The Tribune

By NEIL HARTNELL and ANNELIA NIXON

Tribune Business Reporters

Bahamian shoppers have been warned to brace for Christmas price increases as Tropical Shipping and other freight providers hike rates in response to soaring fuel prices, with one business asserting: “It seems like we’re not getting a break.”

Companies spoken to by Tribune Business said Tropical Shipping’s move to increase freight to The Bahamas from the US and Canada by largely 11.1 percent across the board, with effect from November 8, will hit “at a bad time” for consumers as it will likely raise shipping costs for Christmas orders.

Reiterating that multiple expense increases “are all coming at us at one time” as far as Bahamian businesses are concerned, many said they have no choice but to raise their own prices so as to maintain margins and ensure they can “survive” to provide essential commodities and critical employment.

Debra Symonette, Super Value’s president, told this newspaper the 13-store supermarket chain will seek to hold-off raising grocery prices for Bahamian shoppers for as long as it can adding “it is highly likely” there will be no immediate increase in response to Tropical Shipping’s move.

She confirmed the company is “very conscious” of the struggle many Bahamian households face to make ends meet with cost of living pressures showing no signs of easing - the International Monetary Fund (IMF) estimating that this nation will finish 2026 with the second highest annual inflation increase of 5.2 percent among Caribbean tourism-based economies, behind only Jamaica.

Tropical Shipping is among the main ocean freight providers to The Bahamas on routes from Florida, other US and Canadian ports, but private sector sources have said it is far from the only sector operator increasing rates in response to high fuel costs stemming from market volatility sparked by ongoing Middle East instability.

Super Value and other food stores are among those set to be most impacted, with Tropical Shipping poised to increase the bunker surcharge for 20 and 40-foot refrigerated containers by $40 and $80 in just under three weeks - from $360 to $400 for the former, and $720 to $800 for the latter. Both represent 11.1 percent rises.

“They are all coming at us at one time,” Ms Symonette told Tribune Business of cost and expense increases. “It seems like we are not getting a break. The consumers feel like they are not getting a break, and we are not getting a break either. All we can do is help them where we can. We’re just hoping things change for the better soon, and we’ll all get some relief.”

Besides the latest round of ocean freight increases, the Super Value chief said the supermarket chain is also facing the changed VAT treatment of uncooked food, which prevents it and other food stores from reclaiming the tax they pay on their inputs according to the percentage of their sales accounted for by such products.

“It is costing us more because we have to expense a lot of it,” Ms Symonette explained of the changed VAT treatment. “They [the Government] are supposed to be looking to work with us and come up with a solution that can have a win-win. We haven’t quite got around to finalising that yet, and we are finding we are paying a significant amount more although I cannot give a dollar figure.”

If uncooked food accounts for 50 percent of a company’s sales, that business cannot reclaim half or 50 percent of the VAT that it pays in inputs such as electricity and rental expenses. Apart from this, Ms Symonette said Super Value and other businesses are also contending with rising energy and lease costs, plus staff themselves “expecting a cost of living increase” in wages.

“Any kind of change in the supply change eventually trickles down,” she added of shipping costs. “We will have to make some type of adjustment; maybe not right away, but eventually if it lingers on it’s going to affect us because we have the same operating costs. We are going to have to cover those costs, so we will have to make an adjustment in the prices.”

Asked about the timing of any rises, Ms Symonette replied: “We cannot say yet. It’s highly likely we won’t do it right away. We’ll see how it plays out and start to adjust accordingly if necessary. If it lingers on, and it seems likely to linger on.. this situation with the war, the gas prices, the oil, it doesn’t seem to be going anywhere now. Everything seems to be going up.

“We won’t be able to control them, and have to survive and have to adjust to meet our expenses. It’s not only that [shipping costs] going up. We have other costs going up. We have to take that into consideration. There’s quite a few. Just paying for maintenance. You call someone and they say they have to put prices up because of the cost of gas for their vehicle.

“Everyone is crying, everyone is making adjustments. We cannot get away from it. Everything is going up, up, up. It’s just becoming harder for people to live. We do our best to control certain costs but some things are out of our control.”

The Bahamas, as an import-dependent nation that brings in virtually all it consumes from abroad, is especially vulnerable as a non-producing nation to importing inflation and other external shocks that then feed into its own economy. Ms Symonette said she does not believe The Bahamas has reached a cost of living tipping point yet, although the shipping costs jump “may put us a bit closer”.

While unable to specify which goods and prices may be impacted, she added: “We understand the pressures that people are under. We are very conscious, and that’s why we offer any specials we can, pass on any rebates we get.

“We try to offer different brands and offer different prices so that there is a selection and, if people need it, there are cheaper brands. We do whatever we can. We feel the pressure too. We are individuals and shop, too. We know what they are facing.”

