November 3, 2014

Food Prices Continue to Take Center Stage in Israel

Tel Aviv- The public outcry on high prices at the supermarket was not quite like the 2011 social protest when the price of cottage cheese crossed the NIS 6 barrier, and became part of the housing prices protest. At that time, the food companies responded immediately. The price of cottage cheese fell, as did many other food prices. But, say industry sources, the spotlight on retail prices has never dimmed and it particularly raised its head during the recent holidays. Before the protest, the operating profits of the supermarket chains were 4-6%. With new competition and continued focus on pricing the profits currently stands at only 3%.The profits and profit margins of the food manufacturers, on the other hand, have not declined, and are currently at 10.5-13% for the major manufacturers, the global average operating profit margin. In the debate as to why prices continue to be so high, the cost of kosher certification is always thrown in the mix as does the fact that Israeli companies loose 20% of workdays due to the Shabbat and holidays.

In another development, food producers and importers have diminished the size of their packages in order to conceal price hikes and give consumers the misleading impression that prices have fallen, a "Globes" survey has revealed. In some cases, the smaller packages have raised the price to the consumer by double-digit percentages. In other cases, retailers say that consumers bought the product because they did not notice the change in quantity, and believed that the price had fallen.