Friday, August 05, 2005

Bottled water association decides on price hike :: KT

Quoting:
The price of five-gallon water bottles for domestic consumption in the UAE is slated to increase by Dh1, following a decision by the five-gallon water companies association, recently.

The price hike was decided at a meeting attended by the 42 five-gallon mineral bottle water companies in Dubai in May this year. While a number of large companies such as Oasis and Nestle have already implemented the hike, several small and medium-sized companies are awaiting the decision by Zulal Water Company, owned by Sharjah Electricity and Water Authority (Sewa).

“As soon as Zulal gets a clearance from the Sharjah government to hike the price of its five-gallon water bottle from Dh5 to Dh6, smaller companies will toe the line,” a source from a five-gallon water bottle company said.

“Zulal's approval on price hike from the local authorities is expected soon,” the source said, disclosing, “No sooner Zulal announces the hike, other water companies in Dubai and Northern Emirates will follow suit. Zulal, being a government-owned company is currently supplying five-gallon bottle to homes for Dh5, while retail outlets receive it for Dh4.50. Zulal has a major market share in Sharjah, hence smaller companies cannot hike up their price for the fear of facing stiff competition from Zulal in terms of price.”
Typically economists are critical of cartels that raise price. However, because a government firm is a major player it is conceivable that that firm is subsidized, and current prices are below cost. If this is the case, then an increase in price could result in an improvement in the efficiency of the market.

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