Mark A Turnquest, founder of the 242 Small Business Association and Resource Centre, and a well-known consultant to the sector, told Tribune Business that his clients - many of them clothing and electronics goods retailers - have informed him that the Tropical Shipping rate increases could not have come at a worse time with the Christmas shopping season imminent.

Some merchants rely on Christmas to make up to 40 percent of their annual sales, and Mr Turnquest said many are now scrambling to try and bring in festive product orders before the November 8 ocean freight hikes. However, he added that the ‘Black Friday’ sales post-Thanksgiving may not be impacted as many retailers will likely have already imported inventory.

“In preliminary discussions with my clients, they are concerned about the rise in prices to the customer because they have gone beyond trying to evaluate the impact of Tropical Shipping’s increases and the percentage upwards,” he told this newspaper. “

“They said there is going to be a price rise, and it’s coming at a bad time because what’s coming up in the next two months is Thanksgiving and Christmas. Some of them have put their orders in but have yet to receive their product. That’s what a lot of them are doing. They are fighting to keep their shipping costs down and not have them be a big burden after November 8.

“But, because of lack of working capital and cash flow, they may have their shipments coming in one before the hike, one after the hike. The challenge is that, for Thanksgiving, costs may not go up, but for Christmas, costs may go up. The Christmas shipments are going to get the hit,” Mr Turnquest added.

“They will have to determine what the increase in prices for Christmas are. They have indicated they will remain the same for the Thanksgiving period, but that is half as big as Christmas… The timing is very bad. You’re looking at up to 50 percent and over for annual sales for some at Christmas.

“Between Thanksgiving and Christmas will be big. A lot of people will be shopping like crazy and then, for the rest of the year, retailers just float. You have seasonal things like Valentine’s, Easter and Back to School but the bulk is Christmas.”

Other businesses are equally concerned. Patricia Cleare, speaking on behalf of family-owned vegetarian restaurant Better Living, said she expects shipping-related increases to affect businesses across the board, including those importing frozen, refrigerated and dry goods.

She added Tropical Shipping is one of only few shipping providers she knows that transports frozen and refrigerated products, making its pricing particularly important to her restaurant’s operations.

Ms Cleare said she believes the cost of dry goods is already rising and further increases are inevitable in an import-dependent economy. She also questioned whether shipping costs ever fall when oil and fuel prices decline.

“The only problem I have is when all these increases go up… when the price of oil drops, the problem I have is the price don’t drop for the cost of shipping,” she said. “Once they go there, they don’t ever come down.” 

Ms Cleare said she has not yet increased prices at Better Living, preferring to absorb additional costs where possible rather than immediately passing them on to customers. She said she has noticed some changes in freight costs but is trying to maintain existing prices until higher expenses make adjustments unavoidable.

“You try as much as possible to hang on and not increase right away because you don’t want to just do that so sudden,” Ms Cleare said. “You want people to be a little bit more settled with what’s going on.”

Her restaurant will review the cost of new shipments before setting prices, while existing products will retain their current prices as long as the business can maintain acceptable margins, she said. However, Ms Cleare warned that new products could become more expensive if freight charges rise to levels the restaurant cannot absorb without compromising its ability to offer reasonable charges.

She said the business faces additional supply challenges because many of its vegetarian products and supplements are imported, requiring careful sourcing to ensure ingredients meet its requirements.

Ms Cleare said some suppliers in the US are experiencing difficulties obtaining certain products, forcing her to look to alternative markets where goods may cost more.

“I’ve already had a supplier who already told me that they’re having problems getting in certain things,” she said. “So we have to seek these products elsewhere, other than the United States, and sometimes it costs a little more.”

Those sourcing difficulties could compound the effect of higher shipping charges, she added, as businesses may have to travel further along the supply chain to secure the products they need.

Meanwhile, Virley McKinney, project manager and lead engineer at Asphalt Maintenance Paving & Testing Company, said higher freight costs will add to the expenses already facing businesses from rising fuel and building material prices.

“That’s expected,” he said. “As a business, we had to increase some fees because of, for example, the increase in building materials as well as fuel. So, at some point, you expect the domino effect.”

The company imports equipment and materials, and has already raised some of its prices in response to broader cost increases, he said.

Mr McKinney said the company will assess whether its existing price adjustments are sufficient to cover any further increases from Tropical Shipping, or whether additional changes would be necessary.

“Ultimately our customers will experience a slight increase,” he said. He added that the company has begun adjusting prices before receiving formal notification from Tropical Shipping, as it sought to account for rising expenses rather than wait for further increases to take effect.

Mr McKinney said his firm does not currently intend to switch shipping providers because of its existing relationship with Tropical Shipping, citing reliability in delivery, procurement and availability.

Instead, it will determine how much of any additional expense can be passed on to customers and how much the business can absorb. “Some expenses would be passed on to the customer while we’ll probably absorb majority of them,” he said.

The extent of any further price adjustments will depend on how the freight increases compare with the changes the company has already implemented, Mr McKinney said.