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Comfort food starting to come at heavy price
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08:52, April 24, 2008

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Bread, pasta, tortillas, canned fish and meat, dairy products, imported vegetables and fruits. These are staples of foreigners living in China. And that's precisely why spiraling food prices across the globe and the rise of the yuan against the US dollar have spelt double trouble for them.

Prices of wheat and corn have doubled over the past year or so, according to the US-based Earth Policy Institute. This means higher prices of food products made directly from them, such as bread, pasta and tortillas. Pork, beef, milk and eggs, which depend indirectly on the grains, have become costlier, too.

More than the rising food prices, it is the decline of the greenback that has made expatriates' life more difficult, says a 29-year-old Canadian living in Shanghai.

"The exchange rate of the dollar against the yuan has dropped more than 20 percent from when I came to China," he says. He was posted to the Shanghai office by his international export firm three years ago. "The devaluation of the dollar can be interpreted as a drop in my pay because I have to pay in yuan here."

Then take the example of a young French woman who lives in Beijing and shops almost daily at Jenny Lou's, a well-known chain store that imports a variety of food products. Peisha, as she prefers to be called, says prices of all imported food products she normally buys, such as canned tuna, bread, pasta, vegetables and fruits, have gone up. Her preferred loaf of bread alone costs an extra 2 to 3 yuan. Desperate to save as much as possible, she has started buying tuna canned in China because they cost less.

But it is not only consumers who are feeling the pinch of the rising food prices. People running restaurants that specialize in foreign cuisine have been hit hard too. "Everything has become costlier," says Lu Hongwei, owner of Agrilandia-Italian Farm. The 9-year-old restaurant in the northeast suburb of Beijing is popular among expatriates and white-collar workers for its rustic Italian countryside flavor.

"The price of pasta imported from Italy has risen thrice since last September. It's 70 percent more expensive than last year," says Lu, who also owns another Italian restaurant, Il Casale, near Lido Hotel. Pasta prices in Italy rose more than 20 percent last fall, triggering a nationwide protest in the country.

The cost of raw material has gone up by 40 percent in Lu's restaurants, forcing her to raise prices on her dishes by 15 percent. "I had to pass the pressure on (to customers)," Lu says. "Even then I earn less than what I used to." But she still considers herself lucky because the flow of customers in her two restaurants has not ebbed.

Global warming and the increasing use of durum wheat to make biofuels are the main reasons for the spiraling food prices, experts say. Durum wheat is the main ingredient that goes into making pasta in Italy. Italian millers' association Italmopa figures show durum wheat prices in the country have jumped 150-170 percent since April 2007. And the country imports about 40 percent of the durum wheat it consumes.

Rising raw material costs throughout the world have driven up dairy product prices too. Exports of milk from Australia and New Zealand, for example, where large parts have been under drought for the past three years, have gone down.

"Dairy products have seen the biggest jump in prices among all the products we sell," says Ding Wei, marketing manager of Shanghai-based Sinodis, a leading importer and distributor of food products in China. "The cost of dairy products has increased 20 to 30 percent since the second half of last year, compelling us to raise our prices much more frequently than before," Ding says. Sinodis supplies imported food products to major supermarket chains, hotels, restaurants and airlines in more than 30 Chinese cities.

In Beijing, the manager of Indian Kitchen, a popular restaurant with outlets in many Chinese cities, says meat dishes cost a lot more to make because the lamb and beef prices have increased two-fold. Sweet dishes, a specialty of many Indian restaurants, cost more too with sugar and vegetable oil becoming dearer. So to minimize its loss, Indian Kitchen has raised its lunch buffet price from 38 to 42 yuan per person.

US citizen Fred Kan, who works in the food and beverage industry, has a similar story to tell, even though he has not felt the impact of rising food prices that badly. "As a chef, I often shop for food and have a clear idea of the prices. Obviously, they are getting more expensive," says the 31-year-old who has been living in Shanghai for the past four years.

Kan used to run a restaurant in Shanghai. At present, he is trying to start a new one that specializes in Italian cuisine. "Since the cost of raw material is rising, we have to make some adjustments on food prices. But we cannot shift all the additional cost onto our customers," he says, despite realizing that the rising food prices pose a big threat to his upcoming venture.

Many stores and restaurants have raised the prices of their products and dishes to cope with the trend. Nick's and Mart at Lido Hotel, 70 percent of whose customers are foreigners, is selling cheese, wine, pasta and imported spices at higher prices, says manager Zhang Manjiang. But the store is now preparing to buy more varieties of products from domestic and foreign suppliers, instead of concentrating only on overseas manufacturers.

But then there are customers who swear by certain food brands and are ready to pay more for them. That should bring some respite to the harried store owners and restaurateurs.

Source: China Daily

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