST OF LIVING

Retailers, manufacturers defend commodities price increases

Cofek says retailers are unilaterally increasing prices of basic goods.

In Summary

•Manufacturers have however pegged the increases on costs of importing, production.

•Retailers on the other hand say all prices are from the manufacturer and they largely sell as per the recommended prices.

Basic food items on display at at a super market
Basic food items on display at at a super market
Image: FILE

Manufacturers and Retailers have dismissed exploitation claims by the Consumer Federation of Kenya (Cofek) on the back-to-back rising commodities prices.

The lobby group last week said retailers are unilaterally increasing prices of basic goods, taking advantage of the impending general elections, inflation and the Russian-Ukraine war.

Most affected are Fast Moving Consumer Goods (FMCGs), Cofek Secretary general Stephen Mutoro said, mainly maize and wheat flour, sugar, cooking oil, tissue paper, milk, groceries, among others.

Cofek has since cited abuse of abuse of buyer power between manufacturers and supermarkets, calling on the Competition Authority of Kenya (CAK) to “restore order in the retail sector.”

“Equally, we expect Retail Traders Association of Kenya (RETRAK) to rein in on their members before we publicly cite them and call for consumer boycott,” said Mutoro said.

He further demanded that manufacturers communicate their updated Recommended Retail Price (RRP) on their websites.

The Kenya Association of Manufacturers (KAM) has however said manufacturers are not increasing the prices of locally manufactured products, rather, the prices are subject to prevailing costs of raw materials, transport and logistics among other factors affecting the cost of production.

International prices for some of the essential commodities have also increased significantly due to various external shocks, KAM said, confirming that indeed,

effects of the covid-19 pandemic, the Russian - Ukraine crisis and the petroleum crisis are actually driving up costs.

The weakening of almost all currencies against the major international global currencies like the US dollar is also a major factor as it makes imports more expensive.

The Kenyan shilling yesterday exchanged at a mean of 117.16, compared to 107.71 same month last year.

On commodity prices for example, Crude Palm Oil prices were around $700 (Sh82,040) per metric tonne pre-Covid, but rose to $1,980 (Sh232,056) in March 2022.

This has was occasioned by a short supply amid high demand after the pandemic heavily affected Indonesia and Malaysia which are the two biggest producers of crude palm oil ,crippling harvesting and milling activities.

“Oil, metals and other commodities and inputs have mostly gone the same way,” KAM head of membership and governance, Tobias Alando, told the Star yesterday.

This, even as local industries struggle in recovering from the effects of the pandemic, which led to revenue losses for manufacturers.

Additionally, the Russia-Ukraine war has adversely impacted exporters, with shipping lines increasing freight charges by 10 per cent in response to the rising cost of fuel and logistics disruptions.

“The inflation rate has also gone up significantly over time caused by the depreciation of the Kenya Shilling against major currencies and in some instances, the demand-pull such as the petroleum shortage seen earlier this year,” Alando said.

Overall inflation increased from 5.08 per cent in February 2022 to 5.56 per cent in March 2022 and further to 6.47 per cent in April 2022. It touched a high of 7.1 per cent in May, Kenya National Bureau of Statistics data shows.

RETRAK, the retail sector lobby group, said its players do not control manufacturing prices.

“Buying price from the manufacturers has risen dramatically due to what we are told are increased costs of manufacturing. Retailers’ margins have decreased due to their attempt to maintain prices,” CEO Wambui Mbarire told the Star.

She said formal retailers must manage the shelf price otherwise products would not move as consumers would move to where bulk can be broken into smaller sizes, for affordability.

“Supermarkets are easy targets as they are consumer facing, but they do not control the Manufacture costs. The Manufacturer on the other had still dictates, in many cases, the shelf price at the Retail outlet,’ she said.

Mbarire however acknowledged the impact of global factors which have not only affected the Kenyan market, but economies across the world.

“The supply chain needs to be further interrogated to establish the pricing model that results in the price at shelf. This should cover manufacturing, distribution and retail,” she said.

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